Don’t forget my upcoming posts:
10 Questions to Ask your Attorney to Ensure the Success of Your Business and How to Get One for the Price of a Daily Coffee
How I’m personally using Amazon as my personal Cash Cow outsourcing the entire process and how You can Do the Same
Businesses that can Cash Flow in Less than a Month – Yes it’s True
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Starting your own business and being your own boss can be fulfilling. However, there are many things you need to consider before jumping in and quitting your day job.
Personally I like to follow Tim Ferris’s paradigm of the “Four Hour Work Week”. If you are slaving away at a business only to make less money (especially in the beginning) than you did when you had a stable job, you are just trading one poison for another. I highly suggest starting a business where EVERYTHING can be outsourced. I’m not saying that you don’t need to be involved, but you need to delegate many of the day to day minor decisions to someone else. If you find it difficult to do this, you will surely be trading your job for a business that will drain you even more so, but without all the securities that a stable job provides. Tim Ferriss puts it eloquently by saying, ” Doing less meaningless work, so that you can focus on things of greater personal importance, is NOT laziness. This is hard for most people to accept, because our culture tends to reward personal sacrifice instead of personal productivity.” If you can find a business that will require very little “baby sitting” on your part while still being profitable, you have a winner. All you need to do is scale up and collect checks. In today’s economy, there are no shortage of business ideas and no excuses for being a slave to your business robbing you of your precious personal time doing the things you love the most. Don’t make the mistake of trading in one poison for another, only to be more stressed out and more uncertain of the future than before.
With this in mind, I’m going to discuss some things to consider when starting a business.
Are you Even Ready to Start a Business?
Starting a business sounds glamorous enough. The thoughts of not having to deal with an arrogant boss or conform to your company’s timeline of when you should take sick leave or even (gasp) a vacation sound appealing, but are you REALLY ready? Some of the best ideas end in disaster because the person was not personally ready. Personal problems are amplified when there are problems with your business. Think having personal problems and having to go to work is challenging? At least you can count on your next paycheck. When running a business you’re not guaranteed anything. I’m not saying this to stifle your dreams, but to give you a peace of reality that everyone needs.
Do you have at least a 6 month security blanket tucked safely away in case of your worst case scenario? Owning a business can be great but if the worst happens and you are financing it with your monthly salary, you can expect really bad things to happen when and if things go awry. Having your financial house in order BEFORE starting or investing in a business is one of the biggest favors you can do for yourself. Business is risky and unless you are doing something that cash flows immediately, you need to have some money saved up. There is nothing worse than having unexpected business expenses AND unexpected personal expenses at the same time. These problems will amplify everything else in your life and in effect will cancel out what you are trying so desperately to achieve.
Unless you plan on the business cash flowing immediately with little investment then I suggest focusing on reducing your personal debt first before investing in a business. I don’t mean all of your debt, you don’t have to pay off your house or your student loans first.. this is “good” debt that is tax deductible and backed by an appreciating asset. It would be foolish to advise you to pay off those kinds of debts before investing.
I am advising you to pay off or significantly reduce your credit card and consumer loan debt. Depending on the business you’re in, it can be cyclical and you need cash to ride the waves. You don’t want your personal credit to suffer because you have business expenses to pay and are not able to pay your credit card debt. If you have a lot of debt, work overtime, cut expenses, sell stuff you don’t need on Ebay or Craigslist, do what you can to get money.. but it is not a good idea to start a business that does not cash flow immediately when you are ridden with debt. What do I mean by when a business cash flows? I mean that glorious day when your revenue exceeds your expenses. So unless you know for sure you will cash flow within a short time of starting, pay off your debts first and save some money in case of an emergency.
The Idea
For every idea you have, there may be 100 people with the same one. This has never stopped me, but it’s something you need to think about. What is the competition in your area? Is there another company doing the same thing? Can you do it better? How can you do it better? Uber and Lyft revolutionized the taxi business, can you do the same thing? Be very clear and focused on what you are offering. If you are a starting a restaurant, focus on one product. Don’t be a steakhouse, a seafood place and a hamburger joint all at the same time. The more niche the product the better the chances that you will succeed.. So really concentrate on narrowing your idea down as much as possible. You also (maybe even more importantly) need to find out if the idea is patented? Is there licensing involved? You don’t want to get in a tussle with a pissed off patent attorney, trust me, I’ve been there. Search for patents and trademarks at the USPTO. You want to make sure your idea or logos are not infringing on anyone else’s legal rights. Also go to your local zoning board and see if your home office (because to properly register with the city you need to have a home office) is zoned for the business you want to run. For example, I was interested in in starting a video lottery business a few years back. I made an offer on a piece of land where I wanted to put it. Luckily I checked with the zoning and video lottery board and the business could not be within so many feet of a government building, school or church. There were also other restrictions I was not aware of. It could have cost me a substantial amount of money had I not done my homework properly. Do you homework and thoroughly break down your idea and if it is a feasible one within your place of residence. If not, don’t let that stop you, look at other localities nearby, every city is different. Just do your homework before you invest ANY money.
The Business Plan
You wouldn’t drive somewhere you didn’t know how to get to without a map would you? Likewise it is foolish to start a business without a business plan. A business plan will serve as a map and even a flow chart for your business. A long with a business plan you will need an operating agreement for your business. The operating agreement will be the law of the land within your business, without one the state will call the shots in the event of a dispute. I highly urge you to read “LLC’s for Dummies” or research as much as possible LLC’s on your favorite internet search engine.
The Business Entity
This is where you need to pay careful attention. Doing this incorrectly could cost you your home, savings or everything you own. Each one of the business entities have their pros and cons. Typically, most people start out as an LLC. Though I would think twice about starting a business with another person (partner) you need to be very careful about being a single member LLC. It is beyond the scope of this post, but you can read more about it at MYLLC.com. To get around this, you can give someone a small (non voting) percentage of your company, then you should be ok. In my personal experience I would never partner with someone again, especially without having a majority of the control. I would advise not to agree to a 50/50 arrangement or any derivative thereof. If it’s your idea, then you need to maintain control of it. Once again, I highly recommend “LLC’s For Dummies” as a guideline to structure your company appropriately. You need to be familiar with charging orders, capital accounts, DBA’s, articles of incorporation, registered agents, so on and so forth. When you partner with someone, you are in effect marrying them. The only difference is, it is much more difficult to get out of a partnership than it is a marriage. In my current state of mind, I prefer seeking investors for a non controlling interest in my company as opposed to partnering with someone.
Do your homework first and structure your business correctly the first time. I highly recommend getting an attorney involved before joining any kind of partnership or seeking investors. Do not use the same attorney your partners are using , but one that only has your best interests in mind. An attorney will help you navigate the tricky and fickle waters of starting and running a business. They can review contracts, articles of incorporation, gear you towards laws concerning licensing and so much more. I recommend getting a prepaid attorney for your business. It is very similar to having an attorney on retainer, but much cheaper. I highly recommend Legal Shield before you seriously undertake starting a new business. For a small monthly fee you can have unlimited support from a competent attorney advising you in the legal matters of your business. I have someone I work with directly that has been SUPERB in answering questions about how Legal Shield works. Her name is MICHELLE LONGERBEAM and you can reach her directly via phone or email on her website. She has always answered my questions in a very short amount of time. I encourage you to go to our Associate link at Legal Shield to get the personal service you deserve from her. She can answer anything you would want to ask, what the plan covers, how many questions does the attorney ask, are there any restrictions, just anything, she’ll guide you through it before you make a decision. I can tell you, if you are serious about starting a business, it pays to have competent legal counsel looking out for your best interests. It also lets the your partner(s) know you are serious about what you are getting yourself into.
Exit Strategy
What if your business just isn’t working out? What if your partner and you just aren’t seeing eye to eye on how to run the business? You need a solid plan on when you should pull the plug and how the remaining assets will be divided up. Knowing when a business is failing and when to jump a sinking ship is something you need to think about, no matter how optimistic you may be. Maybe it is successful and you just want to buy your partner out for whatever reason, that could be part of your exit strategy. Of course you want to plan for success and carry out your affairs as if you are going to be successful. Getting lawyers, a CPA and other professional advice may seem like overkill to you right now, but trust me it will save you nights of not sleeping and untold amounts of money later.
In Conclusion
It is my personal conviction now that not only do I not want to be a slave to a job, I do not want to be a slave to my business. In the world we are living in today, it is easier than ever to find businesses that won’t suck the very life out of you. I am collecting checks from “work” or decisions I made many years ago, sounds crazy but I do. In my next posts I plan on discussing the following;
10 Questions to Ask your Attorney to Ensure the Success of Your Business and How to Get One for the Price of a Daily Coffee
How I’m personally using Amazon as my personal Cash Cow outsourcing the entire process and how You can Do the Same
Scaling Up – How to Invest in Virtual Businesses and Run them from the Comfort of Your Home
Businesses that can Cash Flow in Less than a Month – Yes it’s True
It is more possible than ever in the history of the world to be successful and live the life of your dreams. We all have access to tools that were unthinkable just a few short years ago. Think BIG and NEVER let anyone tell you that you can’t do something. There are countless stories of successful and famous people who made their mark on our world when they were told they would not amount to anything. NEVER let anyone’s words dictate your life. Look for the good in YOU, look for the good in the World, look for the good in Life and turn away from the negative. You deserve only the best!
The world is truly your oyster. Now go out there and get what you deserve!
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