In honor of National Small Business Week, our Marketing Manager asked if I could write an article about helping a new business start. With so many business basics available in articles, Google, or the latest version of Chat GPT, I wanted to write about more than just a step-by-step legal guide to starting a business. With that idea in mind, I am providing a few of the primary aspects of starting a business while also reviewing some of the skills I believe are important for entrepreneurs to learn to be successful.
The Basics.
The first question most people ask is, “Do I need to set up a Limited Liability Company (LLC) or other business structure.” As you would guess, most lawyers will tell you yes. This is a little self-serving since we all like to collect a fee to help you create your operating agreement, register with the secretary of state, and obtain an EIN. However, for a relatively low initial cost, no additional annual fees, and the level of liability protection it provides, most people find setting up an LLC a good investment.
The second question is, “Why is the LLC structure so popular?” Without putting you to sleep with a long, boring conversation regarding taxes, most entrepreneurs want to keep things simple without copious corporate formalities. Having set up over 300 LLCs in the past five years, I can tell you an LLC works well in many situations.
The third question most potential entrepreneurs will ask is, “What relevant information should they know to start a business?” Most small business startups do not suffer from a lack of information. Instead, they struggle with the sheer volume of information that is available. This and the long line of people and businesses that want to sell you services for your startup can all seem overwhelming. For that reason, it may be helpful to review some of the other aspects that are so important in starting a business.
Be Relentlessly Positive.
Most of us have some cognitive dissonance between what we believe we can achieve and what reality tells us – e.g. me at the gym most mornings. While too much of this can lead to people living in a fantasy world, the skill of not looking reality straight in the eye can have its benefits. With the success rate of most startups hovering around 50%, it is not hard to understand why the skill to stay relentlessly positive in even the most strenuous circumstances is required.
This is especially true during the startup phase, or when a situation arises that feels like the odds of continuing to operate are overwhelming. This may be when you fail to get the capital you need to get started, a key employee decides to move on, or you are just struggling to have enough cash flow to keep the lights on. To be clear, I am not encouraging a departure from facing reality; there is great value in dealing with these situations and imagining a positive way to navigate through these difficult circumstances.
Be Willing to Change.
If you talk shop with business owners, they will tell you that relationships are the most critical part of any business. Another owner might advise that business is really all about your ability to attract and hire good talent. A third owner might say that bringing a new or novel idea to market is really the key to success. After all that, a fourth business owner will tell you the real key to success is access to capital to get started.
By this point, you’ll begin to wonder how many keys there are to having a successful business and what keys are the most essential. The answer is both beautifully simple and mind-numbingly complex. There are no magic keys to creating a successful business. You must make changes until you find the formula that makes your business successful. Talk long enough with most successful business owners, and you will hear all of them eventually say one thing, “Our business has changed a lot over the years.”
Be Willing to Embrace Failure.
You may think this is similar to making changes, but this is a different skill set. By the time most entrepreneurs get started with a business, they have overcome both their self-doubts and have learned to shut out the skepticism of others. This skill is imperative because, without self-confidence and a strong belief that you can be successful, it is far too easy to listen to others and give in to the skepticism that you are not fit to be successful in business.
However, this belief can also become the Achilles heel for business owners. They begin to believe that sticking with an idea will pay off and that the market or employees will eventually come to their view – this is seldom the case. Generally speaking, the market and employees will reward good ideas, and bad ideas simply never take off. Sometimes entrepreneurs will continue to pour time and resources into ideas that simply do not move the business forward because they believe the tide will eventually change. The best way to overcome this Achilles heel is to embrace failure. An entrepreneur embracing failure can try a new idea, use it if it works, and shut down an idea that doesn’t work before it becomes fatal.
While I would like to tell you we have the magic keys to ensure you have a successful business, unfortunately, that is not the case. However, we would be happy to discuss how we can provide you with resources that give you a better chance at success.
Ken Hochstetler
Attorney at Law
Business Law, Estate Planning, Real Estate Law