What are the most important priorities in starting a business? Here is my perspective, having been through this process several times.
- You need to have a great business plan. Don’t buy one of those templates and then just fill in the numbers. You have to really, really, REALLY research your market, your business strategy, your PlanA, PlanB and Plan C. You MUST understand your market thoroughly. You need to shop it around and have as many people as possible shoot at it, telling you why this or that won’t work. You need to know what competition will do, your response, their counter response and your counter to their counter. This is 3 dimensional chess. You better simulate it and figure on every thing that can possibly go wrong will go wrong and how you will respond. This is mind-crushing, numbing, detail oriented, depressing work. You better answer the question of what your competitive advantage is so strikingly that it is self obvious to even a critic. Remember: you and your partner are star-struck with an idea. You only see the positive. You haven’t looked at the downsides. You are in the euphoria of creation. Reality may hit you pretty hard if you don’t have a good business plan. See https://CEAnow.org for a course on selecting the right business, figuring out how to succeed at it, and developing a realistic business plan.
- You MUST have a well-thought out business organization plan. You mentioned “partner” and I shuddered, because a partnership is the worst form of business organization, bar none. You should probably start out as an LLC. You will need an operating agreement. Again, if you buy one of those off the shelf things and go your merry way, you are inviting DISASTER. Been there, done that. Stop. You should go through every possible scenario of what can go wrong. How will you respond? What happens if your partner wants to resign, withdraw, take customers, withdraw assets? What happens if they want to stay and force you out? What happens if you disagree on something and can’t work it out? When do you get paid? How much? Who determines it? Who is the tie breaker? How are arguments resolved? Who owns the intellectual properties? How are percentages of ownership determined? Is there a difference in ownership from the financial contributions? What if you want to sell the business, merge it, or have another investor? What if that investor wants an outsized amount of ownership? Who will sign on the loans? Who will guarantee them? Who will be the tax representative? Who will make binding agreements for the business ( entering into contracts) and who has to approve that? What happens if one party enters into a contract without the agreement of the other? Who will approve expenditures? Who will approve bids, set prices, manage the employees? Who will hire, who will fire? How will logjams be resolved. And finally, how will the profits be split? Who will determine how much cash needs to remain in the business? I could go on and on, but you get the point. You had better work through every possible thing that could go wrong and right. Otherwise, you will be sitting across from some expensive attorney deciding whether to sue your “partner” or how to respond to their suit while the business crashes and burns. It is essential that you seek the help of a good business attorney. We have a great couple of courses on this at CEAnow.org.
- You must be prepared, mentally, physically, emotionally and spiritually to start a business. This isn’t for sissies. You are doing something that will be unlike anything you have ever done before. If you think it will be tough, you are underestimating it. Please, be sure you, your business partner and your spouse and family are on board. Most people have no idea of how consuming starting a business is. You must be committed completely. You must, in the bottom of your heart know and believe that failure is not an option. You must be absolutely obsessed with making your business a success, no matter what it takes. If you go about this half-hearted, or believe that you can pull the parachute and escape when the going gets rough, you will not succeed.
- You must be prepared financially. Starting a business will stress your finances no matter who you are. You must have your lifestyle adjusted and family on board for this adventure. The saddest case I know is of a realtor who wanted to start his own business. He was with a large shop and had a good income, and he lived at a pretty nice level. When he started his own business, he kept his high-life lifestyle in place, until his house was in foreclosure, his kids booted out of their private school, and his blue Mercedes was taken away ( I saw it towed on the flatbed right past my office one day). His wife left him, he narrowly avoided bankruptcy, but he stuck with the business. It is now doing well. He had a good vision, but he sure didn’t prepare correctly. This cost him dearly, irrevocably, tragically. Don’t let this happen to you. Hunker down. Budget. Have reserves all over the place. Don’t depend upon quick success. Be prepared for bumps in the road.
Have I sobered you up? I hope so. Reading Inc Magazine or Entrepreneur gives people the wrong impression of what it takes to start a business. Those mags are business pornography. The truth is much grittier. Just be prepared. Be determined. Be committed, irrevocably. You’re going to war… don’t become a casualty. Be a victor. Many have and you can too.