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Tell us about: Bob Massi Starting Own Business
Starting your Own Business
What You Need to Know to Succeed
Over the last ten years, I have seen more people start their own businesses than ever before. Partially, due to a poor economy forcing them into entrepreneurship and partially because technology has advanced so far that it’s opened up new opportunities. As an attorney who has helped new business owners for over 35 years, it’s both wonderful to watch and frustrating to see how many jump in head first without setting it up properly.
The story of Jake & Alex: Best friends who didn’t make the best partners.
Jake and Alex have been friends for over 20 years and coincidentally found themselves without work, due to downsizing, at the same time. They voiced their frustrations to each other and realized that in between the grief, they both had some great business ideas. It may have felt like a pipe dream in the past, but they decided they were being given a chance to start something new together. After all, they had been close friends for what felt like forever so they were the perfect match, or so they thought.
Together, they had a good amount of money saved so they opened a coffee shop that was more modern with better menu options than what was currently available in their town. The truth is, they did have a great idea. They were starting something that people wanted and they chose a great location that would attract strong foot traffic. They also had a deep mutual trust. Yet what they would realize over time is that they were too alike in terms of their skills and neither had a strong enough sense of business to make it work. They also didn’t have the same long term goals for the business and made the cardinal mistake of never putting anything in writing when they partnered. These missteps were just the beginning of what led to the demise of their business just 18 months after opening, and eroded decades of a long friendship.
I have seen countless stories similar to the above and it proves that a good idea doesn’t work unless it’s set up for success from the beginning. If Jake and Alex had come to see me prior to officially starting the business, I would have told them that before anything else, the following foundational elements always need to be established:
- A competent attorney: An attorney would have warned them about potential pitfalls and ensured they put everything in writing to avoid problems later on.
- A good CPA: An accountant could have helped them avoid some of the financial mistakes they made at the beginning.
- A strong banking relationship: This is always a must have.
Beyond these, there are a number of common mistakes that frequently lead to the failure of a new business:
The choice between an LLC, sole proprietorship, joint venture, corporation, partnership and more: Know the difference and what’s right for you. People don’t take this element seriously enough and an attorney can advise on proper operating agreements, buy-sell agreements and more to limit any future liability.
DIY legal websites: Don’t be fooled by their convenience. They are never a good idea and not a substitute for a competent attorney who will advise you on your specific case. It will only cost you later on when something goes wrong.
Checks and balances: As the business grows, it can be tempting to outsource tasks and take your eye off what’s happening behind the scenes. Embezzlement is a real issue and has happened to many people who have made this mistake. Make sure to set up a checks and balances system to ensure you have a watchful eye on all aspects of your business, especially financial.
The right partnership: As described above, partnerships can make or break a business. Ask yourself the following questions before diving in: Do you and your potential partner complement each other in skills? Do you have the same vision for the company and do you have a good understanding of their background as well as other business successes or failures? I have a saying on this topic that with partnerships, you inherit their enemies and never their friends. I have seen this prove true again and again.
If you’re considering a new business venture, call Massi & Massi Attorneys at Law at 702-870-1100. We’ll sit down together and make sure everything is laid out properly for success.
