Stephen Burrow
In this final installment of his series on starting a new business, Stephen Burrow discusses the little things that often help small businesses succeed in the long run.
This article is the last in a series about starting a new business – the dream of many independent, ambitious people.
In Part 1, we discussed a small business having a well-devised plan and sufficient capital. In Part 2, I outlined some of the steps necessary to bring your business plan to reality. Now I want to go over some of the little things which, in my experience, help small businesses succeed in the long run.
As I said before, you do not have to have an attorney or an accountant to perform any of these steps. However, they certainly may be advisable given your resources or aptitude for these tasks. Some of these will seem like common sense while others may even be unnecessary. Regardless, I am always amazed at the number of supposedly savvy businesspeople who do not take some of these very elementary precautions.
Speaking of precautions, once again a reminder: I am not your lawyer. This article is not legal advice. My suggestions/recommendations are for general information only. They cannot possibly cover every circumstance or situation. If you want advice tailored to your specific needs, you should contact an attorney or certified public accountant.
Let’s get into it.
1. Get a separate bank account for the business
I am amazed at the number of people who use a personal checking account for tracking business income and expenditures. I have even seen people operate businesses on a full-time basis for years running everything out of a personal account, sometimes a joint account with their spouse. Marriage is a foundation of our society built on mutual love and trust – not accounts receivable and payroll taxes.
While this may seem unnecessary if your business simply receives revenues with few expenses, in my opinion having a separate account for your business is not a debatable decision. A separate account allows much easier tracking of your business-related transactions come tax season. It will also come in very handy if you ever receive one of those fun audit letters from the IRS or Mississippi Department of Revenue.
I cannot imagine the circumstance in which operating a business out of a personal account is preferable to having a separate account. Almost every financial institution will allow you to have a free checking account, provided you have either an established banking relationship with it or keep a minimum amount on deposit.
2. No business contracts or other form documents
Business forms can be a good starting point for establishing the relationship between you and a customer/client. It is easy to overlook when your business is first starting and your attention is focused simply on getting your operations going (and money coming in). However, having a set of basic contracts or other forms can potentially save you tens of thousands of dollars down-the-road.
A simple written contract should set forth what you propose to do or sell in exchange for a promise by that customer/client to compensate you. Most importantly, that document should describe what everyone’s rights and remedies are in the event one of the parties fails to perform under the agreement. The best example is having a provision that if the client fails to pay you, then you not only have the right to sue them for damages, but also recover attorney’s fees, litigation expenses, court costs, etc. If you do not have a contract or have a written contract which does not specifically reference attorney’s fees, and you have to sue your client for non-payment, then your legal fees will come out of the amount the client/customer owes you. Having provisions in written contracts regarding attorney’s fees is absolutely vital especially when the unpaid amounts are relatively small. In those cases, attorney fees and court costs may often exceed what you might recover, dissuading attorneys from taking the case and forcing you to abandon any collection efforts.
Another important term in these agreements is a governing law/jurisdiction clause. If you are performing services for a customer in Alabama and he/she fails to pay you, you may be forced not only to sue them in Alabama but apply Alabama law which may or may not to be as favorable to you as Mississippi law. A common contract provision is to apply Mississippi law and designate the county where your business is located as being the exclusive jurisdiction for any future disputes between you and the customer.
3. Marketing
I am not expert in marketing. However, businesses just getting started have got to get themselves known through means other than just referral by family and friends. So many people have no idea how to get their business known to potential customers. They just assume customers will start coming to them automatically.
How your marketing is done will depend greatly upon the type of business you have and the geographic scope of customers you want to attract. While marketing is often part of a well-developed business plan, with sufficient capital set aside to implement it, consulting with someone experienced in this area, even if for only an hour or two, will be beneficial in helping you to achieve your goals.
4. Read before you sign
As part of your business, you will also be required to sign various contracts with suppliers, consultants or others whose goods and services you will need in order to take care of your clients/customers. Just as important as it is for you to have your own contracts, you need to be aware of the obligations you undertake when signing certain agreements with your vendors.
One of the biggest mistakes I see small businesses make is signing long-term contracts which obligate the business (and often you personally) to a vendor. Understand that during the start-up phase of any business, you may not have much leverage to negotiate better terms than on a vendor’s form. However, it never hurts to attempt to negotiate to remove onerous terms or seek out a vendor who may not require a personal guaranty or a vendor maybe willing to engage in a shorter-term obligation. Otherwise, should the business be unsuccessful, or you wish to make a significant change in terms of location or suppliers of goods/services to the business, you may find yourself trapped in an agreement the obligations of which may extend long after the business has closed.
5. Peer-support
Whether you are starting a new business at 26 or 62 years of age, we all need someone to whom we can go for advice or guidance. While there is certainly nothing wrong with having an attorney or CPA help, many times he or she will not have the experience in your specific industry to help you avoid traps, pitfalls or common mistakes.
For example, I certainly can help a new engineering firm with the legal requirements of bidding on a public works contract. Yet, I have no experience in how that engineer’s bid should be worded or priced. Finding someone in your industry who is retired or established (but not a direct competitor) can go a long way towards helping your business succeed. That person should know the proverbial “tricks-of-the-trade.” If that person is retired, then he or she may introduce you to potential customers/clients or tell you which industry resources are most effective at helping your business grow. While you should certainly offer to pay this person for his or her time in helping you, you would be amazed at how many retired people may be willing to help for no other reason than someone helped them find success when they are were first starting out.
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There are many more nuggets of advice which can help you succeed, but that is certainly enough for now. Like most things in life, your chances of success are directly related to the amount of time and effort you devote to your new business. There is simply no substitute for you devoting your attention and labor as opposed to relying primarily on others to make your business successful.
