Three Things to Consider When Starting a Business
When someone starts a business, an almost endless array of questions can come to mind. While it is virtually impossible to consider everything that will occur during a business’s lifecycle before you even start, here are a few things that new owners can consider.
Before considering anything else, it is smart to consider whether a business even can work. If there are insurmountable barriers, the business is a waste of time. If a business is not going to make money, what’s the point?
It is important to distinguish the difficult from the impossible. All businesses require hard work to get off the ground. But some have fundamental flaws that make it impossible for them to succeed.
This is the time where a potential business owner needs to take a hard look and play devil’s advocate. Ask the tough questions. Will others really like my product as much as I do? Am I really that much better than the cheaper option down the street?
If a business plan is viable and moves forward, it is time to do some long term planning. Even well run businesses can fail. So it is important to gauge liability—both to the business and personally for the owners.
Entities and statuses like corporations and LLCs are extremely important because they limit the liability of the owners personally for the business’s debts. That said, owners may have to take on personal obligations for some of the business’s debts. Those obligations should be considered carefully.
Another important thing to consider is insurance coverage. General liability coverage is often inexpensive and a great coverall protection. Many landlords require it to rent from them. Professionals will usually need some kind of professional liability coverage like malpractice coverage or errors and omissions coverage. Workers compensation insurance is often required. And cyber coverage or data breach coverage are usually a smart idea for businesses that work with others’ data.
Once the business starts coming together, it is time to consider the federal, state, and local laws and regulations that affect the business. Most people are aware that they will have to pay taxes on the business. But what about a business license? Do you need a certificate of occupancy? Are there environmental regulations that affect the business?
Starting a business is exciting. But before any venture gets off the ground, it is worth considering viability, liability, and compliance when planning how to set up your business. Looking at these three issues can easily prevent many problems down the road.