Startup Business Tips

Got a Business Idea?

Coming up with a great idea is difficult; turning that idea into a business is even harder. Great companies fail for many reasons that have nothing to do with their products or services. You can prevent that with these startup business tips.

Why It Doesn’t Matter How Great Your Idea Is

An important question for the would-be entrepreneur or business owner to ask is: What is the secret sauce for this business? What will differentiate it from others, and what is protectable in the business?

The truth is that just having a great idea isn’t enough. Products and services seldom sell themselves. Entrepreneurs need skill, training, experience, and passion in other critical areas to survive and grow. Some of those skills include:

• Knowing how to attract and retain key people
• Having a working understanding of business structures, accounting, and finance
• Knowing when to take risks, raise money, and navigate whether to share ownership or get it back
• Being able to negotiate various contracts – to buy a competitor or sell your business

Starting and maintaining a business is not for everybody. But the fact that you are here reading these startup business tips is a significant first step.

Like a chess player, you need to think a step or two in advance about whether you will be abandoning opportunities when making business decisions.

What To Consider Before You Enter a Market

Each entrepreneur needs to assess what they are good at and where they need help. You have a personal skill set, but you may need partners who cover your weaknesses or accentuate your strengths.

That said, avoid partnering up without proper thought. Too many novice business owners rush into a market with a partner they don’t know. Or they try to sell to customers they don’t understand.

Here is a short, incomplete list of things to know before you go into a new market:

• Are you better at running a business or starting from scratch?
• Where is the money going to come from?
• How will you involve others in the business? If so, under what terms?
• Which legal structure will you use to organize the business?
• Which risks can you insure against?

New business owners are well-advised to build a network of advisors and professionals. These include attorneys, accountants, and other consultants. Forming an advisory board can also be very helpful to your business.

Even better, you do not have to hire anyone to learn business tips. Many professionals are willing to discuss issues over coffee or a phone call.

Business Structure Impacts Everything

New business owners must select the best business structure. The tax savings for choosing the correct entity can be huge. Laws vary from state to state, too.

Choose Advisors and Employees Wisely

Be well-educated before you approach advisors. It saves time and money and steers the relationship onto a beneficial path. Hiring and developing your employees is also key to the success of your business.

Financing Your Startup Business

A lack of cash is the next big problem many companies will face. New enterprises tend to starve for liquidity and struggle to grow when the bank account runs low.

Of course, raising money for your startup almost always comes at a cost. Entrepreneurs who fail to recognize and compare the prices of financing sources can put their enterprise at risk.

Entrepreneurs often put money upfront, whether from savings or through credit. Others rely on friends and family. You can even seek financing from customers and suppliers.

Angel Investors

A step beyond friends and family are angel investors. Angels are a more sophisticated source of capital. Generally speaking, they want the same type of equity as the owner. Some, but not all, angel investors seek participation rights in the business.

Angels tend to come in around the low six-figures. But they may also pursue more substantial investments into the high six figures.

Private Equity and Venture Capital

Private equity and venture capitalists are the most complicated private business financing sources. These players are professional investors. They often seek an advanced class of equity in exchange for their partnership. For example, most seek out board representation or other business rights.

Professional investor money tends to be very, very expensive money. These players are savvy and protective of their interests. That said, the consultative expertise of a PE or VC firm can transform the right smaller business into a large, successful company.

How To Protect Your Idea, Assets, and Yourself

Every business owner needs to know how to structure their business relationships, both legally and practically. Consider the following:

• Intellectual property protection
• Confidentiality agreements
• Non-compete agreements
• Invention agreements
• Risk management, insurance, and ADR

Put It In Writing

One of the best business practices is to put all of your agreements in writing. These include employment agreements, shareholder agreements, supplier agreements, and partnership agreements. Business owners often get into trouble when they work with friends or family because they fail to put the terms of their agreements in writing.

An employee handbook is a good idea to document employee and employer expectations. This is especially true in the era of social media, the internet, and email. However, employee handbooks can be changed. Employee contracts are final and enforceable whenever a dispute arises.

Looking Ahead

Entrepreneurs should focus on those things about which they have great passion. Most successful entrepreneurs wear many hats and discover things slowly or by accident. There is an economic advantage to seeking help from experts in business development. Remember: if you’re going to make it, you need to know how to manage employees, investors, customers, suppliers, regulators, and the IRS.

We think you’ll also like:

1. The Basics of Business Formation: What Every Entrepreneur Needs to Know
2. Does It Pay To Pursue Your Dream of Starting a Business?
3. Choosing a Financial Planning Advisor: No Magic Involved

[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

1. Turning an Idea or Product Into a Business
2. What Every Founder/Entrepreneur Must Know
3. Intellectual Property 101/ Copyrights, Patents, and Trademarks…Oh My!

This is an updated version of an article originally published on January 25, 2017, and last updated on October 4, 2023.]

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