Previous Becker articles have covered the importance of business succession planning for the mature business owner. Succession planning is only one of the transition steps a business will undergo. Another is in the start-up phase.
The new entrepreneur, not necessarily a young entrepreneur, is motivated either by income or by identifying and seizing an opportunity in the marketplace. The new entrepreneur is often swept away with enthusiasm and may overlook important foundational pieces for long-term success.
Here are some basic ‘tips and traps’ for the new entrepreneur.
1. Write a business plan. There are many resources available including paying a consultant to assist you. Whatever you spend, it will be money well spent.
2. Establish relationships with lawyers, accountants, financial planners, insurance professionals and a banker. Most advisors offer initial consultations at little or no cost. While you may not need professional advice at the outset, establish these contacts early for future reference.
3. There are significant legal and accounting differences between a sole proprietorship, partnership or limited company. You will need proper professional advice to make the right decision.
4. Set up a separate bank account and records keeping system for your business, even if you are operating as a sole proprietorship. You may have to register for PST and GST and have other compliance requirements.
5. Put business relationships in writing, including those with your employees and independent contractors.
6. Manage your accounts receivable. Allowing money to go out, with no money coming in will cripple your business. If you grant credit, get personal guarantees from your incorporated customers.
1. Do not run your business activities out of your personal financial accounts.
2. Do not assume that your existing personal or homeowner insurance will cover your business operations.
3. Do not assume that anyone you deal with has the same understanding as you do about the relationship. Get it in writing.
4. Do not forget to identify and comply with all government regulations affecting your business.
5. Do not avoid getting proper professional advice when you find yourself out of your comfort zone.
6. Do not ignore your family. They are your biggest source of support and should remain your first priority.
While there is never any guarantee of success, with proper planning your chances of success will increase dramatically.
John Becker is a certified Family Enterprise Advisor and the senior lawyer at Becker & Company, located in Pitt Meadows. John has been a lawyer for more than 30 years, and now focuses his practice on family business succession planning, corporate and commercial law, and real estate. Send questions to: firstname.lastname@example.org