Ten Tips on Forming a New Business
When entrepreneurs initially discuss an idea for a business the natural tendency is to focus on the creative synergy and expectation of success. Then the reality of business formation, legal requirements, permits, licensing, financing and a myriad of other problems curb the initial enthusiasm. (I will informally refer to entrepreneurs forming a business as “partners”, whether they have a formal partnership agreement or not.)
These partners will be making Important decisions that will determine the success of the business enterprise. To address these challenges, a new business may seek assistance from an attorney, a tax/financial consultant or business advisory agency. At less cost, self-help approaches and checklists are also available. A possible downside of forming a business without professional help is that the partners may not have the specific business experience, insight and expertise of professionals who have helped others through the difficult and complex path of forming a new business.
What may be overlooked, even by professionals, are the steps that help the partners communicate clearly with each other and solidify the teamwork and interpersonal relationships that are crucial to the long-term success of the business. At the core of every business enterprise are the people that invest energy, resources and money. The partners must come to a clear understanding of their mutual interests and how they will cooperate to ensure the success of the business. In addition to a specific business, marketing and financial plan the partners may need to address the following issues:
The relative proportion each partner is investing financially and how that will impact the individual and the business.
The current workload and specific duties and responsibilities of each partner and what new duties and responsibilities each is assuming in the business.
How the partners will communicate with each other and run the business.
Each partners’ expectation of success and monetary objectives in the new business.
The extent to which each partner is realizing personal satisfaction in the activities of the business.
How the business will define and assesses its measure of success over a specific period and what actions will be taken if these objectives are not met.
The need for written policies or guidelines on customers, human resources, and legal compliance.
Relationship and communication with other businesses and the community.
How the business and the partners will establish the reputation and branding to guarantee success.
A process or procedure to deal with the inevitable conflicts or complaints that can distract the focus of the business and consume an inordinate amount of time, energy and resources.
Early in the process of formation a new business may benefit from exploring and developing specific, realistic, written commitments of the partners. Clarifying these issues will help the partners determine if the business concept and working group is realistic and practical. If the business continues this exercise will improve the partners’ working relationship which will contribute to the ultimate success of the business.