What to Ask: Business Operations and Startup Tips | Matthew Erskine, Esq.
UpCounsel attorney Matthew Erskine explains what every startup should be asking their legal team about business operations and startup tips3 min read
How will things fall apart?
No one plans for failure when starting a business, but failures are a reality. It is always best to discuss and have a contingency plan for how to wind up a business if some event that is beyond your control makes it uneconomical to carry on.
What is your business idea?
At its core, every startup has a business idea that is a new combination of competencies and situations that add more client value than you competition. Can you articulate it? Does every aspect of your business plan create value for the client? Have you protected your trade secrets that give you your competitive edge?
How strong is your business plan?
Everyone knows about drafting business plans, but how well does the business plan cope with future uncertainties? How does the plan integrate information from a wide area of disciplines into a coherent whole?
What are the people and resources available to you, and how much are you willing to risk on this idea?
Since the future is uncertain, you need to define what resources and people you have available right now to explore whether you want to continue putting time and money into this idea or when is it time to stop.
How well have you generated strategies?
Nothing is ever smooth, so have a "plan B" ready to go if things turn sour.
What is the best way a small business owner can protect personal wealth and assets from business risks?
The best way to protect personal wealth is do the work beforehand to have a successful business. After that, don't overcommit your resources and time to the project. Decide what you are willing to put at risk and what are the objectives before you make the jump, then stick with it.
What is the best way a small business can maximize its tax deductions?
Saving taxes is not a strategy for success; it is a tactic used to make your business strategy more efficient. Do not take actions just to save taxes in the short term, especially when it could harm your business goals in the long term (such as a Sub S election).
What specifically are small business owners most confused about when you first meet with them?
The reason why they need to talk to a succession planning expert even before they start up the company
How can quality legal services help a small business grow?
It gives you the confidence in your future success and your ability to profit from uncertainty
How can quality legal services help small businesses save money?
It is not about saving money; it is more about efficiently making a net profit.
How can small businesses maximize the value of their legal team’s services?
Integrate them into the business operations and planning.
Should business partners have the same amount of equity in a company? Why or why not?
It depends on the situation and the people. The first thing to understand is that early investors always get crammed down in future rounds of financing, so never use the percentage of equity in the company as a lure for investors. What is 25 percent equity today may be 2.5 percent equity in 10 years.
What are the top three things a small business owner should be aware of when purchasing an existing business?
Due diligence reviewing customer lists, sale records, advertising materials, and employee contracts. Determine why the business is for sale. Determine whether it is really necessary to buy a business, or can you just buy the assets?
Do you have any other essential legal guidance for startups that you haven't already included in this survey?
Remember, the only reason you work for yourself is because you cannot stand working for someone else. Forming your own company is riskier, more work, and less profitable (at least in the short term) than your job.