Many people have ideas for a business they want to start. Often these ideas stem from the individual’s passions and from a vision of how they can live their passion, all the while making a living doing so. After all, this is ideal; to be passionate about your work!
Some people step out of their fear and begin the business. They are driven for numerous reasons; they need a life change, they are un-employed, they cannot stop thinking about “what could be.” For those brave enough to step into the world of entrepreneurship there are many things to consider and realize.
Many people start their business with little to no sense of what goes into starting, running and operating a business. They simply launch based on their passion. Now, without passion there is little to no point in even beginning this process, because the road will be tough. There will be bumps, obstacles, pot holes and a whole bunch of other things thrown at you that will make you question your decision. There will be many days when working for someone else seems like a good idea. Without passion, those days will scream at you. Without passion, it will be that much easier to walk away when it is hard.
As a consultant specializing in startups, and as someone that has started, run and operated numerous businesses, I understand and have seen where the passion can go.
As you start your business you are filled with excitement. Filled with a sense of the future and what is too come. So, what happens? Often times, as you get into the business, the nuances drive the passion away. You start off by picking the name. You design a logo, and design business cards. You are official, in your mind.
Some of the initial trouble points:
- What type of entity should I be? There are pros and cons to each; an LLC, Sole Proprietor, S corp, C corp. If you are lucky enough to have a good tax advisor and corporate legal counsel, they should be able to help you with these questions. Remember, there are tax implications as well as liability considerations for each type of entity. I see many startups that do not address this issue up front. They do not seek counsel and they do not understand the implications; and they are significant.
- The next problem arises with operating agreements, equity splits and managing relationships with partners. Again, good counsel is helpful but costly.
- How to manage taxes; state and federal taxes, sales tax, income tax (based on entity structure).
- How to hire personnel and when to hire an employee vs bringing on an independent contractor. Again, this is a major issue that the Department of Labor takes very seriously. Managed incorrectly, it can lead to significant fines.
- Choosing and managing vendors; marketing, accounting, web design, legal, bookkeeping, etc. Let’s face it, there are many people with professional licensure or that claim to have expertise. All I can say is interview many and check references for all. The wrong vendor can easily lead to a whirlwind of poor advice and guidance.
- Many new business owners think they need to do everything themselves; marketing, bookkeeping, etc. The quickest way to destroy the passion is to take on what you are not good at. This reduces the amount of time you have to build and grow the business and focus on your passion. I am a firm believer in outsourcing, but know enough for checks and balances.
- Financial instability. You started your business. You have a set amount of capital. You created a budget. You will spend more than you anticipate during the startup phase. Once you start driving revenue and the business is standing, there will be weeks that are slow. As the owner you are the first to feel the squeeze and this stress and instability can be very trying.
- Do I need business insurance? Yes. How much and to cover what? Depends. Get an agent.
There are many other nuances of running/owning a business that no MBA will prepare you for. Human resource issues, insurance questions. Dealing with a law suit or having to fire someone. Dealing with ERISA law, or disgruntled employees. Dealing with a partnership that is no longer good.
I am by no way trying to scare you from starting that business, I am just saying, in the words of my MBA Economics professor, “Take the sunglasses off.” Owning your own business can be extremely rewarding, but it is not without trials, tribulations and stress; follow your passion and surround yourself with people that can help you with the nuances that get in the way!
About the Author
Matthew Connell is Program Director-Business Administration Department at Goodwin College and Co-Founder of social impact startup Yellowbrick.me, an online tool that provides parents, families, and communities with the resources needed to raise socially responsible children.
Learn more in our interview:
Yellowbrick.me Co-Founder Shares Updates About the Startup