8 Critical Things Entrepreneurs Often Ignore When Starting a Company
The views expressed by the business participants are their own.
The very definition of entrepreneurship means many curves. Founders start companies based on an idea, create a business plan for what they believe the future of that idea will be, press their foot down on the gas pedal and go. Along the way, inventors are forced to make many quick but impactful decisions with limited resources and foggy information about how their results will play out. In fact, they built the foundation of the house, not knowing how its roof would end up.
Many of these early stage decisions are basic and become more important as the company itself grows. Because of self-imposed goals and deadlines, founders may overlook important parts of building a lasting business. Rushing can be met with regret later in the company’s life cycle, costing time, human and financial resources and, potentially, the company. In fact, according to the United States Bureau of Labor Statistics, about 10% of startups fail within the first year. However, that percentage increases over time, and the long-term failure rate is 90%. Ultimately, the choices we make today may take years to manifest, and the consequences can be disastrous.
Related: The 3 Biggest Mistakes I Made When Starting a Business – Here’s What I Learned From Them
Here are eight key actions that founders ignore when starting their companies:
1. To properly build their company under the right structure
There are many structures that corporations can take early, including LLC, C-Corp and S-Corp. Each has its advantages and limitations, and it is important for founders to match their company structure with their financial and tax goals. For example, an LLC can be structured like a convertible note and include private investors. In order to properly determine the best structure for their business, founders should outline their investment strategy and consult with an attorney who is familiar with company structure.
2. Protecting their IP
Intellectual property must be protected at the beginning of the establishment of the company and certainly before the product is introduced to the market. Companies should ask an IP attorney to file the company’s trademark and product names, logo designs and any product designs as protectable. Additionally, especially for technology companies, patents must be filed prior to product launch. Although the cost may seem expensive, especially at first, IP can end up being a company’s main source of value in the long run.
3. Forming an appropriate advisory board
While the foundation phase may seem premature to get an advisory board, it can actually be beneficial and critical. The truth is that founders alone cannot cover all the skill sets and experience bases needed to ensure a positive outcome in the future. Even in the initial stages of fundraising, the “team” is the main part of the investors who bet on the success of the company. Advisors can fill skill gaps that were not initially present and serve as an important decision maker for an investor. Therefore, founders should assess their teams’ skills and gaps and formally in-house counsel to fill those experience/skill gaps.
- Determining the right financing strategy. It’s often thought that venture capital is the holy grail of investment and that the most successful companies are built with VC funding. VC money is good for some companies, but there are also limitations – once a company receives VC money, it has third parties holding a good portion of its equity, and those parties have a strong say in decision-making going forward. . Some companies may want to grow at a different pace than required by VCs, leading to differences. As a founder, it is important to identify exactly how success is determined for the company – ask yourself what growth looks like and how much of the company you are willing to part with in the long term.
- Assessing the strengths of the creative team and identifying gaps. Although consultants may fill adjacent skill gaps, the reality is that they do not work full-time for the company. Therefore, it is important to identify current and future skills gaps within the creative/management team, identify the roles needed to fill them and create a timeline for hiring them. Some may not be needed until the next round of financing, while others may be immediately.
- Exploring the current environment of the great. Although an inventor may have the most innovative idea in the world, the current macroeconomic environment may not be able to support it. It is important that you review the broader environment regarding the reception of your product or service and the general environment. For example, the market may be ready to offer, but the overall funding environment may be dry. Practical testing will enable the founder to create a more realistic growth plan.
- To pave their way to the market. Founders can get so caught up in their product or service that they forget to evaluate how they are going to communicate it to others. It is important for a new business to clearly identify its primary target customer and its total target market in order to understand how much it will cost and how long it will take to acquire those customers.
- Determining their long-term commitment/investment. Jeff Bezos said, “Overnight success takes 10 years.” This could not be more accurate. Entrepreneurs read the glowing social media accounts of fast-rising companies and experience the fastest hockey stick growth curve and expect that success, but success takes time. So early on, founders should assess their time horizons and decide how long to commit to their endeavors. Part of this may be their personal commitment, especially if they have a family. Your part may be financial—as a founder, knowing your financial direction is important. Hiring an outside executive coach and therapist can help better navigate these waters of life.
Related: Don’t Ignore This Important Business Activity If You Want Your Startup To Succeed
John Wooden, the coach of the UCLA Bruins basketball team, who is considered the greatest coach in NCAA history, taught his players how to put on shoes and socks correctly. When asked why, he said, “The little things matter. All it takes is one little wrinkle in one sock to put a blister on one foot and it can ruin my whole season.” Winning the game of entrepreneurship starts with intention, founders do everything they can to put themselves in the best position for success. Beyond that comes a little luck and a lot of energy, but it starts with proper preparation.
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