Starting a business involves more than completing a few forms (although completing forms is certainly part of it). A successful start-up has a well-defined plan and a clear identity, and establishing one involves several important steps; missing any of them can doom your business to failure before it even gets off the ground.
Below, the business lawyers at Phillips & Santana explain five of the most important steps you can take to give your Michigan start-up the best chance of success.
1. Take Your Research Seriously
You might have an amazing idea for a product or service. However, no matter how unique and innovative your idea is, it’s important to make sure your idea is realistic, economically viable, and marketable before you start pouring money into it.
Before you open up shop, take time to assess:
- Your motivations for starting a business: Are you passionate about this opportunity, or do you just want to quit your existing job? How much time, effort, and money are you willing to put into your start-up?
- Industry trends: In your field, where are companies headed? What unmet needs would your business address? What challenges or threats might your business model face?
- Customer research: Who are your prospective clients? How often do they use similar services? What are your customers’ average demographics?
- Competition: Where are you planning on operating your business? What existing companies serve the same market? How would your company provide customers a better option compared to what’s already available?
Treat this research like your business’ life depends on it — because it does. You want to build your business plan on data and facts, not hunches and feelings.
If you need help accessing market data, use your local library or the Michigan Electronic Library’s subscriptions. It’s also a good idea to work with a mentor, business lawyer, or consultant as you work through these complex issues.
2. Craft a Comprehensive Business Plan
Now that you understand your market niche, customers, and competition, it’s time to draft your business plan. While you need a business plan to secure financing, your plan is much more than a fundraising tool; it’s your long-term road map.
A good business plan should:
- Introduce your company’s products, services, business model, and strategies
- Explain your marketing and sales plans
- Discuss your business operations (staffing, management structure, and work flow)
- Identify your financial needs, anticipated costs, and cash flow projections
Your business plan shouldn’t be a one-page summary or a list of ideas. Instead, it should carefully outline how your business will operate, set benchmarks, identify weaknesses, and create long-term strategic goals for your start-up.
Thankfully, there are many resources for entrepreneurs who need help with a business plan. You can contact an experienced business lawyer, get in touch with the Michigan Small Business Development Center, or find other local organizations that mentor and advise people with business development needs.
3. Understand Your Financing Options and Revenue Potential
Most people in Michigan don’t have the cash flow to pay for a start-up business on their own. Instead, most of us obtain a small business loan or other financing. Depending on your circumstances, you might get a traditional loan, use the equity in your home, draw from your retirement or credit accounts, or even explore crowdfunding.
However, getting the money you need is just one step towards your business’ viability. You also need to understand your start-up costs, your estimated cash flow, and possible issues that might cause financial instability.
Too often, entrepreneurs have unreasonable expectations about how quickly their business will turn a profit. If you don’t have cash reserves or a contingency plan in place, one delay or mishap might spell the end of your business.
4. Pick the Right Business Structure
You can organize your business in a lot of different ways. Depending on your circumstances and area of business, you might benefit from opening as a limited liability company (LLC), corporation, partnership, professional services corporation (PC), or sole proprietorship.
Before you register your business as a legal entity, you should analyze its tax implications, potential risks and liabilities, and investment needs as well as the burdens associated with different types of designations (such as reporting rules).
It’s difficult to select the right type of business entity without help from a business lawyer or other professional. If you need help understanding your options and identifying the correct way to register your business, contact Phillips & Santana for assistance.
5. Follow Michigan’s Business Laws and Regulations
Starting a business in Michigan involves dealing with a lot of government regulation and oversight. You’ll need to:
- Select a business name and protect it as intellectual property
- Register your business with the State of Michigan
- Apply for state and federal tax identification numbers
- Follow state and local licensing and permitting requirements
- Comply with all labor and employment laws
- Satisfy state and federal corporate regulations
- Obtain the appropriate insurance policies
- Draft legal documents such as partnership agreements, contracts, and articles of incorporation
It’s understandable if this all sounds overwhelming. If you need help with legal compliance, either as a start-up or a mature business, it’s a good idea to consult an experienced West Michigan business law attorney.
Make the Law Offices of Kari Santana Part of Your Business Team
At the Law Offices of Kari Santana, we’re committed to the success of West Michigan businesses, and we assist all types of business owners with their comprehensive legal needs. Whether you need help forming an LLC, complying with state and federal laws, or negotiating or enforcing a contract, our skilled business lawyers can answer your questions and provide affordable solutions to any issues you might have.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.