As a Baltimore Small Business Lawyer, I regularly meet with new clients starting a new business seeking my “lawyerly” advice. Often they immediately want to file for an LLC, open a bank account, and open shop to start selling XYZ. They want to start businesses as varied as gas stations to record labels; from retail stores to microchip manufacturing; from woodworking to pottery. I always start the very first business client consultation with the same opening line, “Do you have a business plan?”
Starting a small business: non-lawyerly advice to achieve success
Most of the time, I advise my clients to cover their non-legal bases before worrying about shelling out any money for a lawyer, LLC filings, or opening a bank account. Why? Not because I don’t want to earn the legal fee for the legal work, but as a Small Business lawyer, I would not be doing my clients a service if I failed to help them succeed in the long term. So, here are my simple steps to starting your own business:
- Have an idea
- Write the idea down. (this is called a business plan)
- Think about the idea: who will be buying it and how do you get people to buy it (this is the marketing section of your plan).
- Is your idea going to have any customers?
- Figure out what it is going to cost to start and run your business. Then double your estimates. (the financial part of your plan)
- Figure out what the regulatory environment is for your business. A retail store needs a trader’s license from the county in which you are selling. A restaurant needs a liquor license, a food vendor license, certain training requirements, and possibly a trader’s license. A consultant just needs his brains. (this is another section in your business plan)
- Who are you competing against? (this is the “competitive analysis” section of your plan)
- Put it all together in a coherent plan, with a short executive summary (you will need this to borrow money from any bank or any venture capital investor)
- Meet with a Baltimore Small Business lawyer (preferably me), an accountant, and any other trusted friends and advisers (make sure they are all smarter than you are). Have them tell you what you should be doing to be successful.
- File the necessary documents with the state, local, and federal government for licensing and LLC
- Determine if you need a trade name and any trademark protections for your business. File for them if you do.
- A hundred small items in between the idea and the implementation, but eventually start your business.
This process should take anywhere from 6 months to a year for just business formation. It can take less, but to be done correctly requires a tremendous amount of time commitment. Of course, it can be skipped too, but our experience is that success often comes faster and easier with the heavy lifting done upfront.
As a lawyer, why am I so insistent that clients who want to start a business write a business plan and spend so much time researching the industry?
A couple of reasons:
- It makes you think about unanticipated problems, such as unforeseen regulatory issues or costs to starting your business.
- The financial analysis, in particular, will highlight your ability to earn a profit in your business
- for example, by understanding your market and your costs you may learn that the potential client base for your product is only 10,000 people, they will only buy your product once or twice a year and your product costs .$50 to make and sells for $1.50, you will only ever possibly earn $20,000 per year in profit. By thinking and not spending, you can invest your money in another idea later on by avoiding bad business plans.
Small business lawyer: The bottom line
Frankly, whether or not you write a business plan is totally up to you. There are plenty of samples available online for free and people at SCORE and the SBA will help you write them for free, plus there are literally hundreds of books and classes on business plan writing. There is no magic format. It is a difficult process if you do it correctly, but the rewards for your business will pay handsomely long term. Have businesses succeeded without them? Yes! But the bottom line is that we want your business to succeed as much as you do, and it starts with a plan.
