In the startup world, there are a lot of opinions about the correct and incorrect ways to set up a new business. Making the right choices during a company’s early stages is crucial to successful structuring, but it’s often difficult to know what the right choice is. Weeding out common myths can help business owners make informed decisions for themselves, and for the future of their company.
In this blog, we will discuss some of the most common startup myths and the truths behind these narratives. Gaining a well-rounded understanding of these ideas can help set up your business for success from the very beginning.
Myth #1: Lawyers Aren’t Necessary Pre-funding
It’s never too early to hire a lawyer. Securing proper counsel from the very beginning can help your business avoid legal mistakes and protect your ideals. Having an attorney as your partner can help prevent more risks than necessary, and protect the future of your company with expert legal support.
At HJF Law, our team of experts are here to guide you through every stage of your business. From the time you begin determining how to transition your idea into actuality, our attorneys are here to walk you through every step to make sure your company becomes a success.
Myth #2: Loans Are Necessary
Not everyone has the funds to invest their own capital into a new business. For those that do, bootstrapping a new company with personal funds carries a larger risk, but also allows certain freedoms and a more direct focus on working in your business rather than on your business.
Among those who lack a large amount of capital to invest their own cash flow, many assume applying for a bank loan is the only appropriate action. Loans can seem attractive for obvious reasons, but having to repay funds with interest might cause more harm than good down the line. However, there are other options for new companies to acquire funding.
Investors can be a solid alternative for acquiring funding without securing a bank loan. Venture capitalists are always looking for their next big investment opportunity, and seeking out the best investment match for your company could prove more beneficial than a simple loan by expanding your professional network and circle of expertise.
Myth #3: A Full-Scale Business Plan is Required for Funding
Plenty of startups rely on investor funds to operate before they become profitable. Securing funds is crucial for future success, but it can also be challenging. Nailing a pitch is key, and investors will want to see an organized company with a promising future.
While a well-developed business plan is great to have as a beginning guideline, it is likely there will be many unknowns during early stages. Rather than creating detailed, rigid plans for two, five, or 10 years down the road, it is better to outline potential challenge scenarios and explain how it is possible for your business to navigate and overcome them. This kind of strategic flexibility shows a combination of planning and adaptive response that investors love to see.
Myth #4: If You Build It, They Will Come
Entrepreneurs are typically excited to bring new companies to fruition. Once the idea has been fleshed out, market research completed, funding identified, and plans are underway, it seems like the next step is for customers to come eagerly calling.
The truth is, it is just as important to invest in marketing as it is your company. Business owners must establish their brand including logo, tagline, and assets then sharing those with the world is how people will begin to know who you are and what you offer. Business registrations, copyrights, and trademarks go hand-in-hand with this process, ensuring competitors are not able to steal brand identity — and therefore your audience.
Myth #5: Policies and Classifications Can Wait
During the business creation process, it may seem like official documentation is not necessary. After all, why go through the trouble of establishing official policies and employee guidelines before the business is ready to go live?
The truth is that it is exponentially easier to set up any potentially necessary documentation before it is needed. Even in the early stages of your business, consumers will want to know that their data is safe. In order to build trust with the people who will use your product or service, a privacy policy is absolutely necessary. For that first customer, it won’t be enough that you are “working on it.” It must be legally established well beforehand.
Before hiring is considered, it is crucial to determine what that should look like for your new business. With opportunities to shape task delegation between various types of employees, interns, or contractors, having those agreements and handbooks in place before you need them can also help determine the best hire, saving time and money in the long run. The difference between various types of employees is also stark in the eyes of the law. Avoid expensive fines and costly legal troubles by making sure your team is properly classified and documented before onboarding new hires.
Remember, it’s never too early to hire a lawyer. Call (347) 808-5149 to schedule your free consultation and make sure your business is protected today.