Starting a new business venture is undoubtedly an exciting (and sometimes, overwhelming!) time in your life.
Whether you are thinking about starting your very first business or looking to set up your next business venture, here are 5 key considerations that you should be thinking about from the outset.
1. Understanding your goals
It may seem obvious, but the first question you should ask yourself when starting a new business venture is what your business goals are, for both the short and long term. Understanding what you are hoping to achieve from your new business venture should be the first consideration in deciding on the appropriate business structure, and will assist you to determine the nature and complexity of the business structure and/or any corporate governance documents that you may require.
As a starting point, you should consider:
- Whether you are setting up a business to be your primary source of income for the long term, or whether you are looking to establish and sell your business at the earliest opportunity. Where do you hope to see yourself in the next 5, 10 or 15 years?
- If you are going into business with another person (perhaps a family member or a friend), has each party clearly articulated their position on how the business will be managed and their preferred roles and responsibilities?
- Your personal asset holdings and asset protection strategy, and in particular, whether there are any potential risks to your personal assets in the event that the business is subject to a third party claim or other liability.
2. Choosing a business structure that supports your business goals
With your business goals clear in your mind, the next step is to determine the business structure that best aligns with your goals for the future.
There are various types of business structures which each have their own benefits and limitations. Choosing a business structure that it not suitable for your future business goals can be costly and time-consuming to address and rectify once your business is established.
For example, where your ultimate aim is to build the business to a point where it can be sold to a third party, you should ensure that your chosen business structure is set up in a way that is appealing to potential purchasers and that facilitates a clean and simple sale.
If you will be starting the business on your own but plan to introduce new business partners in the future, you should ensure that your chosen business structure gives you the flexibility to do so in a simple and cost-effective manner.
3. Decision making and exits – Making sure all of your bases are covered
If you will be starting a new business with a business partner, friend or family member, it is important to ensure that the key decision-making processes and responsibilities are clearly documented from the outset.
We often speak with clients who have previously operated their business with their business partner co-operatively and with no significant issues. But then something changes, whether it be a breakdown of a personal relationship, financial strain or other life circumstances – and very quickly the business begins to suffer.
The best protection for your business is to have a clear decision-making procedure in place from the outset. This should also include agreed procedures to be followed when disputes arise, or if one of the business partners needs to exit the business.
If you will be conducting your business via a company or corporate trustee, click here to learn more about how a Shareholders’ Agreement can help you to navigate these issues and protect your business in the long term.
4. Protecting the value of your brand
Brand development and marketing activities associated with building value and increasing the reputation of your business can be an expensive exercise, so it is important to make sure that the brand under which you choose to run your business won’t cause you headaches in the future.
Clients often ask us to provide them with assistance in registering their brand as a trade mark well after their business has been established, and considerable expense has been incurred in developing and implementing the business’ brand. Unfortunately, we sometimes discover that a client is unable to register their brand as trade mark because it is deceptively similar to one or more prior registered trade marks, or because the brand does not satisfy one or more of the other inherent requirements for trade mark registrability.
Registered trade marks not only make it much easier for you to prevent other traders from leveraging off the reputation that you have built in your brand, but they can also represent a substantial asset to your business. If the opportunity arises for you to sell your business in the future, prospective purchasers will often look favourably on registered trade marks as a valuable asset to be acquired.
It is important to consider whether your brand is able to be registered as a trade mark at the earliest possible opportunity, to ensure that you will not have to face the possibility of an expensive re-brand in future.
Want to know more about the benefits of registering your brand as a trade mark? Click here for more information.
5. Finding advisors who align with your business ethos
Last (but certainly not least) is finding the right legal and taxation advisors to support your business during its initial growth phase. It is important that your professional advisors have the necessary skills and experience to support your business for the long term.
Perhaps even more importantly, your professional advisors should be people who understand not only what you are trying to achieve, but who can also provide guidance and support in a way that aligns with the values of your business and you.
Sometimes the idea of speaking with a lawyer about a new business venture may seem like a task that “can be put off until the business is up and running”. From our experience, engaging professional advisors in the early stages of your business can end up saving you a lot of stress and money in the long run.