Topic: Business Planning
Plan Your Business for Survival!
We all know intuitively that
there is risk to any business enterprise. We have all seen restaurants come and go. We have heard the statistics: 50% of all
businesses fail in the first year, and 95% do not survive the five year mark.
Fortunately, those statistics are just urban legend (or a little exaggeration
to make a point). There is risk to doing business, but that risk can be
minimized and managed. Anyone who wants to get rich
quick should play the lottery. Going into business is not for you. Making money
is a motivating factor, for sure, but successful businesses are more often started with different primary motivations. Love of the product or service, desire to serve other people, belief that a better product or service can be provided,
and wanting to make a difference in the world are the stuff that successful business people are made of.
Most businesses do not make money at the start. A successful business needs a solid foundation, and that solid foundation requires planning and capital. Not taking the time and money to build a solid foundation is a recipe for failure. The foundation of a successful
business is built with professional help. A good CPA, insurance agent and attorney are essential to managing and minimizing the risk. Involve them early,
and include the cost for these services in your business start up plan. It will cost more than you expect, and it
will cost more than you want to pay. If your business survives five years, however, those costs will long be forgotten, but the benefits will endure. Approximately, 50% to 55% of start up businesses still survive five years later. Plan for survival!
Part of a business survival kit includes legal planning. Insulate yourself from personal liability by incorporating or organizing as a limited liability company (LLC). Take the time to understand what it means to operate a business as a corporation or LLC. A
good attorney should not just do the paperwork; a good attorney should educate you on the reasons for incorporating or organizing your business and how to maintain the business as a corporation or LLC to protect you from avoidable exposure to business liabilities.
Business survival includes ongoing maintenance of the corporate or LLC form of business. The legal work is not finished when the corporation or LLC is formed; it has just begun. A corporation needs bylaws, and an LLC needs an operating agreement that makes sense and works for you. The formalities of the corporate or LLC form of ownership must be maintained in everything that is done and includes ongoing attention. Maintaining those formalities is not difficult, but they are often ignored, and sometimes to the peril of the business, or worse (personal liability).
No one goes into business planning for the business to end. At some point, potential business ending events must be considered. Business survival depends on it! Any time that two or more people are involved in the ownership of a business, some thought needs to be given to things like: what happens if one owner wants out; what happens if one becomes disabled and is unable to perform; what happens if one dies. If you have not planned for these things, and if you have not provided mechanisms for addressing them, such events are often a death knell, even for a successful business. Talk to your lawyer. Plan how these events
will be handled. Plan for survival!
Kevin G. Drendel
Drendel & Jansons Law Group
111 Flinn Street
Batavia, IL 60510
This article is not intended to
provide legal advice or create or imply an attorney-client relationship. No
information contained herein is a substitute for a personal consultation with
an attorney. For more information, visit www.batavialaw.com or call (630) 406-5440.