- Make decisions for the long term. Even early on, think strategically about who to work with, what you're selling, and what types of funding to consider.
- Protect what you're building. Your startup may be scrappy—but it should also be legally protected.
- Separate your business from your personal life. If you do take funding from family or friends, treat it as a business transaction.
Any entrepreneur will tell you: There is much more to founding a company than just coming up with a brilliant idea. It's exhilarating—a dream for many—to start and grow a business from scratch. But, no surprise, it requires decision-making, planning, and (last but not least) a lot of hard work.
You're passionate about your goals for your new company, and we're passionate about helping you achieve them. So we came up with 3 tips to help you navigate the pitfalls and decisions you'll be making as a budding entrepreneur.
1. Make decisions for the long term
When you're first starting a business, you have a clean slate. It's your job as an entrepreneur to create a plan and strategy that maps a path for your business to lasting success. This clean slate is both a benefit and burden. You get to dictate your business's future; but doing so can be a weighty responsibility, and requires a lot of time and planning.
As your business starts to take shape, be wary of quick fixes and easy short-term solutions. Instead, think strategically about what your business might look like in 1, 5, and 10 years. Ask yourself these questions:
- Who will you want to have at your side? Do you want a co-founder? If so, what are each of your roles?
- How might your business model evolve over time? How will you generate revenue? What are you selling?
- What are the long-term tradeoffs of different funding options? Are you borrowing money or taking on equity investors? Or would you rather self-fund?
Take the time to write down a business plan thinking through all aspects of the business, including the size of the market, your business model, startup costs, earnings projections, and timelines. This doesn't have to be set in stone but writing down everything can provide a valuable roadmap you can turn to in the future when you face forks in the road. Having a written narrative can also help you share your business idea easily with possible investors.
2. Protect what you're building
Your startup may be scrappy, but it should also be protected.
When you are first drafting your business plan, you should think about the right business structure, such as LLC, S corp., or sole proprietorship. You should also consider whether you're developing any intellectual property that ought to be protected, and how to best draft contracts with suppliers, customers, or other business partners.
Although legal guidance may feel like a large expense, especially when you're just starting out, remember that you're playing the long game. Consider adding legal help to your team and seek counsel when appropriate.
3. Separate your business from your personal life
When you're pouring your heart and soul into a new company, it's easy for the lines between your personal life and business life to blur. But particularly when it comes to financial matters, it could be a good idea to draw a clear boundary.
For example, if you accept funding from friends or family, treat it as a business transaction. Define the terms: Is it a gift, loan, or equity investment? Create a detailed contract outlining rights and responsibilities of everyone involved and have it notarized. This might feel like a weird formality, but it can do wonders to avoid conflict and maintain personal relationships down the road.
For more tips and resources for your money and beyond, go to the Modern Life website. Also, make sure to sign up for our newsletter below for stories, tips, and resources delivered to your inbox every week.