Entrepreneurs launch new businesses for a variety of reasons. Some dream of changing the world. Others want to alter the way people live. A certain percentage is chiefly interested in solving a problem. Many entrepreneurs want to make a good living for themselves through their companies, and maybe even become wealthy.
Regardless of your motivation for starting a business – whether you are already on that path or are merely considering it – your business won’t last long if you don’t place a significant emphasis on your bottom line.
Now, that doesn’t necessarily mean making a ton of money, especially during the first few years. But it does mean heading in the right direction and avoiding bankruptcy. One of the ways to sidestep financial disaster is to become as protected as possible from legal liabilities.
By owning a business, you are automatically “eligible” to be sued by somebody, be it a customer, another business or even an employee. You need to be aware of this and take precautionary steps to prepare for it. Insurance coverage is the key here, of course, and your first step is to get yourself a good company attorney who can advise you.
Ideally, your lawyer will be at your side as you create your business. He or she can help you with properly filing your applications, setting up your bank accounts, and establishing contracts with business partners and possibly with employees.
In addition to dealing with any claims that arise against your company, your lawyer can protect you against potential liabilities that could occur as a result of adding new products, expansion, employee injuries, natural disasters and many others.
An additional concern – and hopefully your attorney will be on top of this – is the possibility of losing your liability coverage. Among the ways this can occur are failing to provide the services you promise, using company funds for personal expenses, failing to make good on your guarantees, failing to comply with corporate regulations and failing to provide a safe work environment.
Another way you can focus on the bottom line when you’re starting out in your new business is through shrewd procurement. This means clearly differentiating between your business “needs” and your business “wants”.
Spend money on the items your company needs to serve its customers, and hold off on the new office furniture for a while. The amount of money you have going out is just as important as the amount of money you have coming in. You need to be able to cover your expenses while you’re trying to reach that break-even point, as well as beyond.
Yet another way to protect your assets is to conduct product launch tests before initiating a huge campaign. You might think you have a sure winner with your new gizmo, but the market might not agree and your large investment could result in a big setback.
Your smaller test – perhaps conducted in a limited geographic area – should give you a good grip on how that new product will be received nationally. You can always ramp it up if you see good results from your preliminary marketing efforts.
Finally, decide how much your time is worth. What does that have to do with the bottom line? Inevitably, unexpected problems will crop up as you attempt to launch your business. Should you try to remedy them yourself, or should you pay someone to do it? Base that decision on how much you have determined that your time is worth.
For more on this topic, check out this article from Entrepreneur magazine.
Even if making a lot of money is not your primary goal in launching a new company, you need to keep a close watch on your bottom line in order to stay in business. Keep this priority in mind at all times.
Allen Baler is a leading entrepreneur and Harvard grad. Allen Baler is a Partner in 4Patriots LLC, based in Nashville.
Disclaimer: This blog post is not a substitute for the sound advice of a business professional with expertise in the subject matter discussed. Please seek appropriate counsel on what strategies make sense for your business.