Thinking of Starting A Business?

4 Questions to Ask Yourself

to Avoid Failure

With the onslaught of COVID-19 in March, many aspiring entrepreneurs decided it was time to take their side hustle to the next level and turn it into a full-time gig. As of August 2020, there are 30.7 million small businesses in the United States, accounting for 99.9% of all businesses in America, according to the Small Business Association. This is a 3.15% increase from 2019 and that percentage is expected to continue rising.

 

Though an incredibly exciting transition, it’s also one that requires attention and structure in order to achieve success for your business. As a brand consultant with decades of experience working closely with a variety of start-ups, I’ve seen eager-eyed entrepreneurs make small mistakes, as well as detrimental legal errors that undeniably affect the overall success of the brand.

 

Running a business takes more than simply being good at your craft and getting contracts signed. There needs to be a strategy in place from the moment the company is born, in addition to having both legal and administrative components in order. If you are planning on diving into the entrepreneurial waters in 2021, there are several questions you need to ask yourself in order to make sure you’re getting both your business strategy and legal ducks in a row. Otherwise, your company will join the 20% of small businesses that fail within their first year.

 

Question 1: Do you have a brand strategy in place?

 

A large portion of small businesses begin without really knowing who they are, what they’re selling, and what exactly sets them apart from their competition. Well before your launch, you should have a structured business plan in place. Through developing the plan, comes an excellent opportunity to thoroughly examine your motives for starting the business, which will give you a good idea about how you want to execute your brand and relate to your customers.

 

Development and implementation of an effective, unique strategy leads to strong brand loyalty with those buying from you or hiring you. Make your brand messaging clear and authentic – speak directly to your consumers. Why should they buy from you? Why hire you? What sets your brand apart from the rest?

 

Question 2: Have you registered for an LLC?

 

A common (and very big) mistake I’ve seen among individuals as they start their business ventures, is that they run their entity as a sole proprietor, rather than registering as a Limited Liability Company  (LLC). One of the main reasons for this being that they haven’t differentiated their business from a side-hustle or hobby yet. I see this all the time, and it’s an issue.

 

Why? Because if you don’t register your business, you are personally liable for everything. This means that if a client has an issue with your product or services and tries to sue you, your personal assets such as your home or car, are at risk. You are completely responsible for fighting the lawsuit. Roughly 43% of small business owners say they have been sued or threatened with a lawsuit. You don’t want to be part of this percentage.

 

Question 3: Are there additional licenses you need to run your entity?

 

Many businesses hit the ground running without even knowing they need specific documentation to legally run their operation. You will need a general business license, tax identification number and depending on where you are located and the type of business you’re opening, there will likely be additional records needed.

 

When small businesses owners don’t set the legal foundation for their entities at an early state, it increases the likelihood of failure and running into legal troubles with the IRS in the future. Neglecting to file the correct paperwork can result in the following consequences:

 

  • Required to close with no guarantee of re-open

  • Put on probation for a set amount of time

  • Charged with local fines and/or fees

  • Required to pay back taxes if applicable

 

Question 4: Do you have a launch plan?

 

Once the business structure and brand identity have been established and the appropriate paperwork has been filed, a step that’s often skipped is having a formal business launch. I’ve seen start-up after start-up fail to announce when they are officially in business, causing them to miss a major opportunity to connect with prospective clients.

 

Write an email to your existing database. Distribute a press release to your local media outlets. Don’t miss the mark on this opportunity to let your community know you’re open for business.

 

Starting a business is challenging, there’s no denying that. Step 1 is to accept that your side hustle is no longer your side hustle, it’s a business that needs structure and your constant attention.  If you’re thinking 2021 might be the year you will launch a legitimate business venture, I hope you will use the questions in this article as a guide to avoid legal trouble and overall failure in your entity’s future.

 

Knowledge is power, right? We want you to be aware of what we’ve seen take entrepreneurs down an unsuccessful path, so that it won’t happen to you. For Covington Law’s recommendations on how to combat the obstacles described in this article, please see the second blog post below.

 

For information on Covington Law’s Corporate Identity Package and additional legal services, click here.

 

 

About Carolyn Covington: Carolyn Marshall Covington joined Covington Law's team as Chief Brand Strategist in fall, 2020. In 2016, she received the Legacy Leadership Award at the Beauty and Barbers United ceremony. She is a seasoned thought leader in the beauty and fashion industry, bringing years of consulting experience to our team and clients. In 2020, she was inducted into the (NAWBO), NC National Association of Women Business Owners Hall of Fame. Carolyn has helped countless business owners take their strategies to the next level by offering her expertise & recommendations.

You Decided to Start a

Business, Now What?

So, you did it. You made the decision to start your own business and you’re ready to conquer any challenge thrown your way. Now what? In a recent post (**link to blog 1), we detailed the top four questions you should be asking yourself as you gear up to start your business venture. To re-cap, see below:

 

  1. Do you have a brand strategy in place?

  2. Have you registered for an LLC?

  3. Are there additional licenses you need to run your entity?

  4. Do you have a launch plan?

 

Each question should have a thorough answer. Otherwise, you will find your business failing before it’s officially even launched. Starting a business is overwhelming. There are countless components that need to be taken into consideration and it’s important that you don’t miss a beat.

 

A hack to increase your start-up’s chances of succeeding is to work with an experienced business mentor and/or law firm to support your entity through the initial launch stages. It’s been proven that mentored small businesses grow 3.5 times faster and raise 7 times more money. By hiring a third-party to help launch your business from both a strategic and legal perspective, you can expect the following benefits:

 

Guidance and support. Particularly for entrepreneurs embarking on their first business venture, goal setting and overall strategy can be overwhelming and difficult to flesh out. Experienced business consultants have seen everything when it comes to both failure and success and will know how to guide you based on the specific mission of your business. A consultation will help you assess why you started the business in the first place, focusing on your goals and the steps needed to reach them. Input from industry experts is invaluable when it comes to making your business venture profitable.

 

Legal Knowledge. It’s absolutely crucial that you file the correct legal documents needed to launch your business. Working with a third-party firm guarantees that you will have your legal ducks in a row so that you don’t run into problems further down the line. Depending on what kind of business you run (i.e. food and beverage, beauty and wellness, etc.), there will most likely be multiple licenses you need to register for, including but not limited to: Limited Liability Company (LLC), Assumed Business Name Certificate, Tax Identification Number, Sales and Use Certificate, and more. An experienced consultant can assist in helping you set the legal foundation needed to run a successful and legitimate business moving forward.

 

Strategy recommendations for your brand identity. An experienced firm that has worked with a broad roster of clients will have a solid understanding on where your company stands with its competition. Having a third-party weigh in can help you see exactly how your target market will perceive your company and mission, leading you to determine if you’re on the right path. The goal is to give recommendations based on the mistakes they’ve seen, so that you don’t make the same mistakes. 

 

Covington Law’s solution

 

As a result of many years working with businesses at all levels, we wanted to create a package that meets the needs of entrepreneurs gearing up to start their own business. We know how overwhelming going into business for yourself can be and we’re here to help from both branding and legal perspectives.

 

We are thrilled to introduce Covington Law’s Corporate Identity Package, where we offer third party guidance from our team of experts consulting start-ups during the early planning stages of a business launch, further determining the status of their structure and legal foundation. With an initial consultation, we take a deep dive into the “why” behind your business. We may ask the following questions:

 

  1. Where are you located?

  2. What is the purpose behind your business?

  3. Why should someone hire you or buy your products?

  4. What sets your brand apart from the rest?

  5. What are your overall business goals?

  6. Do you intend to hire employees?

 

The questions above help us understand which legal documents you need to file for to legitimize your company as well as where you are from a branding standpoint. We assist with your business strategy in an initial consultation, file for the appropriate forms, and offer a press release announcement that will be distributed to our PR newswire upon your official launch. This way, you can focus solely on the business. To learn more about our offerings, click here.

 

About Carolyn Covington: Carolyn Marshall Covington joined Covington Law's team as Chief Brand Strategist in fall, 2020. In 2016, she received the Legacy Leadership Award at the Beauty and Barbers United ceremony. She is a seasoned thought leader in the beauty and fashion industry, bringing years of consulting experience to our team and clients. In 2020, she was inducted into the (NAWBO), NC National Association of Women Business Owners Hall of Fame. Carolyn has helped countless business owners take their strategies to the next level by offering her expertise & recommendations.