Starting Your Start-Up Journey
Photo credit: Unsplash
What separates a start-up from a hobby is the intention of doing something in order to generate revenue and make a profit. There are times when a hobby turns into a start-up but even when that happens, we can only term it as a start-up when it not only generates revenue but there exists in the founder or founders the intention to make it into a real business. Now that that’s out of the way, here are some key things to have on your checklist as you consider starting:
1. Understanding Your Business Model - a lot’s been written about business plans but quite honestly, I’ve used ours mostly as a reference document more than a primary document. Further, a lot of the challenges encountered were things we couldn’t foresee at the planning phase. In short, do a simple overview of the business plan but don’t kill yourself trying to perfect it. Secondly, starting is more important than having a perfect business plan. Just make sure you understand your industry landscape, your competition, what unique offering your products or services have, how you want to enter the market if you have the right team, and what risks to anticipate. These can be in bullet form.
2. Business Registration - there are various types of businesses you can register, depending on your country. The most popular are sole proprietorships, partnerships, and companies limited by liability. In the US, companies limited by liability have further categories such as LLCs, S Corps, and C Corps. It’s important to understand the pros and cons of each and find the one that suits your needs. Two things worth mentioning though is that a limited liability company is the best option, in my opinion, as it separates you and your personal assets from that of the business. You and your business essentially become two different entities. Secondly, if you’re incorporating in a country other than your own, ensure that the limited liability option you choose is easy for foreigners in that country (this will come in handy when you are building your brand, because after all, why should you settle for local when you could go global?). Ultimately, your decision should be guided by the vision for your start-up so that you get the legal entity right from the get-go.
3. Tax Registration - this is usually different from business registration above as you need a registered business first before you can register for taxes or register your intellectual property (IP). With regard to taxes, some entrepreneurs express the concern that an additional responsibility for tax liabilities is enough to scare them from registering their businesses with tax authorities. On this, I have three takes: first, if you keep your records well, you should be ok; second, failure to pay taxes is an offense in most countries (tax avoidance and evasion are topics for another day) and that is not how you want to start your business; and lastly, the fear of tax registration really robs you of future financing opportunities because tax returns and audited financials are an important element of your business that you will need in future when looking for capital to grow. If you still have no idea where to start, consult a proper accountant - not someone who’s doing you a favor, though. It’s ok to start with friends but try to keep your record keeping and bookkeeping on point. If you don’t have accountant friends, work with freelancers.
4. IP Registration - There are people who assign their business IP to themselves but I think for a neat set-up, separate yourself from the business as much as you can. I didn’t take IP as seriously as I should have at the beginning and that came at a cost. It wasn’t because I didn’t know its importance but rather not seeing far enough into the future to appreciate just how big the Enda brand would become. Do yourself a favor and bet on your dreams by being proactive about at least protecting your business name, tagline, or logo (or all of them).
5. Business Bank Account - Yeah, you definitely need one. For taxation and record-keeping purposes, it’s best when all your business money is completely separate from your personal cash. It’ll also be useful down the line from a financing perspective when you’ve built a solid relationship with your bank or financial institution.
There are of course other things that come later, like a website, governance structures, etc. However, if you at the bare minimum just set out to do the above, you’re pretty much set to START!