From neglecting to obtain the required business permits and licenses, to copyright infringements or failing to comply with email marketing regulations, we take a look at seven common mistakes new businesses make – and how to avoid them.
1. Avoid stepping on Intellectual Property toes
The importance of doing a very thorough search before deciding on the name of your business or product is vital. Spending a few hundred dollars on the services of an intellectual property lawyer is definitely a good investment at the start of your business to protect you from the expensive mistake of infringing on a trademark or copyright that is owned by someone else.
It is also absolutely crucial that you familiarize yourself with the trademark laws at the state, federal and international level, as failure to do so can land your business in hot water. Getting a competent and reputable small business lawyer on board to guide you on some of these matters, especially as you may likely have not done it before is definitely a good idea.
2. Don’t forget to check which licenses, permits, and registrations your business needs
The running of any business happens within a legal framework of laws and regulations and it may require certain licenses and permits to register and operate your business. These not only comprise local business licenses but can also include health and safety related permits, fire permits, permits that pertain to running a business from home, building permits, liquor licenses, manufacturing permits, permits required by the hospitality industry, to mention but a few.
So, according to the nature of your business and in which state, county, or city you are going to operate your business, there may be licenses and permits that you need to obtain before you can get your business up and running. As the possibilities are many, varied and sometimes complex, the importance of getting this aspect of your business sorted out properly cannot be overemphasized. Most cities have a licensing agency – which is always a good place to start, but you cannot go wrong with good legal advice from a business lawyer with a thorough knowledge and understanding of the local business environment.
3. Do not neglect to get the requisite documentation in place
Starting your business off with correct legal documentation is of the utmost importance. Putting in the necessary time and effort at this early stage to get all the paperwork in order ahead of time will stand you in good stead in the long run, and help avoid future problems.
The requisite legal documentation includes things like employer identification number applications, business bank account applications, licensing and permit documentation, option and confidentiality agreements, forms pertaining to the business structure, offer letters and possibly customer contracts. And if you decide to insure your business, business insurance application forms.
4. Do not disregard email marketing regulations
Email marketing has become a huge part of the digital world we live in, and most businesses use it as a very effective marketing tool to reach their clients. Unfortunately, a lot of abuse has occurred in this regard so email marketing in the US is regulated by the CAN-SPAM Act of 2003. You would be well advised to familiarize yourself thoroughly with its stipulations, as there are stiff penalties for not adhering to them.
Even if another company handles your email marketing, you will be held responsible if this law is transgressed. So it is very important that you monitor what others may be doing on your behalf with email campaigns.
In short, these rules basically and briefly boil down to the following:
Don’t use deceptive subject lines, always identify your message as an advertisement if it is. Always include your location, your postal address and a return email address in the email. You must likewise always give your recipients a clear option to opt not to receive future emails from you, and then act on these opt-outs promptly.
5. Always get your accounting and financial ducks in a proper row
Entrepreneurs are often so fired up with the ideas and plans for a new business that they neglect or forget the importance that a sound financial and bookkeeping infrastructure plays in the sustenance of the business. It may, therefore, be sensible to hire a professional bookkeeper or accountant, even if only part-time, to show you the ropes and help you automate your accounting with some of the excellent accounting software packages available.
Furthermore, here are some key points to consider in getting your new business off to a viable financial start. First and foremost, manage your cash flow rigorously right from the beginning. This means keeping a close eye on all spending and limiting unnecessary expenses wherever you can. Meticulously record cash inflows and outflows, keeping track of all invoices and receivables to make sure you keep your books updated.
Also, keep a close eye on what you expend on labor. Try at all costs to keep reserves to fall back on in the spirit of “saving for a rainy day.” Identify the most crucial aspects of the business that you need to develop first, and then spend your time judiciously on those.
6. Have you established a proper entity for your business?
Businesses come in various guises – partnerships, sole proprietorships, corporations, and Limited Liability Companies (LLCs.) Choosing the proper business structure for your business is vital because it will not only affect the personal liability that you carry for the business, but also the tax base that your company will function on, among other things.
Since running a business as a sole proprietorship, starting an LLC or establishing a partnership can require relatively little setup to get up and running than setting up a corporation, many businesses often prefer going this route. It is very important to note, however, that despite their relative simplicity to form, proper due diligence should be carried out to determine if it is indeed the best vehicle for your business.
7. Is your business compliant with relevant local laws?
Businesses in the US are expected to comply with various laws at various levels of government. The state, industry, structure and type of business, among other things, will likely determine exactly what laws will be relevant to your new business.
Ignorance of the law is never an excuse for breaking the law, and any business (owner) that is caught violating any business law will likely face the consequences. Which is why proper care must be taken and relevant research and advice must be sought to ensure that you are complying with all relevant laws that are applicable to your business.