Business Planning Help

Do I really need an Attorney? 

While considering what you want to include in your Business Plan, the wise thing to do is look into any legal aspects of your planning and include the essential ones in the completed Plan. We’ll review some of those aspects here. If you have more in-depth questions about legal matters, I am not an attorney. But my partner in creating this website, Spencer McIlvaine, is an attorney. So you will want to contact him at www.mcilvainelaw.com.

Some things of a legal nature that should be a part of your pre-planning or in the Business Plan itself – usually both - include:

** Organizing your business into an LLC (Limited Liability Company) or a Corporation. An attorney can help you decide which entity to select. The main reason, as I see it, is for some liability protection. As a Sole Proprietor, you expose yourself – and your family – to an unnecessary level of risk that may be alleviated by organizing your company. Another plus in organizing your venture is that to those reading your Business Plan – a lender or investor – it makes a much more positive impression. Your company looks more stable or “intentional” than a Sole Proprietorship, which could make you look like you’re just “trying out” your business idea with no particular long-term plans.

When I have a client whose startup resources are fairly limited, I recommend they get this taken care of before they commit to the Business Plan project – I think it’s that important.

** An attorney can also help you protect the name, logo, etc. in one way or another. Those things and others are referred to as Intellectual Property and include things like trademarks, copyrights, trade secrets, etc. (A Trade Secret is a low cost alternative to patents. See the McIlvaine Law link for more information.) Just registering your company name with the State, as with a Fictitious Name registration, doesn’t really protect that name. They can usually tell you if the name you’re trying to register has already been registered by someone else. But if it has not been, you are still not protected from someone else wanting to use it themself. For that, you’ll need an attorney specializing in Intellectual Property such as The McIlvaine Law Firm. It would be a shame – actually a disaster, to some degree – if you went to all the trouble and expense of setting up your new business venture only to learn someone else is either already using your name, logo, etc., or has taken yours. You probably could still go ahead with your business idea, but you’d have to change all that in every part of your Business Plan and project. If your Plan was already finished, that would mean an extra expense to re-do all the parts with the changes needed, not to mention having to re-do all your business printing – business cards, letterhead, envelopes, invoices, contracts, ads, directory listings, etc. – all would need to be changed. This is another example of being “Penny wise and Pound foolish”. My personal preference is for an attorney who specializes in Intellectual Property, rather than one who is “willing to do it for you”. There’s a big difference!

** In my ten years in the business planning field, there’s one recurring excuse I’ve heard over and over by people starting new businesses. They say they can’t afford to get appropriate legal advice and assistance “right now. I’ll have that taken care of later, after I start making some money”. That reminds me of another old saying I’ve heard all my life: That’s like “locking the barn after the horse is gone”! When they say that to me, I always have to ask them if they’re talking about the money someone could take away from them when they sue them! You need whatever protection is available to you from the very start, not later. If their financial situation at startup is that difficult, I always prefer that my clients start with the legal assistance first and then come to me for help with their Business Plan after the appropriate protections and legal issues have been taken care of. It’s only CommonSense!

** Other business issues your attorney can assist you with are creating other legal documents you might use daily in your business. They can vary, of course, with the type of business you operate, but can include Contracts, Leases, Vendor Agreements, Conflict of Interest Agreements, Non-Compete Agreements, Employment Contracts, and others that may pertain specifically to your own industry. Your attorney can prepare these documents for you, or review these documents if you already have them, especially if you created them yourself. If you are not an attorney yourself, it is relatively easy for them to not be accurate or adequate and not afford you the legal protections usually associated with each one. They also might not read as professionally as you need them to and, as a result, may not give the strong, positive image your business needs.

** Something I’ve been happy to take advantage of with my own business attorney is his retainer program. It affords me more of the personal attention I feel that I, as a Small Business owner, really need and that can often be less than sufficient with a larger law firm. I like the accessibility, too. If I have a question, I want an answer ASAP, not whenever he can get to me. It’s a tax-deductible business expense that is well worth it. (Be sure to check with your CPA on tax deductibility, just to be sure.)

Getting professional legal advice is not only extremely important - it’s the professional way to handle your business affairs. Having your business organized and being able to tell the lender you have a legal advisor, will make your business plan that much stronger and more appealing to a lender.

Whether or not you realize it, your life is filled with “plans”, road maps, etc. These few examples illustrate that point:

Picture this: you’ve decided to start a small business of your own for one of a variety of reasons – you’re replacing a lost job, you’ve always wanted your own business and now that the children are on their own you think the time is right, or maybe you’ve come up with a great idea! (If the latter, be sure to read the next issue for ways to protect that great idea from those who don’t have one of their own so they want yours!) You’re procrastinating because you’re not totally sure just where to start or what you need to do to get it going and keep it going.

And this: You’re on your way to a family vacation or a business trip or a funeral in another state. You jump in the car and start driving. Where are you going? What route should you take? How many miles is it? What weather conditions can you expect? Are you aware of any major detours that could affect your arrival time? And, especially these days, how much do you have to budget for fuel?

And this: You’re going to the grocery store for a few items you really need. You grab a cart and start down the first aisle you see. You get up to the checkout with a full cart, you pay your bill, drive home, unpack the groceries and discover that you bought everything in the store except for the items you actually went to get!

Do these scenarios sound familiar? What do these – and others you could surely name like a recipe, a budget, a To Do List – all have in common? What was missing? Each of these situations needed a plan of one kind or another. One required a map, an inquiry into detours and weather, and some calculations and maybe even some calls to your roadside service provider. I would call that a Plan. The second one, to the grocery store, might seem like a frivolous example, but we’ve all done this – gone to the store without a written list! And what would you call that list? I would call it a Plan!

The point is that pretty much everything we do in life, if we want any measure of control at all, requires a Plan of one kind or another. Can you imagine a wedding without the months of advance planning? The first example, starting a new business, is no different.

What is the purpose of a business plan? Think of it as your “road map”. Like taking the trip without a map, starting a business is pretty much the same: Ask yourself: How will I know when I get “there”, if I don’t even know where I’m going?”. A business plan is used for any number of reasons. The most familiar, of course, is to seek funds from a lender or investor. Even if your business idea doesn’t require money (Wanna adopt me? Then I could inherit that rare bird!), or you have all the money you need without OPM (Other People’s Money), you would still need a business plan because whether you’re using OPM or your own money, you still need to know what you want to do with it versus what you need to do with it. You absolutely MUST plan. In short, you need to know where you’re going and how you intend to get there. Any lender or investor will require an in-depth presentation of that financial study with projections, usually at least three (3) years forward. In the business plans I prepare for my own clients, I prefer to project out five (5) years. The lender is interested in how you’ll repay your loan. I’m interested in how my client’s business will look farther out so they can plan more specifically and be able to make appropriate adjustments before they become problems. “Fore-warned is fore-armed”.

A Business Plan is filled with confidential information – money matters, research, information on your market and competitors and, yes, your idea as well. For that reason, you won’t want to show it to anyone who doesn’t have a specific need to know. In another issue, we’ll discuss how to protect that information, but for now just remember to keep it to yourself.

In another issue, we’ll discuss some of the specific financial areas to be explored for your business planning project, but for now just be sure that you cover all the bases. There’s a statistic that tells us that most new small businesses fail in about the first two years! I know that sounds discouraging, but after ten years in the business planning field myself, I would bet that a further study of those failed businesses would reveal that the majority of them started their businesses with either an inadequate business plan or with no plan at all! For some, it’s a matter of not knowing about business planning, for others it’s about thinking they know it all so they don’t need to write it down, and for still others, it’s a case of what my Mother used to call “being penny wise and pound foolish” – they simply weren’t willing to invest in their own business and their own future. To my way of thinking, not being willing to invest money in my own business yet expecting it to pay off is like the lottery: I never win anything in the Lottery, but I do know that I CAN’T win if I don’t have a ticket. You could say that your business plan is your “ticket”. I’d say there’s a hint in there – think about it.

And while you’re thinking, remember this:

 When You Fail to Plan, You Plan to Fail!

Good business planning has to include a discussion of your credit. To give yourself every opportunity for a suitable business loan, your credit MUST be in order – GOOD order.

Any lender/investor is going to check your credit history and score before even considering lending you or your business any of their money, so you should do the same.

Mistakes happen - companies don’t always report to the credit bureaus when you’ve fulfilled your obligations to them, etc. That last one can be a double whammy to your credit because not only do you have what appears to be excessive debt, you also appear to be a deadbeat – one who doesn’t pay their bills – because those debts will likely appear to be old! It’s critical for you to know what your potential lenders will see when they look up your record. It’s also gives you a chance to fix anything on your credit report that needs “fixing”, or to be prepared to explain those situations. (TIP: fixing trumps explaining!)

First and foremost, you must keep your word when agreeing to acquire anything on credit. That means PAY YOUR BILLS WHEN THEY’RE DUE! If you see yourself developing a problem in that area, you MUST discuss the situation with the one you owe the debt you so new payment arrangements can be made. All this is done to protect your credit rating and credit score. A new lender will assume that if you haven’t paid the creditors you already have, that you very likely won’t pay them either!

A recent new law allows you to receive one free credit report once yearly from each of the credit bureaus. In addition to keeping your credit record clean in preparation to apply for a business loan, you also need to be watching for identify theft incidents. There are three credit bureaus so you could request a free credit report from a different one of them every four months (for a total of 3 free credit reports per year). This does not include a free credit score – there’s usually a small fee to get that number. You’ll want to do that when you apply for your business loan so you’ll know what the lender/investor will see at that time. Beware of ads promising a free credit score – get all the facts before signing up. Here are the three credit bureaus:

Equifax
800-685-1111
www.equifax.com
P.O. Box 740241
Atlanta, GA 30374-0241

Experian
888-397-3742
www.experian.com
P.O. Box 9532
Allen, TX 75013

TransUnion
800-916-8800
www.transunion.com
P.O. Box 6790
Fullerton, CA 92834-6790

Additional information about avoiding identity theft can be accessed by contacting:

Federal Trade Commission
Consumer Response Center
600 Pennsylvania Avenue NW
Washington, DC 20580
877-IDTHEFT (438-4338)
www.ftc.gov/bcp/edu/microsites/idetheft/

This article is for general information only. For specific issues and assistance, contact a CPA or an attorney for professional advice.

Here is an article that discusses the current ‘credit crunch’ facing the U.S. economy. 

The article discusses how borrowers are having a harder time convincing banks and other lenders to give them small business loans.  The article’s solution is to use cash advances from credit cards. 

But a credit card balance is not likely to be an effective substitute, as it will likely not provide you with nearly as much start up capital as you will need.  Thus, a small business loan is still the best option for a new business. 

Our solution…present the lender with the best business plan that you can put together and impress them with the profit potential of your venture.  There are still loans out there, but lenders are simply less likely to take risks in the present climate.

What is a Business Plan? Think of it as your road map. If you were to take a trip without a road map, how would you know when you get there if you don’t even know where you’re going? The same could be said for a Business Plan: How will you know if you and your business idea are going where you want it to go if you don’t even know where that is?

Whether or not you realize it, your life is filled with “plans”, road maps, etc. These few examples illustrate that point:

-1- Your Budget = a “plan” for using your income to meet your obligations and goals.

-2- Grocery List = a “plan” to buy what you need and to keep you from those impulse buys.

-3- Recipe = a “plan” that tells you what you’ll need in order to produce what you want; what it will take to end up with a successful dish/product.

-4- To Do List = a “plan” to get things done.

Looking at even these few examples – and I’m sure you can think of many more – should demonstrate to you how logical – and essential – a properly thought out, researched and organized Business Plan really is and how important it can be to your new business. Actually, those examples are very similar to the makeup of a Business Plan.

Usually, a Business Plan is used when applying for a business loan or when recruiting investors. The style and content of your Plan may vary somewhat for each of these endeavors, but what they all basically do is “tell your story”. Even if you do not need a loan or an investor, you do still need to plan (see paragraph one!)

A Business Plan is filled with confidential information – money matters, research, information on your market and competitors and, yes, your idea as well. For that reason, you won’t want to show it to anyone who doesn’t have a specific need to know. In another issue, we’ll discuss how to protect that information, but for now just remember to keep it to yourself.

And remember: When you fail to plan – you plan to fail!

The first thing you need to get started on your business plan is a road map.  The following list of contents is by no means a complete list, nor is it the format used by CommonSense Business Solutions (the parent company of this website).  It is, however, a place to start. Read the rest of this entry »

Business Planning Help is a website dedicated to providing professional information to small businesses throughout the United States.  Coming soon are regular posts detailing the components, uses, and benefits of a business plan.  So bookmark this page and visit us regularly!