Start a new business venture and you will soon find yourself gathering lots of information on new topics and discussing them with many folk.

The most important of these folk you discuss things with should be your accountant or CPA.

But what areas of advice will they cover? Will it be the normal tax and registration issues, the corporation and business set up requirements?

Or will they really be switched on and introduce you to the seven commandments? You better hope so if you want to stay one step ahead.

Well, now it actually doesn’t matter because I’m going to spill the beans for you!

1. Get It In Writing!

Everybody wants to save money in a start up situation and so spending it on a bunch of legal experts before you’ve brought in a penny is not always top of the list.

Even though protecting things such as Intellectual Property and setting up complicated schemes to protect your future wealth are great reasons for doing this in their own right,  getting what you agreed down on paper is absolutely vital.

This does not require a bank of solicitors or attorneys. A document typed out on a word processor and signed and agreed by all parties involved will suffice.

So many problems that precipitate business break ups stem from simple misunderstandings or poor memories. You know what I mean; “he said that, no she said this.”

Write down what you agreed from the outset and avoid these potential disasters.

2. Work Out What It’s REALLY Going To Cost Up Front

“Well the refurbishment will run to about $20k and then we open the doors to a packed house every night!” I’m afraid I hear that kind of approach all too often.

The sad thing is that so many businesses do not get any closer to a proper cash flow forecast than this before launching their new ‘hit’ bar or restaurant.

This lack of preparation is nearly always compounded by an amazing ability to always under estimate break even points and over estimate revenues.

Maybe there is a method to the apparent madness! Maybe if they all knew the real costs up front, there would not be half the raging successful businesses that there are today. They would have been too scared to start in the first place!

On the other hand, running out of money half way there is not going to win you ‘new entrepreneur of the year’ either.

And in some cases you would be better off not starting your life-long dream if it is going to mean financial ruin and heartache.

If in doubt, find good advisers and pay for their opinion. It could save you a whole lot more than just money in the long run.

3. Do Your Research First

I do not know how many times I have seen new ventures launched without the new business owner taking even the slightest amount of time to do their research first.

Market research will tell you if there is anybody out there willing to buy what you want to provide. You would have thought that was interesting information to know!

Maybe sometimes it is the fear that someone else will copy or steal their idea, I don’t know, but it sure is a dumb thing to do. Do you know how rare it is to find a truly original idea these days? Taking that idea to the marketplace in a professional and competent manner is where the smart team wins. Ideas on their own make no profit at all!

Get as many varied opinions a s you can on your business idea up front. Listen to different views and reactions.

Most of important of all, speak to your potential customers. Will they buy what you have to offer? What is the right price?

The important goal here is to get your idea to the market place as soon as possible, with all the relevant, important information and research completed so that you can make informed decisions when you have to. That cannot be done without doing your research beforehand.

4. Know Who Does What When

If there is more than one of you involved in the venture then it is critical to know who does what when. Who is responsible for ensuring what task is completed by when.

You also need to know who gets what and when.

Making partnerships of any kind work, relies on trust and confidence in the other party. Having everything down in writing helps keep everyone on the same wavelength and avoids extra stress in an already difficult situation.

5. Know Your Risk Aversion

Sit down and work out what your attitude to risk really is. Are you going to be comfortable borrowing money for the business? How about putting up security for the loan from personal assets?

It would be a wise decision to include any significant others in your deliberations otherwise if things did go wrong and you had gone ahead and re mortgaged the house it could be more than just a business and a house you lose!

6. Define A Buy Back Price Up Front

Now this tip alone could you save millions! In the situation where you have raised capital from a private investor, be it friend family or acquaintance, agree a buy back price with them up front.

Offer them a healthy return so that everyone wins, say 300% return on their investment (nobody is going to be upset at that kind of return), and include an option that allows you to buy back their shares at any time in the first 3 years.

You could be pleasantly surprised just how much that could save you if things really take off. It could be the sweetest deal you ever pull off.

7. Enjoy What You Do!

What’s the point if it cannot put a smile on your face? Try and keep it all in balance and try and remember the reason that you are doing it all anyway.

Often the same set of circumstances can be interpreted different ways. Are you a glass half full or a glass half empty kind of entrepreneur?

So there you are. Follow my seven commandments and you will have a head start over most of the field.

This article was written by Brian K Fitzgibbon CPA.

Brian is an experienced accountant and small business consultant. He runs his own business, lectures extensively on small business topics and has checked out and valued many hundreds of small businesses for buyers.

Brian is also the author of the highly acclaimed and invaluable
"How To Value A Business And Buy It Without Fear"
A do-it-yourself guide for first-time and experienced buyers alike.

To download a FREE Chapter from Brian's book please follow this link: "HowToValueBusiness.com"

January 15th, 2009 | Tags: accountant, attorney, buy a business, buying a business tips, new business, risk aversion, starting a new venture | Category: articles | Subscribe to comments | Leave a comment | Trackback URL  |