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3 Ways to Avoid Shocks and Surprises When Buying A Business

January 22, 2013 by Guest Post 5 Comments

by Deborah Sweeney, CEO of MyCorporation.com| Featured Contributor

Buying a business presents its own set of unique challenges. Yes, you usually get to skip the startup period where you have to struggle to claw out a reputation in a sea of competition and bring in customers. However, it’s important to note that the current owner might be selling their business for a variety of reasons. Maybe the business is struggling more than they let on or they’re sinking a lot of time into it without much of a return on investment. Chances are they won’t let you in on some of the “surprise” internal problems before signing over the business, but there are some steps you can take to avoid any extra shocks or unforeseen situations before you complete the transition into being a business owner.

1. Remember Due Diligence

Before you get a chance to sit behind the boss’s desk, you’re more likely to be spending a lot of time sitting through meetings, negotiating, and signing contracts. It is very easy to be lured into complacency, bolstered by a false sense of confidence gained from these official talks. Don’t let this happen, or you will be in for a nasty shock when the business changes hands. Meet with employees, look at the numbers, and spend a week or so immersed in the company so you can get a good feel for how it operates. This natural, day-to-day exposure will show you how things are truly run, and what problems you should plan on addressing. There is always recourse if things don’t go right and you feel like you were sold a bill of goods, but it’s much less expensive and time consuming to undertake substantial due diligence to ensure the business is what you think it is.

2. Lay Out a Transition Plan

What’s going to happen to all of the employees currently working for the business? Are you going to replace any of them or are you going to keep things as uniform to the old management style as possible? Every business is different and some businesses will need more changes than others. Even if the changes you’ll make are minimal, you should still have a clear, open plan for transition. Let the employees and executives know what changes you think you will make on day one – rumors thrive in an office environment, and the last thing you want is a room full of bitter, hostile employees who think you are going to fire the entire office when all you really plan on doing is replacing a few key managers.

3. Stay Calm, Stay Organized

Buying a business is tricky, so you will either have to be hyper-organized or have some sort of support team in place. Legal counsel is highly advisable, and at the very least you need to hire an accountant to help look over the numbers. If you can swing it, try bringing in some of the management team currently running the office to help you stay on top of everything. Someone who knows how to run the company’s HR department will be useful when planning hiring and cuts, and having an assistant attend meetings with you will help with notes, paperwork, and to-do lists. Staying organized saved me a lot of time and stress when I decided to buy MyCorporation, and was one of the key factors in making my transition into the CEO role a successful one.

Unless you have a crystal ball handy, there are still going to be a few surprises waiting for you when their business finally becomes your business – “the best laid plans of mice and men oft go astray.” The trick is to do all that you can before you buy the business so, when these surprise problems inevitably pop up, you know how to solve them. If you follow the legal and financial advice given to you, know how the business is run, and have a solid plan in place for the rocky transition period, you should be very happy with your new business. Plus, it’s always fun to be the boss!

Photo Credit: mikanui via Compfight cc
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About the Author:

Deborah Sweeney is the CEO of MyCorporation, an online filing services company that specializes in incorporations and LLCs. Find her online at mycorporation.com and on Twitter @deborahsweeney and @mycorporation.

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3 Areas of Intellectual Properties New Businesses MUST Invest In by @DeborahSweeney

September 6, 2012 by Guest Post Leave a Comment

by Deborah Sweeney, CEO of MyCorporation | Featured Contributor

Most new businesses don’t start out with of cash – more often than not, budding entrepreneurs will have a bit of seed money and, if they’re lucky, some sort of loan to work with. But as a new business owner, you’ll probably be looking for as many corners to cut as you can. Most people just try and get a working computer and some sort of space to inhabit, promising that they’ll look into all of those other little business bits and bobs when money starts rolling in. The problem is that every second you’re open for business; you’re building up your brand. Your business will suck up any experience and dedication that you bring to it, so it is VITALLY important that you invest in certain intellectual properties early on. That way you maintain control of your brand, and you’re able to build up all aspects of your business at once, rather than small parts at a time.

1. A Business Name

It sounds a little obvious, but a lot of people sort of start their business in a bit of a grey area. Few will actually quit their steady job, invest in the infrastructure to begin their company, and prep to open their doors to the public. These days most businesses are more likely to begin on a work computer over a lunch break. Online boutiques like Etsy or eBay storefronts, for instance, are great ways for would-be business owners to test the waters of their market and see if they can make some money. But they’ll typically slap a business name on these ventures, even if they don’t technically have a business, because ‘Jane Doe’s Wool Based Clothing Store’ doesn’t have the same ring, or staying power, as ‘All’s Wool That Ends Wool.’

If nothing else, register for a ‘Doing Business As’ name the minute you start selling anything through a storefront, real or digital. They aren’t insanely expensive, they allow you to open up a bank account for your business, and getting one now means you can rest easy knowing that name isn’t going to be nabbed up by anyone else.

2. A Domain Name

As your business begins to pick up steam and your name gets around, there is a risk that someone will swoop in and try to grab whatever domain would best fit your business. You need to be building an online presence for your business, and having a website is a great way to collect all of the information about your company in one easy to access space. The problem is that, once again, this might be an expense you can easily rationalize out. After all, whatever web service is currently representing your business might be doing just fine, and it is probably free. Domain names are also cheap, and buying one now guarantees you’ll be able to hold onto it as long as you pay for its renewal. Even if you don’t feel like designing a web page at this point in time, it’s extremely easy to set up that domain to re-direct to your Facebook page, or your digital storefront. Plus it makes it a whole lot easier for potential customers to find you online.

3. A Logo… or some other type of distinct signage.

I put this one last because, in all likelihood, it will be the last of the three things listed that you’ll decide to buy. Logos can be tricky – sometimes you can get a good one that’s affordable, and other times you wind up spending more than you wanted for a mediocre design. Be picky with the proofs. If you aren’t, you might be stuck with something you’ll end up hating a few months down the line. Take your time when finding the right design, sketch out a few ideas, and make sure you like what you see. Logos are great because they’re easily recognizable, unique, and can represent all of the strength and trustworthiness of your brand in a few pixels. So while you may not need one now, you will eventually and it’s a good idea to get one early on simply so your business is tied to your logo right from the get-go and made even more recognizable because of it. When you do find the right logo, just remember to trademark it immediately – it’s just silly not to legally protect something you put so much effort into.

After you invest in, protect, and publicize these three things, your business will be on much firmer ground, and you won’t have to go backwards to make sure all of your customers know about these different parts of your company. Yes, it might take more money than you want to spend at the moment, but when business really starts to pick up and orders roll in, you’ll be happy you made the investment.

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Deborah Sweeney is the CEO of MyCorporation.com, the leader in online filing services for entrepreneurs and businesses. MyCorporation provides start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark and copyright filing services.

With her extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on who should consider incorporation and trademark registration and has been involved in the formation of hundreds of thousands of businesses with MyCorporation’s customers.

Deborah is a member of the American Bar Association, servces on the Board of Regents at California Lutheran University, and is a contributing blogger with Forbes, American Express, and many more business blogs.

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5 Questions to Ask Yourself When Putting Together a Business Plan by @DeborahSweeney

August 1, 2012 by Guest Post 2 Comments

by Deborah Sweeney, CEO of MyCorporation | Featured Contributor

It’s easy to get scattered whenever you start writing up a business plan outline. Maybe this is your first crack at it and you aren’t sure which way to begin so you start writing about your business and everything you have to offer. If you’re doing just that so far, then that’s good! Keep that part up! Not a whole lot of people will tell a business plan writer that either, to babble on and on about what their business is and does and aspires to do. I recommend starting off discussing what you do know, rather than struggle your way through the seven steps that is the business plan process trying to put together an answer even if you aren’t sure of it.

The expectation here is that your business from the get-go should be neat and ordered, even in the earliest stages of planning, but going by the book, exactly by the book, can leave some much needed questions unanswered.

1. What are these seven steps you’re even talking about??

Keep calm and carry on, kiddos. For absolute beginners, going through the steps to a business plan can be daunting enough in itself. Below is a basic outline of what these steps are and what they mean:

1) Executive Summary – typically this is placed at the end and is a quick summary of the plan as a whole.

2) Business Description – the history behind your business, what the product or service is and does, the development stage you’re in and much more can be found here.

3) Market Analysis – who your target audience is and what they need.

4) Implementation Strategies – how you plan on reaching said audience and the methods you’ll track your results with.

5) Web Plan – particularly important if your business operates online, where you’ll discuss development costs, marketing strategies and more for your website.

6) Management Plan – the members of your business’ team and their core responsibilities.

7) Financial Analysis – where you’ll keep tables related to your cash flow and projected profit and loss.

2) Do you know why you’re writing this?

For the business… right? Not quite. Unless you truly know the audience you’re trying to reach, the investors you hope to attract, and your business inside and out, then you might want to hold off on working on it until you do have concrete answers in place.

3) Do you know who your competition is?

Chances are really high that you aren’t the first person to have thought up this brilliant product and don’t have at least a couple of competitors to deal with in the market. Know your competition and what they’re doing, both right and wrong, but don’t make their work your complete focus. Put your focus on the strengths you have in the company instead as well as your weaknesses – and learn how to work with both.

4) Are you being realistic enough?

You can’t set a business plan around some random date next year that you decided will be the day your business makes its millions and goes public on. Be realistic in all things from your budget to the amount of time you spend on your product or service. I never discourage shooting for the stars, but in the early stages of your startup every dollar counts and overshooting early on can lead to disastrous consequences.

5) Will I be able to rewrite this plan later on?

Striving for perfection on your first draft can lead to disaster. You should be able to answer this question with “yes” because every plan, no matter how airtight it is on its trial run, will eventually need to be retouched as circumstances change for your company. This is a good thing trust me – it gives you space to breathe! And every growing business needs a touch of that no matter how established it is.

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3 Ways Budding Entrepreneurs Can Beef Up Their Legal Protection

July 10, 2012 by Guest Post 2 Comments

by Deborah Sweeney, CEO of MyCorporation | Featured Contributor

Running MyCorporation has been one of the most exciting and fulfilling experiences in my life. I love having my own business, being able to watch it grow and develop – it’s like having a third child, minus the screaming and diapers. My experiences with MyCorp are also why I always encourage anyone with a good idea to take the plunge and become an entrepreneur. Unfortunately it isn’t as easy as saying “All right then!” and filing some paperwork – business ownership brings about plenty of apprehension. My encouragement is typically retorted with a quick “Well, what if I get sued?” or a “But what if I never make it off the ground?” These are serious concerns, but there are ways to help beef up the legal protection around yourself, your family, and your assets. My top three recommendations for any budding entrepreneur with visions of ruin rather than riches are to:

1. Incorporate or form a Limited Liability Company

Most small businesses keep a sole-proprietorship structure; it is kind of the default for new businesses with one owner. Plus it is easy to create, maintain, and pay taxes for. Pretty much everything goes back to the owner, and that is that. But this structure provides absolutely no legal protection to the owners. If the business goes belly up, creditors will come after the owner’s assets to pay the business’s debts. Every new business should look into incorporation or LLC formation because it will turn their business into its own legal entity with its own assets and wage, separating the business from the owner. So even if things don’t end on a high note, the owner still has a house to go back to. Plus, if their business gets into any legal trouble, the plaintiff will be suing the business, not the owner. All personal assets will remain untouched.

2. Copyright your intellectual property and file for trademarks

This pearl of wisdom is the one most often overlooked. Most business owners I talk to feel like there is no reason to copyright anything – they run a little shop in town or a small enterprise online, who would want to rip them off? That is a TERRIBLE mindset to have when running a business. Your business will be built on your blood, sweat, and tears. Its reputation will be hard won, and the last thing you want is for someone to come in and swipe it all away for their own venture. And it does happen. I’ve heard heart-wrenching stories of owners who have seen their logos and jingles ripped off by a local competitor trying to use less scrupulous means to get ahead. Of course they could take them to court, but that means a nice hefty legal bill at the end of the ordeal. Protect yourself sooner rather than later. It means spending a little extra money, but it is a lot cheaper than having to deal with a lawyer.

3. Buy a General Liability Insurance policy

No matter whether you’re running a busy restaurant or small consulting firm, businesses are unpredictable. They still need insurance. When an accident inevitably happens, or a serious mistake threatens your business, you don’t want to be counting pennies on your office’s floor, desperately trying to figure out how to solve the problem. General liability policies aren’t very expensive, and provide a wonderful little monetary cushion to land on if one is needed.

No matter what, running a business is always going to be a little frightening. There are a lot of variables involved, and there were plenty of nights where I sat awake worried about things I had no control over. But there are always steps you can take to prepare for the future, to put a little bit of space between your personal life and your office life. So before you open your doors, make sure you’ve done everything in your power to create a nice legal bubble for you and your business. The little hiccups and bumps in the road will still make your heart flutter and your mind race, but any legal steps taken early on will help take the edge off.

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