How to succeed in
business by really trying

Business & Careers, Finance & Legal, Life | by Ray Lang ”Your Advocate”

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A shopkeeper was dismayed when a brand new business much like his own opened up next door and erected a huge sign which read “BEST DEALS.” He was horrified when another competitor opened up on his right, and announced its arrival with an even larger sign, reading “LOWEST PRICES.”  The shopkeeper panicked, until he got an idea. He put the biggest sign of all over his own shop. It read: “MAIN ENTRANCE.”

If it was only this easy for your business to successfully compete. Millions of us put in hard work and our sweat and tears into businesses, only to struggle to make ends meet and eventually falter. From the very beginning you are in a survival mode, rarely reaching a place to excel. In fact, according to statistics compiled by Intuit, 31% of all small businesses fail within two years and more than half won’t even last for five years in our country. It is not a matter of how hard you work or how good your ideas in America’s current economy, it is how long you can avoid big business interests from slaughtering you.

There are over 27 million small businesses in the US creating over 70% of all new jobs in our country. You would think our elected representatives would be working hard to defend and protect you as a small business owner. Instead, they create regulations making it too expensive for you to operate profitably and then deregulate big business enough so they can monopolize your markets.
   
Over 43 million Americans make a living by operating or working in small businesses receiving an annual payroll in excess of $1.5 trillion. So how come the federal government plans to spend only about $1 billion on Small Business Administration (SBA) of the approximate $1.3 trillion in discretionary spending in the 2012 federal budget?  Why is it like breaking in to Fort Knox to get any of it?

When I went to the SBA for funding for my law practice and some of my small business clients, I was advised to work through my local business banker. When I went there, I learned that there was no government funding available for me or my clients, and if there were, they did not know how to get any. However, if we had assets valued at multiple times the loan amount and we were willing to pledge all of it, provide personal guarantees and give the bank our first born sons; then perhaps we may qualify for business loans if our background checks pass muster with the FBI and IRS.

Ironically, it was easier for these same banks to get over $430 billion through the government’s Troubled Asset Relief Program (TARP), then for us to obtain a $50 thousand business loan. What’s up with that?

It seems the government’s real plan is for us to find the one percent of the population that controls ninety-five percent of our nation’s wealth and work for them. Has our economy reverted to feudalism where big business owners are the lords of our economy and the working class is no more than their serfs, scrambling for scraps? I hope not. 
Don’t despair small business owners, we can take back our economy.  As a current business owner and general counsel to various small businesses, I would like to share some practical ways to help you navigate through the challenges faced when operating your company in this warped economy.

Establish Your Organization
When starting your business you should set up your organization right from the start to facilitate long term plans and goals. In doing so, the following should be considered:

• An appropriate business form and jurisdiction should be established depending upon a host of factors. Organization options may include “sole proprietor”, “C” corporation, “S” corporation, general partnership, limited partnership or Limited Liability Company (LLC). There are on-line services to inexpensively help you form your organization. Your accountant should assist you on determining which form and place of origin would best suit your business needs.

• Proper state and federal tax elections and filings must be made. A Federal Employer Identification Number (FEIN) is required if you plan to hire employees. Even if you don’t have employees, you may still want an FEIN since many businesses will not work with you unless you have one.

• Applicable resolutions, operating agreements and bylaws for the conduct of your business affairs should be prepared in compliance with state and federal regulations. You should note that to open a bank account for your business you will need to provide proper authorizing documentation.

• Short and long term financing of your business should be considered. It would be a good idea to prepare a business plan which would include your business, marketing and financial models over the next three to five years to help you define and meet these financing needs. Be sure to properly document all forms of debt of equity financing that your business receives.

• State licensing requirements must be addressed. Be sure to obtain applicable local permits and certifications, as well as, filing for resale licenses or “Doing Business As” (DBA) authorities.

Corporate Governance
When operating your company it is important to govern your business, hopefully better than our federal government governs our country. This is especially important if you have employees and/or investors. In such case it may be a good idea to hire a payroll service or PEO firm to assist you. Considerations include:

Employee issues:

• Background checks;

• Employee handbooks,

• Human resources & benefits;

• Insurance (Workers Comp, Unemployment, Disability);

• Education & training; and

• Payroll taxes.

Investor issues:

• Investor relations;

• Shareholder documentation and notices;

• Maintenance of corporate books; and

• Periodic board meetings at least annually.

If you have big plans to one day go public or be lucky enough to merge with a public company you should consider complying early on with federal regulations, or the so called Sarbanes-Oxley Act (SOX).  Additionally, many lenders and insurers are now requiring some level of SOX compliance for financing transactions and obtaining insurance, particularly D&O liability insurance. If you do go this route, be sure to include the associated costs in your budget, since compliance can become quite expensive. SOX compliance generally includes ensuring proper conduct of board meetings and board approvals, shareholder documentation and financial oversight. More specifically, it requires that a company:

• Adopt a Code of Business Conduct and Ethics that apply to the company’s chief executive officer and all senior financial officers;

• Have independent directors on the board, requiring at least one member of the board of directors to be an independent director with financial expertise and all members of the audit committee be independent, to serve as the principal liaison with the company’s independent accountants;

• Not make any loans, or arrange for the extension of credit, to any of its officers or directors;

• Have its principal executives vouch for the accuracy of financial statements and its independent accountants certify as to the management’s assessment of the company’s internal financial controls;

and

• In the course of a liquidation and dissolution, ensure that, before any amounts are distributed to stockholders, all corporate liabilities have been paid or adequate funds have been reserved to satisfy them, and that a reasonable reserve has been established to cover unforeseen liabilities and the expenses that will be incurred as part of the dissolution process.

Conduct Business Operations
When conducting your business always try to employ “Best Practice” standards. Don’t let financial desperation or greed compromise your conscience. Here are ten tips to remember when operating your company.

1. Build your business around integrity and a common business mission.

2. KISS (Keep It Simple Stupid) your business plans.

3. Know your customers and market.

4. Motivate your employees toward your mission.

5. Give your business an EDGE by continually Educating, Directing, Guiding and Evaluating customers and staff.

6. Set a flexible budget and manage by the numbers.

7. Don’t let borrowing get out of control.

8. Stay on top of your book keeping and retain a good accountant.

9. Protect your intellectual property.

10. Most importantly, be passionate and stay true to your vision.

Do not panic and lose hope if your business is struggling. Like the shopkeeper sited above, there are solutions to make your business thrive.  Trust in God’s wisdom for answers.  Even though it is a tough business world with fierce competition, strive for synergies and long standing relationships, rather than seeking to kill competitors and battle for each dollar.

Remember, God is CREATION.  Through creation comes abundance.  Rather than focusing on beating down competitors and exploiting customers, focus on creating value in the world through your business and success will be abound.

If you don’t believe me, take a look at a company like Apple.  Its co-founder Steve Jobs did not invent the cell phone, PDA, computer, tablet, or any other device really, but went on to create simple but beautifully designed products that everyone wanted to own.  The result?  Apple is now the number one most valuable U.S. Company surpassing even Exxon Mobil!  Steve Jobs never really gave thought to the ‘competition’ for there really wasn’t any.

We small business owners are the backbone of our nation’s economy. It is up to us through undaunted determination, innovation and unity to turn this economy around where we can all prosper together.

YOUR ADVOCATE

You have permission to reprint this article so long as you place the following wording at the end of the article: Copyright © 2012 Raymond Lang & Associates P.C. at www.asyourcounsel.com

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