When you launch a new business, you can only hope that it will achieve a lasting impact, making a positive difference in your life, in the lives of your customers, and in your industry more broadly.
Impactful companies don’t happen by accident, but rather they come about through careful planning and strategy. Several steps can contribute to the impact of your business, including legal formation, product valuation, and more.
While there’s no formula or blueprint for startup success, there are a few basic steps that are important more or less across the board. Here’s a quick primer.
1) Choosing the Right Legal Structure
One of the most important decisions you’ll make about your small business is the type of legal structure you’ll choose.
There are a few options:
With a Sole Proprietorship, you own and operate the business all by yourself, assuming all of the business’ liabilities while claiming all of its profits.
A Partnership works in much the same way, but allows you to distribute liabilities, profits, and operational responsibilities between two or more business partners.
A Corporation offers more robust legal liability but also comes with significant regulatory overhead, including the need to issue shares and hold annual shareholder meetings.
A good middle ground for small businesses is the Legal Liability Company, or LLC. Registering your business as an LLC establishes it as a distinct business entity, allowing you to shield your personal assets from creditors and from litigation. This allows you to protect your business’ impact from potential lawsuits, but does not come with a lot of onerous regulatory requirements.
Registering your business as an LLC is usually a very straightforward process, though the steps can vary a little from state to state. Sites like LegalZoom are good resources for legal documents and templates. You will also need to find someone to serve as a Registered Agent for your LLC.
2) Pursuing Financing for Your Business
Most businesses need some startup capital to get off the ground. From product inventory to marketing resources, initial investments can help you maximize your business’ impact. The question small businesses face is, where is this initial capital going to come from?
There are several options to secure business financing, and the option you choose may be dependent on the legal structure you landed on back in step 1. Here’s a rundown:
One option is to self-fund your startup, which may mean dipping into your personal nest egg or else asking family members and close friends for a loan. The big concern here is that you will be limited by your wealth, or by the wealth of your community.
Another option is to seek external investors. Registering as an LLC can give you some of the professional credibility you need to win the trust of investors. If you want to sell shares, a key way to attract big-dollar investors, then forming a Corporation is required.
A final option is to seek business loans and lines of credit from a lender or bank. Again, registering as an LLC can give you a bit more credibility, which may translate into more favorable terms.
Exploring these financing options is essential for establishing your business’ impact.
3) Preparing Other Foundational Documents
Nobody starts a business because they love doing paperwork, but nonetheless, completing certain forms can be an important way to position your company for success. Consider two documents that are especially important for establishing longevity and impact.
Business Plan
Your business plan is not a legal document that you file with the state, though you may be asked to submit it to potential lenders and investors. More broadly, it provides direction and mission clarity for you and your business partners.
Essentially, this is a comprehensive document that outlines your company's objectives, strategies, and financial projections. It may touch on things like the products and services you offer, your proposed marketing and sales channels, and some basic revenue forecasts.
Operating Agreement
This, too, is not a legally mandatory document, but it can certainly be important to have. Your Operating Agreement is a charter for your business, outlining how you will allocate duties and profits between different partners, and how you will deal with a partner who wishes to exit the business.
For LLCs, having an Operating Agreement can minimize legal friction down the road, making it a valuable tool for safeguarding your business’ impact.
4) Positioning Your Product for Success
A final step for establishing business impact is ensuring that you’re offering the very best product (or service) to the appropriate market. This might encompass a few different steps:
Conduct market research. First and foremost, make sure you have a good sense of the market you’re entering. Who are the main players? How crowded is the market? What opportunities do you see for differentiating your product or service?
Know your audience. Additionally, make sure you know the values, demographics, and pain points of the customers you’re pursuing. Focus groups, surveys, and direct user feedback can all help here.
Create a prototype. Building a minimum viable product (MVP), then soliciting user feedback, can be an important way to ensure you’re making a valuable offer.
Iterate and refine. Seek continuous feedback from your customers, and use it to improve your products or services over time. Feedback can also be important for calibrating your sales process and your marketing message.
Simply put, investing in the best possible product or service is an important way to ensure lasting business impact.
Establish Longevity and Success for Your Small Business
When you launch a new company, you can only hope to make a big impact. Marry your hopes with pragmatic steps and concrete actions, including legal formation and careful business planning.These steps will point you in the right direction of long-lasting business success.
Author Bio
Amanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing.
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