If you are an entrepreneur, the start of a new year can be a great time to reflect on what you have built and where you would like to take it next. It can be a time of revitalization, as well as a time for saying goodbye to outmoded aspects of your venture that may simply not be serving you anymore. Below are my three top tips for taking stock and starting fresh with your business in 2018.
Keep Things as Simple as You Can, as Long as You Can.
As an innovator, you have a staggering number of options available when it comes to pursuing your project. Some of them relate to your business structure–a sole proprietorship, a partnership or a corporation. Evaluate the structure you have used so far and determine if it’s still working.
My general advice is to keep things as simple as you can, as long as you can. Over-complication can be frustrating and expensive at a time when your energies and financial resources are better focused on creativity.
There are many ventures that you can begin as a sole proprietor, collaborating with other people under contract until circumstances warrant a more complex form of business organization. In that case, your contracts should make clear that you and any collaborators are operating as independent contractors, provide strict and manageable limits on your personal liability and permit you to assign the contract should you decide to use another form of business structure. Any assets that you create or acquire as a sole proprietor – such as trade-marks, logos, domain names, products, websites, property leases, etc. – can then be transferred to that company or other organization.
Although collaborators often refer to themselves as “partners,” this word has heavy baggage in legal terms. Partnerships are governed by specific legislation and a large body of case law unless overridden by a written agreement between the partners. That can make it a complicated framework in which to operate without some of the protections of incorporation. For instance, unlike shareholders of a corporation, partners are typically personally liable for the debts of the partnership. Unless there are tax, legal or industry reasons to use a partnership structure, I usually suggest that innovators stay clear of the “partnership” label and refer to themselves simply as collaborators, co-venturers or even team mates. If a partnership is truly the best way to work together, then a detailed written agreement should be entered into between the partners to help clarify their respective rights and obligations.
At some point, it will often make sense for a viable business incorporate. There are accounting and tax planning advantages for the shareholders of the corporation, as well as the company itself. That said, due to new tax measures by the Canada Revenue Agency, these advantages are in a state of flux and likely to be minimized. Shareholders of the corporation are also protected from personal liability. This makes a corporation ideal if you have significant personal assets, such as a house or savings, that you wish to protect from any fall-out of negative business developments including law suits. Incorporation may also be required if a key stakeholder wishes to make an equity investment in your venture (i.e., give you money in exchange for shares in the business).
Often, however, I see companies incorporated as a sort of unconscious reaction to pursuing a new business opportunity. Corporations are bound by precise legal and tax rules, and companies can incur thousands of dollars each year in legal and accounting fees to comply with them. If you are at the start-up stage, that money that might be better spent on product development, market research and proof of concept. Save your dollars for when you decide, in consultation with your accountant and legal advisor, that the tipping point has been reached – based on revenues, risk exposure, equity investors or otherwise – to make a corporation the right business vehicle for you.
Don’t Try to Be Everyone. It’s All About Relationships.
Think about how you are running your venture. There is a tendency for entrepreneurs to wear all of the hats, largely because of their tireless enthusiasm, abundance of talent and in many cases, shortage of funds. At some point, however, that will start to become wearisome. Ask yourself what it was that drew you to your project in the first place. What is it that you do best, better than anyone else can? Give yourself permission to focus on that, because only by doing so will you have the stamina to pursue your endeavour happily over the long term. The world is full of bright and gifted people who thrive on doing the very things that make your business feel like a grind to you. Whether that’s managing your social media accounts, bookkeeping, web design – you name it – someone else is out there standing by to help you. Don’t let money be a barrier. Start approaching people and see what kind of mutually beneficial arrangement you can strike. When you form a plan to work together, paper it with a short and concise written agreement so that everyone is clear on what they intend to get from the deal and what they are expected to give.
Let it Go, Let it Go, Let it Go.
Review your revenue streams and focus on the ones that work best. If you have difficult clients or niches that have not yet proved lucrative, ask yourself whether the time, energy and money invested are truly worth the reward. If not, let them go. Review the applicable contracts for termination requirements and form a plan for disengagement that includes a respectful notice period and any necessary transition assistance. Then use that time to help what’s working work even better … or play with your kids, write a memoir or relax on the dock.
As the old year turns to the new, change can be good for your venture. Knowing that you have carefully considered your reasons for change, or for deciding to stay the same, can feel even better.
By Anita Odessa