Structure Your Business

Most people can generate at least one good idea for a business based on their experience, but most people lack the faith to believe they could turn that idea into a thriving entreprise, and they may be right.

Successful businesses depend on a lot more than a single good idea or product. They need resources. So the first step in deciding whether or not your idea will fly is to look at the resources you have to decide if you really stand a chance.

Let’s take an extreme idea: you want to be a famous rock star and set up a band to tour the world. But you can’t sing. You can’t read music. You can’t even play a whistle and you don’t know anyone who has any of these talents. Ha ha. Not going to happen.

Add a visible means of support and a touch of humility that allows you to take 2 years of voice and instrumental coaching. Also lots of energy and the willingness to practice 8 hours a day and hang out at the places musicians go …. Ha ha?

It’s all about marshaling the resources you need: one of which is talent. If you don’t have the experience you need to put your idea into effect, you need to find people who can help you, learn what you need to know, or give up now.

Every idea you have for a new business should be held up against your own abilities to enact them. Crucial to success is self-knowledge.

Knowing yourself is crucial to success because it helps you recognize your limits, but it also helps you recognize your goals.

Most business coaches and books focus on your ROI (return on investment) and assume your key goal for starting a business is profit. They may also make a passing reference to lifestyle, but if you look at the strategies they suggest you’ll quickly see that profit is usually their goal. This model assumes that with profits come expansion, the ability to use your company to achieve a variety of ends, and the ability to sell your company and retire to the lifestyle of your choice.

For example, if you want to “do good” for your community, you would create a profitable company that runs a philanthropy program. Eventually you step back from direct management of the company and devote your life to philanthropic activity.

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However, not everyone wants to run a large company. Running a philanthropic company is not the same as providing the service yourself. Running a private career college is not the same as being a teacher and it takes different skills.

Only you can decide what defines success for you. It takes self-knowledge because it is easy to mistake your goals if you don’t think about them carefully. For example: wanting to teach kids is not the same as wanting to ensure kids are educated. If you want to teach kids, teach. If you want to ensure kids are educated, you might teach, or write a book. go into politics, open a Montessori school, open your own school, teach literacy classes, or ESL…….

Allies are your friends, and you should treat them as such. These are the people who work with you even when there is no recognizable return.

Before you begin your business you need to find out who will support you and what they expect back.

Family

Every business coach will tell you that your family must be on your side. You are going to put in long hours, call on them for help, require them to cut costs or even support you financially. They are the ones who assume the risk of your failure if you are using family assets to finance the startup.

You need to get honest, total buy-in from your family. If the business is still struggling 3 years from now, are they still with you? When you are gone for hours and everyone else has to pick up the extra chores around the house, are they still rooting for you or do they think you are having a good time at their expense? Are they with you in terms of your goals, even if it means a permanent change of lifestyle for them? If something happens to you before you achieve success, are they able to carry on, if not with the business, at least with their lives?

Friends

Friends can also be allies in your business. If you are lucky, they will

• proselytize your business
• lend you the odd lump sum without expecting a return
• hang out with you even when you can’t pay your part of the bill
• recognize that you sometimes have to cancel a get together to handle a business deal
• try your product/service and refer you to others they know.

If you want them to stay friends, let them support you in their own way. When things aren’t going well and you’re looking for people to blame, it’s easy to turn sour on friends who could have but didn’t use your company.

Some people believe you should never mix friendship with business, never hire a friend or lend them money. Let your friends decide how they will help you and accept with grace whatever they offer, even if it is “only” advice and goodwill.

Other Allies

Beyond friend and families you can look around your personal network for other people who might be able to help you. In many cases, as the links between you and others become less personal, the expectation will grow that there is a quid pro quo involved.

Current thinking suggests that it is easier to get people to support you in any project if they can see benefit for themselves in helping. That benefit could be financial, but it could also be providing an opportunity to do something they believe in, fame, publicity….

Regardless, tread lightly while you discover who you know that would like to be connected to your business and its goals. Find out why they are interested and listen for ways that you can help each other.

Not everyone is a good leader. Some people have all the right ideas but are incapable of getting others to buy-in and follow.

Recognizing that you don’t have leadership skills can be painful. Our society hero-worships leaders (along with people who are famous, rich or come in first) even when they berate them for misleading us.

There are many books on how to become a leader and just as many on why some people  are able to lead when other, perfectly capable people are hopeless at it. One reason may be that leadership is not the same as management and many people trying to run a business confuse the two.

Leadership isn’t about being smarter, more far-sighted, or capable. It’s about getting people to follow you down a path you set. It’s about getting allies, staff, and customers so excited about your goals that they want to be part of the project.

Needless to say, you would have to be pretty excited yourself. You would need an exceptionally brilliant vision that you believe in absolutely. Talking about your vision would energize you and everyone around you to the point that they wanted to get started right away.

Your vision must look like something they can accomplish as a team and be proud of when it’s done. There should be no insurmountable obstacles.

Management is all about recognizing the obstacles and looking for ways to overcome them without squashing the vision. It tends to be practical, even pessimistic, but persevering.

Somewhere between the leadership vision and the management of practicalities, there is a strategy aimed at achieving the end-goals. It needs to be written by the leaders and management working together.

Strategies are sweeping plans that guide a series of tactics aimed at fulfilling a goal. The biggest strategy is closely tied to the vision. It engenders a series of tactics which in turn can be viewed as strategies in their own right because they still are not actionable.

For example: we will create the world’s most accessible mobile phone might break down into a number of strategies aimed at production, marketing, distribution and sales. These in turn generate their own tactics.

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Somewhere along the line, you must generate a series of actionable tactics that can be handed out to workers so that together, they can accomplish the vision.

NOTE: One of the fun parts of planning a business is generating strategies and dreaming about when they achieve results.Some people find it much harder to write out the to-do list and get down to work.

NOTE 2: As goals are realized, new goals come into sight and the strategies are adjusted. This is why you need leaders throughout the company who can help you re-vision the business over the long-haul.

Eventually, you will have a to-do list that when completed, will bring you closer to your goals. It is unlikely that you can do it all yourself, which is why you need allies. Even so, there may be skill-based gaps that need filling and you will need to hire people.

The organization of the company is designed to …. keep you organized, especially as you bring on staff.

You structure your company in such a way that it is clear

• who has responsibility for which tasks
• who is responsible for shaping specific strategies to achieve the vision, and assigning the to-do list
• who holds onto and directs the vision

Legal Entities

Your first practical act when starting your business is to decide how to legally structure the organization. Technically you have 3 options

• sole proprietorship
• partnership
• incorporation.

Realistically, your decision will be based on self-awareness, allies and your vision. If you are a control freak who can’t delegate and doesn’t want to share the profits, sole proprietorship is the place to start. But it’s also the right choice if your vision is small and personal, for example, if you are a cabinet-maker who wants to fix and resell second-hand furniture while working from home.

If your vision was developed with the help of other people and/or you recognize your limits and have found someone who wants to work with you to build a business, consider a partnership. It has many potential pitfalls, mostly having to do with control, but it can open a range of resources that neither partner has access to alone.

Corporations are a hassle to run in that they require a legally correct set of books, unfamiliar tax issues, directors meetings and the like. You will need to separate your personal expenses from those of the company, pay yourself an income, keep a business bank account, etc.

Each corporation is run by a board of directors, which means that you can have a group of experts help you make decisions, whose focus is different from that of the management team. They also extend your contacts in the community. Your Board can however, consist of one person, you, and that person can also be the manager and production staff.

Traditionally corporations had the advantage of protecting the owner of the company from liabilities, but that is less true these days.

I’ve found the two main advantages for an SME (small to medium sized entreprise) are:

• other companies treat you more seriously. In fact some companies and government departments will only deal with corporations
• you are forced to distance yourself from the company legally, which can help you gain perspective about the place the company holds in your personal life.