Are you starting a business in Maine?
Our office is gets a lot of calls from individuals who are thinking about starting a business in Maine; so we thought it might help to post a short series of articles on the subject. We need to first begin with a disclaimer. The information in this article (and those that follow) should not be taken as direct legal advice as each case is different. If you are in the process of starting a business, please give us a call so we may gage your specific situation and respond to you in greater specific detail than can be given on a website like this. But, there are things everyone should consider before starting a business of their own or purchasing a going concern owned by another. We will be presenting articles focused on specific legal issues over the next few weeks. However, today, we would like to address an area which, while perhaps not directly connected to your legal issues, is something we would suggest you have in place before you venture into owning a business, a team. So, we call this first of our series,
Building the Team
Perhaps, this comes from our background in sports, but we like to think of a business as a team. Just like any other team, a business is only as good as its owner, its coach and its players. As the owner of the team, it is up to you to bring to your team this important mix. Let us look at this team.
The role of the owner – Perhaps the most important member of the team is you. As the owner you receive the profit from the business, but you also have to bear the losses of the enterprise. To obtain those profits, it is the owner’s job is to develop a team which will be successful. Yes, as a start-up, you might have to wear all of the hats, owner, coach and player, but it is never too early to plan on being just the owner. Before you begin a business, we suggest you take an honest inventory of your strengths and weakness. Do you have the knowledge of the business and its market which you wish to enter as does, for example, Bob Craft, the owner of the New England Patriots, has of the NFL? If not, where do you get that knowledge? We would suggest if you have not worked in the area, that you find a business which will employ you. Also, we suggest you read as much as you can both about the business you are targeting and about the skill sets by others, like the Bob Crafts, Bill Gates, Steve Jobs, etc., who have traveled the start up road with success. But, if you do nothing else, we urge you to have an informal group of advisors in your contact list to call upon. Let’s look at the makeup of this group of advisors:
The Mentor – This person or persons is perhaps the most important in your group. He/she is a person who has experience and the time to lend you an ear. While it might be someone directly in your line of work, it does not have to be. For example, John was fortunate enough to have two. His old boss from the Army and a local businessman, served as his mentors. His Colonel, although he devoted his entire work life to the Army, was an attorney who interacted with attorneys all around the United States. Further, he was in charge of the team which created the United States Army Claims Service which basically is a large law office. He knew how to staff and equip an office which was something John had no knowledge. He also gave him valuable hints on what books to buy; and perhaps more importantly what books he could simply borrow from the law library. The other mentor was a longtime resident and owner/operator of a successful business. He not only knew how to create a profit; he knew how to train his managers to get the best out of his employees. He had a deep knowledge of the community and was willing to share his knowledge and insight. But, another very important function served by both was to be an impartial ear. John could talk things over with them before he took action. Their assistance was invaluable.
Accountant – If you are going to play the game, you need to know the score. The person who sets you up to know the score is your accountant. The accountant’s role is to help you best set up your bookkeeping system so it gives you up to date information on your financial condition. Your accountant can also be helpful to you in finding a few key numbers in those books which will help you guide the business along. He/she also can be helpful, along with your attorney, in selecting the business form (or forms) you will elect (a subject we plan to expand upon in our next article in this series). Next, he/she will be helpful in getting your various tax returns properly prepared and filed. Finally, since they deal with businesses on a daily basis, they can also serve in the mentoring role.
Insurance Agent – Our job as attorneys is to try to help you structure your business to limit your personal liability exposure, but we can do just so much. Let’s face it, life is a risky place; so we recommend our clients establish a relationship with an insurance agent, preferably an agency which is broad based. Clearly, you need a general liability and casualty policy to cover general risks, but there is more. If you are a professional you need to consider professional liability coverage. If you are a contractor, you might wish to have a product liability type of insurance. If you have any employees you will need worker’s compensation insurance. Finally, you might need to consider health, disability and life insurance to protect the business should you get sick, disabled or die. The role of a good insurance agent is to help you through these decisions and to find the least expensive product for your needs.
Media/Marketing Specialist – While we live in a networked world, few of us have the time, knowledge and/or ability to do our own media work. While word of mouth advertising may be the best form of advertising, it is also the slowest. A start up business does not have the luxury of time. Your media/marketing person has the time, knowledge and talent to get your name out to potential customers.
Attorney – The last, but certainly not the least, member on your group of advisors is your attorney. While the attorney can do the paperwork needed to establish your business, he/she can do so much more. He/she can help you structure your contracts to make the laws work for you. He/she can help you design employment packages to attract and retain employees. He/she can maintain your business documents to satisfy tax and other government regulators. He/she can help you collect on just debts owed to you and defend you in court from claims made against you. He/she can help you design and implement a transition security plan which will allow your business to continue if you get sick, injured or die. There are many other support functions which an attorney provides. But, one that might be best serve you is the attorney is duty bound to protect your secrets.
The role of the coach/manager
Have you ever watched a sporting event and looked at the actions of the coach? The role of a coach is very similar to that of a business manager. The coach has the responsibility to find and select players to fill specific needs on the team. The coach must mold those players into an effective unit to be prepared to win the game. The coach establishes the basic strategy to be employed during the game. Once the game begins, the coach has the responsibility to watch the players as they engage in play, to encourage them and to make adjustments to the game plan as it develops. After the game ends, it is the coach’s job to review the team’s performance to make adjustments for the next game. The coach reports on the performance to the owner. If the team loses, it is the coach who bears most of the brunt of the loss; but if the team wins, a good coach gives the credit to the team.
This role is exactly what the manager/owner of a small business does. The only difference is each transaction of the business can be like a new game. In real life, those decisions can dictate how much, if any profit, the business makes. A person with that skill set is essential to any successful business.
The roles of the Players/ Employees
The chemistry among the players and the proper matching of their abilities are the keys to the success of any team. The coach/manager needs to know what his staffing requirements are and how to fill those needs. The coach/manager needs to have a good knowledge of the job assigned to each player/employee. The coach/manager needs to select and train individuals to match those needs. But, it is the player/employee who will do the work on the field to bring success.
In a business, this means each employee must have a clearly defined job description and must be gauged against that job description. Let us imagine your business has six employees: a receptionist, a bookkeeper, a sales person and three production/shipping people. Your receptionist is your voice to the world. She/he is not only greeting your customer, she is your first point of sale. While it is your salesperson’s job to seek out and find customers, the receptionist’s job is to keep them coming through the door. Her job description should match these requirements. Your bookkeeper probably will have many hats. He/she will record your transactions, cut your checks, send out your invoices, prepare your payroll and file your taxes. At least initially, she/he will deposit payments and call on delinquent accounts. They should be spelled out in a job description. Your sales person (which might be you) must know the customer’s needs, but also the production staff’s capabilities. Putting this in the job description allows both the employer and employee to know their roles. Finally, the production staff needs to create the profitable product you are selling. They also need to communicate with the salesperson and bookkeeper to make certain the product they are producing is going out the door in a timely manner. This should be laid out in a clear job description. This does not just happen. It requires hard work by the owner and/or manager. It takes time to draft proper job descriptions. It takes a wise, patient person to blend the talents of each of the employees into a team which is trained to focus on the same goals. Finding, molding, and training the proper mix of individuals to allow them to act independently, at the top of their abilities, is just as difficult for the small business as it is for the New England Patriots. Yet, when it is done properly, like any champion sports team, it is a beauty to behold.
In our next article, we will turn our attention to what forms can a business take and what are some of the advantages and disadvantages of each.