Sheltowee Business Network Blog

When Should You Start Building Your Business?

Oct 04 2019

When Should You Start Building Your Business?

By Carlos Hernandez Ocampo, Esq.

When Should You Start Building Your Business? I first heard a similar question from a Jim Rohn YouTube video. In a seminar, he asked the audience a rhetorical question, “When should you start building a house? The answer is, as soon as it’s finished.”

He was referring to the process of building something in your mind. Going through the planning stages, outlining it, drafting it, and finally, after it is conceptually realized, laying the first brick.

Entrepreneurs usually start with an idea. It is quite easy to get wrapped up in the excitement of the new idea and let that first spark of motivation fuel you all the way to the bank. The better alternative would be to sit down and go through as much planning for your business as you reasonably can before running to your relatives and friends and asking them to fund your latest world-changing solution.

The concept of starting with the end in mind isn't new, and Mr. Rohn isn't the only person to have talked about it. Richard Covey also wrote about it in his book The 7 Habits of Highly Effective People. It's the second habit he teaches.

From a legal perspective, I would counsel an entrepreneur to first think of their exit strategy, then work their way back to incorporation. This process allows them a moment of clarity where they can consider what they want from their company, or the impact they want their idea to have. Some possible questions to ask oneself when starting with the end in mind are:

  • Do I want to have a lifestyle business?
  • Will a more prominent company acquire me?
  • Will I be raising capital from investors?
  • Will I get financing from a bank?
  • Do I want to merge with another business that strengthens my market share?
  • If my business gets acquired, do I want to stay on or walk away?
  • Do I have to pay my grandma back for that loan?
  • Will my partner divorce me if I pursue this business idea?

Good legal drafting can address many of these questions at the very beginning of an enterprise.

There are several ways an attorney can help an entrepreneur plan for these future events. When drafting an Operating Agreement, for example, an attorney can include a Vesting Schedule if the entrepreneur wants to hire talented employees or executives and would like to issue them equity as compensation. This practice is prevalent since early-stage startups have minimal resources in the form of money, but high potential value in the future if they get market traction.

Some of these questions are also helpful in determining the entrepreneur’s personal life choices. Silicon Valley's idea of young, single "techies" starting a new company has become more myth than reality; as a more diverse crowd pursues their business ideas. Now an entrepreneur could be anyone, from a retired college professor to a recently separated Veteran. As their counsel, it is up to me sometimes to spot these issues or gaps in their field of view and advise them accordingly. I often find myself telling my clients they should consult an Estate Attorney, CPA, or a CFP, Certified Financial Planner. The latter is certainly recommended if they want to use their retirement funds or military pension to fund their dream project, and there is a family that still depends on them.

Finally, starting with the end in mind helps the entrepreneur create a vision for their company, and that transforms into their strategic objective. In the E-Myth Revisited, Michael E. Gerber wrote a small passage about Tom Watson, IBM's founder, and why he thought IBM was successful. Watson answered that he first "…had a very clear picture of what the company would look like when it was finally done" and he realized that unless the company acted like that from the very beginning, they would never get there. Having a vision to work towards is crucial for success in anything, especially in the startup world.

Startups are assailed by a thousand different opinions from the moment of inception. Everyone such as relatives, friends, professors, mentors, and yes even lawyers giving business advice, has the best intentions and the “right” way to run your business. Having a vision of what they want their idea and company to become will shelter them from all the feedback that can potentially dilute their original value proposition.

In closing, going through the planning process of your potential business idea is an excellent way to set yourself up for success. It will help you understand the initial decisions you should make legally, personally, and strategically. Best of all, once your business is finished, you can start working on it.

This legal article is made available for your educational purpose only as well as to give you general information and a general understanding of the law as it applies to businesses, not to provide legal advice. You should not act upon this information without seeking advice from a lawyer licensed in your own state or jurisdiction. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction.