I cannot overstate the importance of a solid business plan, which includes
the business’ name, any licenses needed, the proper legal structure and, most
importantly, the company’s goals and objectives. Starting a business without a
plan is like going on a long road trip without a map, but many people skip this
essential step. Having started a small business, I can say that the process of
developing a business plan is as important as the plan itself. The
research required to establish a plan takes a potential business owner through
many of the initial assessments that will determine if the business will
succeed or fail.

Another fatal flaw is that many businesses start out
undercapitalized. You will need sufficient reserves until you establish a
positive cash flow. The number one reason new businesses fail is that they run
out of money before they start turning a profit. You must have a good idea of
how much capital you will need, not only to operate your start-up but also to
pay your personal expenses if the business is your primary source of income.

When I started my law firm 10 years ago, I had to consider items
such as office space; malpractice, liability and property insurance; furniture;
computers; office supplies; personnel; taxes; and utilities. If I had failed to
research the cost of running a law firm, my business might have been grossly
undercapitalized even before I got to the issue of what I would pay myself. A
fair estimation of first-year business expenses, start-up costs and estimated
income is essential in making sure your business is adequately capitalized. Will
the money to capitalize the business come from savings? Will you need a line of
credit or small business loan? If investors capitalize the business, what say
will they have in the direction and management of the business, and how and when
will their investments be repaid? All these questions have profound
ramifications for a new business.

Finally, aspiring business owners often have an idealized notion
of how successful they will be. Because you have lived with the idea of starting
a business for so long, you might assume that potential customers and clients also
will be passionate about the concept and that money will automatically start
flowing in the door. Before that can happen, however, potential customers have
to have some way of finding out about your new business. Determining how you
will attract customers is the first step in marketing your business. Whether you
rely on the Internet, direct mailing or the Yellow Pages, advertising will cost
you money, and it will target a specific segment of the community. If the
market already is saturated with companies offering the same product or service,
you will have to find ways to differentiate yourself from your competition.
Many new business owners fail to appreciate the difficulty of reaching
potential customers or the effect competition has on maintaining a consistent
client base. The best way to properly address this issue is through front-end
research and market analysis.

Once you answer all these important questions, your best move is
to surround yourself with a team of advisors and professionals who know all
about the finer points of managing a successful business – an accountant who
can offer tax advice, an insurance agent who can protect you against certain
risks, and a banker who can offer prudent financial advice. The best business
owners succeed because they know what they do not know.

As a lawyer, I would be remiss not to mention that proper legal
advice also cam protect you from potentially catastrophic
liability. For instance, the choice of whether to incorporate or form a limited
liability company could be important in determining if your personal assets
would be in jeopardy in the event of a lawsuit.

In South Carolina, approximately 92 percent of businesses owned by
African-Americans have no other employees, and they often are run by people
with multiple responsibilities and little or no management training or
expertise. However, if you establish a solid business plan, secure adequate capital,
assess the market properly and seek advice from experienced professionals, you
will have a much better chance to make your new enterprise a thriving success.

Dwayne Green is an attorney with Ford & Wallace, LLC, of Charleston.