Category: Starting Up

Introduction

In the age of start-ups and exponential advances in technology, an ever increasing number of people seem to be taking up the entrepreneurship mantle. However, starting a new business from scratch is not always as easy as it sounds as the challenges are numerous. One alternative to starting a new business that is increasingly being looked into by would-be entrepreneurs is buying (into) an existing business.

One of the main benefits of investing in the purchase of an established business is the fact that it eliminates, or at least reduces some of the risks associated with starting a new business. Having said that, while there are myriad types of businesses available for purchase there can be potential pitfalls that await a buyer who is not properly educated and knowledgable about the ins and outs of taking over an existing business.

So, before venturing into the world of buying a business, be it a Limited Liability Company (LLC,) a Corporation or any other form or type of business entity, you should be aware that there are many things to look out for and be knowledgable about, to ensure that your decision ends up being a positive and beneficial one. 

Therefore, take heed of the following nuggets of advice.

Don’t buy Businesses, buy Assets 

Any business attorney worth their salt will always advise you to opt to purchase the assets of a company, rather than the shares of the company. There are a number of reasons for this. For one, it generally gives you better tax treatment as the basis of the sales tax you pay will be calculated on the price of the assets in their depreciated or used state, rather than what the seller originally paid for them. In other words, it lowers the amount of sales tax you get to pay. 

Additionally, it also means you avoid assuming the potential liabilities the corporate entity might have, including liabilities that the seller might not even know they have at that point in time.

Once the asset sale is complete, the most likely option is that you would then use your own company to take over these assets and run your business. This, of course, means that you will either have an existing corporate entity or that you will be creating a new one. Depending on the type of business and other considerations, creating  an LLC for this purpose is a good idea to achieve this objective.

Investigate the Accounts Payable and Receivable 

When you buy an established business, chances are that some of the business’s customers will still owe the business some money by the sale date, or the date of the transfer of the business’s assets to you. In the same vein, the company might likewise owe money to other parties. It is, therefore, a good idea to agree with the seller who will be responsible for collecting and settling these debts. 

Of course, if the business has larger accounts receivable than payable, then it might be favorable for you to include this in the asset purchase. If the vice versa is the case, then this consideration could potentially affect the asset sale price. It is however important that thorough research and due diligence is carried out on the business, including a thorough and in-depth look through their books and audited financial statements going back several years, if necessary with the help of an accountant. The findings of this investigation are what should determine whether or not to include the accounts receivable and payable as part of the asset sale.

Know your Premises Rights

Before you take over the assets of an existing business, consider what you are going to do with these assets once the acquisition is completed. For instance, are you going to continue running the business from the same premises as the previous owner? If so, does the seller have a written lease for the premises and is the landlord likely to allow for a lease transfer? Are the terms of the lease even favorable? These are just some of the questions that you are going to need answers to.

One tactic that you should consider adopting is to make it a condition of your purchase of the business’s assets, that the lease is transferable and favorable to you. This and other terms of the purchase will no doubt be stipulated in your offer to purchase, which no doubt should be properly drafted by an experienced business lawyer. 

What Contract Exposures are There?

Another important point to consider is the contracts to which the business might be a party to, and the risks and benefits involved with those contracts. An investigation into these contracts is one significant component of what a “due diligence investigation” entails, and should be one of the key prerequisites any well thought-out business asset purchase should consist of. 

Cherish Institutional Knowledge

There are many questions to ask oneself when seeking to buy a business. However, without a doubt, one of the greatest assets in an established business is its people. Often, employees who have been around for some years will have invaluable knowledge of the business, its market, competitors, and most importantly, its clients. Make sure you get to know and build trust with the business’s employees. Many people who purchase a business will often retain the services of the previous owner for a predetermined period, as an employee or consultant, to ensure a smooth transition of skills, knowledge and institutional culture.

Expert advice is usually the way to go

When in doubt, it is always best to consult people with relevant expertise. If you are unsure about how to go about purchasing an existing business, some of the resources that will prove invaluable to you are things like a business broker, an accountant, someone who has experience buying a business, a small business attorney or even the ever helpful Messers Google or Bing, to provide certain information about the company, the industry, the seller and several other such useful information.

While some of these resources might come at a cost, these costs will usually be much cheaper than completing the asset purchase without them only to discover some questionable things about the items you have purchased, 

Even if you are looking to buy a small business, you can be assured there will be no shortage of paperwork, and only an expert attorney will be able to apprise you of the legal minutia at play. While it may bring an extra cost, a good attorney will save you plenty of time, money and headaches in the long run. Be aware of the fact that challenges exist not just in the process of buying your business, but in managing it after the purchase too.

Bio

Kanayo Okwuraiwe is a startup founder, an incurable entrepreneur, a digital marketing professional, a chess lover, a brother, a son, a friend and more. His latest project has seen him create a digital marketing agency called Telligent Marketing that provides law firm SEO services to help lawyers grow their law practices.

Startup funding is its own enormous industry, and healthcare companies have cornered the market recently. According to a Pitchbook analysis summarized by Forbes, healthcare startups raised $15 billion in venture capital in the first six months of 2018, which was 70% more than they did in the same period in 2017. But, as any business owner knows, an increase in funding comes with its own problems. In particular, VC funding has allowed healthcare startups to kickstart operations, but now they have to grapple with individual clients and the subsequent cashflow challenges.

Common Cashflow Problems – And Solutions

It doesn’t matter what type of business you run; every company is vulnerable to cashflow problems. That being said, healthcare organizations tend to face several very specific issues. These include the high – often unaffordable – cost of medical care and issues with insurance providers. Luckily, these problems can be solved with a few simple solutions.

First, be sure you’ve established clear payment policies. Too often, companies will keep sending bills, but don’t act to collect on unpaid invoices or ever directly address those invoices with clients. Be willing to cut off services until accounts are settled. Companies often avoid this because they’re afraid to alienate clients, but it’s good business to protect your financial interests.

Another way to stabilize your startup’s cashflow is by outsourcing your medical billing. This is a particularly valuable strategy if you’re combining startup technology with a more traditional medical practice. Outsourced billing allows companies to harness the specialized skills of claims specialists – and their technology – and keep in-house staffing to a minimum.

Consider The Extended Office

Outsourcing your medical billing can help your startup manage cashflow, but the approach still has a limited reach. That’s why, if you want a more comprehensive approach, your startup should consider an extended business office (EBO). EBOs are precisely what they sound like – an extension of the traditional office, and that’s what makes them so useful to startups.

Rather than investing in a large staff, training, and technology, and EBO provides financial transparency for clients, insurance claim management, and can take your accounts from pre-registration all the way through to collections when necessary. Additionally, EBOs let your existing staff focus on what they do best – providing innovative healthcare services – while ensuring the financial issues are taken care of with expert attention.

Think Outside The Box

Finally, it’s important for startups to realize that the classic “spend money to make money” approach to building a business needs to slow down eventually, so keep that in mind as you attempt to balance your startup’s cashflow. This means that you may need to do more than just collect on existing bills if you want your business to thrive. You also need to consider other financial elements.

So where should healthcare startups try to re-balance the books? One option is at the level of supplier contracts. If you’ve established yourself as a reliable customer with growing purchase volume, then you’re in a position to renegotiate those contracts. Alternatively, if you can’t reduce the costs, you may be able to rearrange when payments come due. Moving around your bills to better align with income can make a big difference.

Every company eventually finds its own cashflow groove, featuring strategies like discounts for prompt payment, payment plans, and efficiency measures, but most don’t figure out these best practices until they’ve been in business for years. With that in mind, though, healthcare startups should use the recent influx of VC funds as an opportunity to grow wisely.

Set some money aside, revamp the budget, and see how you can maximize income while still providing top quality service.

All ecommerce or retail startups follow the same business strategies. Most people believe that ecommerce is eating up the retail world at this moment. Well, it is true to some extent due the inherited benefits of ecommerce, but there can be another significant reason for retail businesses, especially the startups, to fail.

This is the lack of a proper plan and business strategy that will lead them to the path to success. Yes, it is crucial to have a proper business plan irrespective of the mode of it to succeed or else you will be forced to either close it or go bankrupt.

You may feel that the digital landscape is an exciting and promising place to be but rest assured that this is not Utopia! You will have to compete with similar digital brands in the marketplace and along with it also face and try to overcome the innumerable challenges that this digital world is sure to offer you from time to time.

Create an online presence

Without a strong and impactful online presence you will find it very difficult, if not impossible to succeed in this modern business world. This holds true for your brick and mortar store or for your online store alike.

However, this is not an easy task. You will need to consider several aspects to hit it big and also know a few of the online trade secrets for that matter. Such knowledge will help you to reach to the top of your business as well as in the Search Engine Result Pages or SERPs just like the most major brands and other sites.

This will help your customers to find your website easily when they type in a specific keyword in the search engine. For example, when you type in ‘debt relief’ in any of the search engines, it is highly likely that you will see nationaldebtreliefprograms.com featuring at the top of the SERP or at least within the first four or five search results. This is online presence.

There are several important factors to consider for ensuring this as well as the success for your startup.

Brand is the main purpose

The next step to ensure your startup success is to buildyour brand value. Remember, for any business success the values behind it is the key and the primary purpose. It is the core of the identity for any business believe it or not. For this you will need to find out the answers to a few specific questions:

• What it is
• What you have to do and
• Why you need to do it.

Typically, while creating the brand value you should remember that your brand should embody all those values that are not only related to the central endeavors of your business but also provide some specific value to your customers.

That means you will need to have a clear mission and vision regarding your brand and avoid the common mistakes that older brands make and do not age or perform well.

You can do this by making sure that:

• You identify the purpose of your brand
• Align these purposes properly on the basis of the values of your targeted customers
• You know the extent to which your company can motivate brand advocacy and
• You must know how all these will affect in making a purchase decision by the customers.

When you assure that everything is as it should be like the above, you will enjoy the desired results. However, at this juncture you must know that these results may vary from one demographic to another. Therefore, your brand as well as the level of appeal your brand can create in the customers is the key to success.

The bottom line here is that you should never deviate from your brand as there are serious and chain reaction of it.

• When you deviate from your brand, it will seriously hurt your message.
• When your message is hurt, it will in turn hurt the reputation of your brand.
• When the brand reputation is hurt or tarnished, it will hurt your customer values.
• When the values of the customers are affected, it will hurt the organic traffic.
• When the traffic is affected, it will hurt the conversion rate and its chances.
• When this is hurt, it will affect your business revenue.
• When revenue is hurt, you must understand that the end of your business is close by.

Now the question is can you really afford such things to happen and is it worth when you can easily avoid all these with a clear strategy followed? Surely not, and it should not be. This is because your brand is the most important thing for your business that will always persiston the perceptual map of your customers.

Focus on SEO

Now you know a lot about brand and customer value and therefore it is time to focus on the Search Engine Optimization or SEO aspect. This is something that is very important for all business startup as well as the established ones, irrespective of the fact that it is only an only store or a physical store.

Proper SEO will bring in more traffic and there are lots of articles in the internet you will come across when you look for ways to build a better SEO. Not going into how to build a strong SEO, here is the importance of it for your startup.

• A strong SEO will ensure that Google ushers your site to feature near the top of its organic search engine results.
• It will also ensure that your site meets with all the requirements of the Google’s algorithm that keeps on changing so frequently that it is sometimes too hard to keep pace with it.
• In addition to that, SEO will ensure that your site also avoid lowquality posts simply with an intent to generate more revenue but focus on meeting with the Search Quality Guidelines of Google.

All this will ensure high ranks and easy success to your startup business.

People who love the great outdoors and have a desire to share the experience with others, as well as a desire to start a business, should check out the outdoor company scene. It’s a thriving industry, given the right market, and there’s plenty of room for growth and opportunity.

If you have a cutting-edge idea for a new business in this field, now is as good a time as any to get started in any of the following specialties.

1. Golf Course

Although most people don’t regard golf as the “the great American sport,” it is an essential part of our culture. It’s particularly popular among business executives; professionals meet and conduct deals over the fairways. It can also be a highly relaxing use of time.

Building and managing a golf course is a great business. Look for an area that could use an additional golf course and develop the land accordingly. This is certainly not a cheap startup, but it offers fantastic opportunities for growth; plus, you can spend plenty of time on the course yourself.

2. Sports Complex

Many cities would treat a sports complex as a huge and welcome addition. Parents with children who are athletes but have no sports complex in their part of town must travel, sometimes upwards of an hour, to get to each game.

Building a sports complex in such a region would be incredibly beneficial to the nearby municipalities and would provide excellent opportunities for growth and profit. Obviously, this would be a substantial investment, since you’ll need to handle everything from the landscaping to the lights and equipment. But the industry holds great potential!

3. Niche Farming

It’s not easy to start farming in today’s market unless you inherit land or purchase an existing operation. But you can make a comfortable living and spend your days outdoors if you take up niche farming.

You might grow a few select types of produce or raise a small herd of animals. You could own a horse stable, rent out farm equipment, harvest and manufacture special dairy products, sell produce on the side of the road, or participate in other farming practices.

When you do, you’ll enjoy constant nature and exercise while pursuing your need to make a living.

4. Landscaping

Since landscaping outside of commercial and residential buildings makes a big impression on customers and visitors, it’s a profitable industry to break into. It yields potentially high profits, particularly if you’re good with your hands, have creative ideas, and hire a reliable crew.

The equipment investment at the beginning can be pricey, but it won’t necessarily take that long to build clientele, particularly in areas where landscaping needs are substantial.

5. Tour Guiding

Move to a tourist location like West Yellowstone National Park, Hawaii, Alaska, or other a similarly popular outdoor destination. From there, you can brush up on the history of the area and lead tours.

You’ll get to spend every day amid nature and wildlife, and educating visitors on the environment. It’s a highly relaxing and enjoyable career for the motivated outdoor lover.

6. Pest Control

Pest control is popular in the Midwest and southern part of the country, thanks to the overabundance of insects and rodents in these regions. People will pay good money for extermination services, and you’ll get to work with your hands on a daily basis.

7. Boat Broker

If you live anywhere near a body of water in a highly populated area, you can make a great living selling and repairing boats and yachts. Because boats are best showcased on the water, you’ll likely get to spend a fair amount of your time there.

Getting started involves obtaining a license and building up your inventory. You typically make money on commission, so it’s best if you’re a capable salesperson.

New entrepreneurs can start a business in practically any state they choose, but each state offers advantages and disadvantages to business owners, sometimes in surprising ways. If you want your business to have the best overall chance of success, you’ll want to choose a state that’s favorable to you, but is there truly a “best” state in which to start a business?

How States Treat Structures Differently

We can start answering this question by examining how states treat business structures differently. When you create an LLC or corporation, you’ll be subject to laws, rules, and restrictions associated with that state. For example, starting an LLC in Delaware is different than starting an LLC in Montana.

You can note the differences in the following categories:

• Taxes. Most states have a unique corporate income tax rate, and some apply a fixed tax rate to LLCs. Some states have unique tax advantages or perks associated with starting a business in that state, to incentivize more entrepreneurship.
• Liability. For the most part, liability works the same for businesses of the same type, no matter where you’ve started them. However, different states may offer varying levels of protection for LLCs or corporations based on local rules.
• Fees. Some states, instead of having a tax rate for LLCs, instead impose a flat, recurring fee for keeping the business alive. For example, you might pay $300 a year to keep it active, or you might pay nothing—it all depends on the state.
• Annual reports and paperwork. States also frequently have specific demands for annual reports, especially for LLCs and corporations. Some states require you to submit a specifically formatted annual report (and/or other paperwork) at regular intervals, while others may be more lenient with the paperwork required.
• Incentives. States may also individually offer unique perks or incentives for entrepreneurs to start a business in their territory. For example, you might have access to a lower tax rate if you meet certain requirements, or you may have more grants and loans available to you.

Starting a Business in Another State

It is possible to structure a business in a state other than the one in which you live, but it isn’t always advantageous. For example, in some cases, you may end up paying taxes both in your home state and in the state in which your business is incorporated, or you may be forced to comply with the regulations of two different states. Consider the pros and cons of operating a business in another state, and all things equal, lean toward the state in which you plan to reside.

Other Factors to Consider

There are some other factors you should consider when planning where to start your business, such as:

• Startup activity. Some states simply have more startup activity than others, resulting in a feedback loop that attracts more entrepreneurs and keeps that local economy thriving. Generally, states with high entrepreneurship rates are more favorable to new entrepreneurs; there tends to be a better environment for mutual support.
• Overall survival rates. You can also look up survival rates for new businesses in a given area. Some will have a much higher rate of success due to local conditions. This shouldn’t be the only factor you consider, clearly, since you could always be the exception to the rule, but it could help sway you in a tough decision.
• Economic productivity. How does the state’s economic growth rate compare to the national rate? Generally speaking, a state with a higher rate of economic growth will have more opportunities for entrepreneurs in practically all industries, and at all levels. Again, your mileage may vary.
• Employee options. It’s also worth looking at the available talent in a given state (and in the big cities within those states). States with good higher education opportunities tend to have better-educated and more skilled employees available for higher. That said, they also tend to demand higher salaries, so you’ll have to strike a balance here.
• Cost of living. If you plan to reside in the state in which you’re forming your business, you should also consider the cost of living. If you make twice as much money but pay three times as much in everyday costs, it may not be worth the move.

Is There Truly a “Best” State?

As of 2018, some of the commonly cited “best” states include New Hampshire, Massachusetts, Wyoming, Nebraska, and South Dakota, but you’ll find different answers depending on which sources you review, and of course, your individual priorities and preferences should influence your decision.

Accordingly, there’s no such thing as a true “best” state in which to start a business, but some states will be more favorable for your business than others. Do your research before you finalize your decision, and make sure to take all these factors into consideration.