Every professional athlete has at least one coach; often they have several coaches, each with a specialized area of skill and focus, so that the combined coaching enables the elite athlete to achieve and maintain high levels of performance. Well when done right, being in business should be different – good coaches come in many forms, with highly specialized expertise in their area of practice. These extra eyes, ears and skills enable the business owner to gain greater perspective and deeper insight into their options, so that the owner can capitalize on the best opportunities while avoiding common – and costly – mistakes, within the risk tolerance zone of the owner.
The most obvious “coaches” for a new business owner are:
- a Franchise Matchmaking Consultant;
- a Chartered Accountant, and
- a Lawyer who specializes in the area of business you’re about to go into.
Most business matchmaking consultants get paid by the parties that are offering the business opportunities or franchises that they match you with, so there should be no cost for you to this service, either directly or indirectly. You’ll want to engage this professional at the very beginning of your search for the right business, as they can help you save a tremendous amount of time by enabling you to focus on only those businesses that are a strong match to your criteria.. while avoiding the many businesses that are interesting, but not a good fit – all these businesses do is consume research time!
We recommend strongly that you only spend money on professional services when necessary, so whether you use a professional matchmaker or not, you should only be engaging an accountant and a lawyer when you’re near the end of your search process, in other words, when:
- You’ve created your ideal business model;
- You’ve identified enough options of business opportunities that are a strong match to your model;
- You’ve effectively researched you options to understand the platform, the partners, and the performance factors
- You’ve created an “operational” business plan (a clear “6W” factor – what, when, where, who, why and what) regarding how you’re going to launch and build your business
- You’ve created 3 financial models – low, mid, and high performance, based on your operational plan
- You’ve identified what funding you’ll need to launch the business, as well as fund it through to when it is able to consistently maintain positive cash flow;
- You’ve set aside the amount of money you personally plan to inject into the business, plus you’ve applied for and been approved for whatever funds need to be borrowed.
Franchise Matchmaking Consultant
Most people have never been in business for themselves before, thus they simply don’t possess sufficient knowledge to complete an effective search on their own. The most common knowledge gaps are:
- They are only aware of a small number of options available
- They don’t know how to look for a business
- They don’t know where to start their search
- They focus their search based on their current perceptions, and thus often miss strong opportunities that suit them well
Business matchmaking is an emerging industry, so there are a limited number of qualified professionals to choose from. A skilled business matchmaker will take you though a number of exercises to help you gain clarity on these as well as several other critical areas, with the outcome of having a well-defined “ideal business model”. They will then introduce you to only the options that come close to matching your options, and most importantly, they’ll work with you over the course of several weeks to help you research your options and either choose a business to enter into, or help you realize that the timing isn’t quite right for you to become an entrepreneur.
Lawyer
The lawyer is often the final professional you’ll want to meet with prior to launching your business, but in most cases a very necessary one. If you’re entering into a business where there is any type of partnership (including spousal or other family members), then meeting with a lawyer is a must do. If you’re setting up as a sole proprietor, this is still recommended because a good lawyer will help you make sure you fully understand your obligations and/or liabilities prior to proceeding.
Most businesses these days include some type of partnership, whether expressed or implied, so it’s very important to make sure that you fully understand your rights and obligations, and that you are as protected as possible from any liabilities that a partnership might expose you to. Not investing a little bit of money to gain this understanding prior to signing your agreement has ruined many friendship and family relationships and has created significant losses to thousands of people – the courts don’t recognize “I didn’t know that” as a viable defence!
You’ll want to make sure that your “partnership” agreement (for purposes here this includes partnership agreements between friends/family, shareholder agreements, franchise and/or license agreements, etc) defines all aspects of the business relationship – who does what, at what cost or compensation rate, how long the relationship is for, how often it gets renewed and under what renewal terms, etc. There are far too many considerations to list, so for a good overview of the many things to consider, click here for things to consider in your agreement. (hyland shareholder agreement overview)
We strongly recommend that you seek out a lawyer who has significant experience and expertise in the area of business you’re about to get into, because there are usually some unique factors and in some cases, specific legislation that affects your business that you’ll want to be aware of.
If you’re buying a franchised business, then the agreement is often a very detailed document and involves much more complexity than many other business agreements, so reviewing your agreement with the franchise lawyer prior to signing is a MUST DO! There is also franchise legislation in several provinces that protect the buyer to some degree, so it is absolutely necessary to meet with a franchise lawyer to review your agreement and understand all aspects.
It should be noted that it is not the franchise lawyer’s job to be negotiating any major changes to your franchise agreement with the franchisor on your behalf, as many franchisors do not change any aspect of their agreement (especially franchise fees or royalty rates). Instead, the lawyer is there to ensure that you completely understand the agreement, i.e. territory, what is required of you, renewal rights, transfer/resale rights, consequences for noncompliance, non-performance, etc.
Chartered Accountant
Seeing an accountant prior to launching your business is a critical step, yet in order to save precious start-up capital, most people skip this, thinking “I’ll find a good accountant when I have to file my tax returns”.
The visit to the accountant is important because they’ll help with a few critical items:
- Review of your financial business plan
- Review of how to structure your business for optimum operational and tax efficiency
- Structuring of bookkeeping systems & services
You should be able to explain your business model to the accountant in considerable detail – what the market is, how you’re going to go to market, how many staff you’ll need to hire, what type of facility you’ll need, your equipment, inventory, etc., and finally, a detailed financial plan to substantiate as much as possible. Your accountant will then be able to check your plan for reasonable conclusions and compare it against standard plans for the type of business you’re entering into. This professional should be candid regarding their review – where are the gaps in planning, where are there unreasonable assumptions/conclusions, etc.
Would you rather have your plan challenged ahead of launching the business, or find out several months into operations that you missed some critical elements and as a result are way short of your anticipated results? A good accountant will minimize the likelihood of this all-too-common problem.
The other thing the accountant will do is help you understand how to structure your business – sole proprietor, partnership or incorporated company. If incorporated, how many classes of shares (i.e. if you only use one class of shares, then you lose out on possible spousal and other tax reduction/deferral strategies). They can also guide you through some of the aspects of your partnership or shareholders agreement.
Your accountant will also set you up with the appropriate chart of accounts and proper bookkeeping software. Depending on the complexity of your business, you might even choose to have the accounting firm do your monthly bookkeeping through the launch phase, thus enabling you to focus on revenue-creating work instead of administrative work. Some businesses are quite simple and require very little bookkeeping, while most are quite complex. By investing a little bit of time in properly setting up your business, you’ll save a lot of time and likely a lot of money in the long run.