Choosing the Right Business Structure: Considerations for Finding the Best Legal Structure for a Business

Business Structure

What factors should one consider when choosing a business structure? Getting the right set-up is often a balancing act.

Each business structure has its own set of pros and cons. Thus, it is important when choosing the right structure for a particular business that one consider the goals and vision for the business in addition to the personal needs of the owners. Many business owners may not realize that it is relatively simple to switch from one business structure to another, and chances are a business may change its organizational set up as it grows and develops. Nevertheless, choosing a structure that is inappropiate to the situation could end up being a costly mistake.

When trying to find the right legal structure, business owners should therefore sit down with either a qualified accountant, attorney, or business consultant and consider the following points:

  1. What is the size and scope of the business?

    How many owners are there? Does the business have employees? Are these numbers expected to grow in the future? The size of the business and the amount of people involved is important when choosing a business structure. A business with several full-time employees, for example, may be better off as a corporation since several employee benefits are directly tax deductible.

  2. What is the nature of the business?

    Is this business in an industry that is open to lawsuits? Is there a lot of equipment or inventory involved? How important is the level of employee talent, skill, or experience to the success of the venture? Each structure has different tax and liability implications. A corporation and an LLC, for example, offer limited liability protection to its owners, while the sole proprietorship and the partnership do not.

  3. How much financing will the venture need for start-up, operations, or growth?

    Is the business currently making a profit? If there is access to financing or if the amount of financing that is required is relatively small, then the simple structures, the sole proprietorship, the partnership, and the LLC, may be more appropiate.

  4. Where is the business holding in its development cycle?

    Is the venture in the start-up phase; is it a new business, or a growing business? Will there be a significant need for reinvestment in the business now or in the future? These factors will effect business financing and tax needs which can influence the decision on a business structure.

  5. What are the needs of the owners?

    Will owners need access to profits? How much structure and control do they want? Business owners should be aware of what each structure will offer them in terms of taxes, liability protection, and control over the business.

  6. What will be the tax implications of each structure on the business and on the owners?

    Different structures can effect personal taxes and business taxes significantly. A savvy accountant or business owner will know how to pick a business structure to maximize the situation. A corporation, for example, may be able to save on taxes by reinvesting funds back into the business.

In short, there are several factors that business owners should consider when choosing the right business structure. Though many of these factors overlap, each one is important by itself and should be looked at both separately and as part of a bigger picture with qualified professional.

Five Ways to Succeed in Business: How to Get Your Ideas Out of Your Head and Into Action

Succeed in Business

It’s easy to get caught up thinking that all you need is a great idea. The truth is that the idea is only the beginning. It takes more than an idea to achieve greatness.

Success in business is a direct result of action. Sit at any coffee shop and listen to stories of ideas that never came to be. People wax about how, “I thought about opening a coffee shop way before Starbucks did,” as they sip their Mocha Frappuccino®. They lament how, “The studio stole my movie idea,” the idea they never put on paper.

Corporations and studios get their ideas from people, but ultimately ideas are a dime a dozen. It’s what is done with the idea that makes all the difference. Here are five ways to put an idea out of into action.

  1. Imagine the Idea

Visualization is the first step to taking any action. Seeing the idea in a real scenario. The first step is to sit in a quiet place that is free from the distractions of everyday life. Next clear the mind. Begin to see the idea take shape. Develop a clear, specific mental picture and imagine it becoming real. How does this feel, sound, taste? Daydream. Explore the feelings. See it actually happening and own that feeling.

  1. Write It Down

Writing things down gives them form. It brings them from thought, which is abstract, and starts to give them life. Take time to do this when you are calm and relaxed. Write out all of the details. This isn’t a formal plan that others will see, it’s an exercise to help define the ideas and thoughts.

  1. Talk It Over With a Trusted Advisor

Examine the idea from another perspective by talking it through. Does this person understand the message? Is the value self-evident or does it require hours of explanation? In searching for answers to the questions the original idea is expanded and a plan begins to take shape.

  1. Create an Action Plan

No is the time to create an action plan. Include small and large steps and leave room for the unexpected.

  1. Get to Work

Too many good ideas die on the drawing board because no one takes action. Be the exception. Action is required before there is an opportunity to succeed.

It was BC Forbes who said, “A business, like an automobile, has to be driven to get results.” He was right. A stunt car driver for many of the popular 1980’s television shows once said that he could be in a Pinto while someone else was in a Ferrari and he would out perform them every time. That’s why people who are successful in one business tend to open up other businesses and make them successful. It’s not the car … It’s the driver!

Learn to be a good driver then get moving when the ideas come.

Business Startups are Top Employers: Startup Companies Can Offer More than an Established Corporation

Business Startups

Business startups are considered a riskier employer, but they often offer more than companies with traditions.

Business startups are flexible and it is not an exception that what they provide for their employees is much better than the benefits and compensation an established corporation offers.

Business Startups Value Creativity

For many job seekers, business startups are top employers because they give freedom and value creativity. That is why many job seekers are interested mainly in offers from business startups.

No matter what the industry is, business startups usually have one advantage in common – a more informal and relaxed atmosphere. Very often, business startups don’t have thick guides of formal rules one must strictly follow, and this leaves room for improvisation and creativity, which is highly valued by many employees.

One more advantage of business startups is that, as a rule, the promotion opportunities in a startup company are greater than the promotion opportunities in a company with traditions. If the business startup does well, usually the people who were part of it in the beginning get promoted, while in a company with traditions it might take decades till one is offered a low management position. In terms of career development a business startup can be very, very rewarding.

As for compensation, startup companies can be very generous. There are many cases when a startup company pays better for a comparable position than an established corporation.

The Problem with Business Startups? They Grow into Corporations!

Business startups tend to be very dynamic, which certainly is not a characteristic valued highly by anybody who loves predictability. Though it is not an exception for a business startup to go out of business, many startup companies do make it. In fact, many of today’s huge corporations started as small business startups and grew over the years.

When a business startup grows into a corporation, this kills the informal atmosphere. Sure, one can’t say that growing into a corporation is the beginning of the decline of a startup, but certainly when a company grows, this changes the rules.

When a business startup turns into a corporation, many of its founding members resign and move to greener pastures – i.e. they find a venture capital fund and create a new startup company. When this business startup also grows into a corporation, they again move on. For many individuals, the corporative spirit is just way too much to stand and establishing (and working for) small business startups is a way of life.

A startup could be riskier in terms of job security, but the benefits it offers are not to be neglected. On the other hand, large corporations are not necessarily more secure (just a look at layoff news is enough to get an idea of the numbers of employees released), so even if one is willing to trade freedom for security and join an established corporation, her or she might be out of luck and soon be unemployed again.

Top 6 Myths about Business Innovation: Being an Innovative Company Means More Than Just Product Development

Myths about Business Innovation:

Innovation is often seen as an activity focussed on product development however, a truly innovative business should strive for creativity across the whole enterprise.

There are some widely-held myths about the meaning of business innovation. Sometimes these can lead to energy being wasted in the pursuit of illusory goals, whereas at other times there is a feeling that the cost of change is just too high.

Innovation is a high-risk activity

The biggest risk is that your company will be overtaken by a nimbler, more aggressive, more innovative outfit. Anything can be copied within weeks and there’s little you can do about it. The days of milking that cash-cow year after year are gone for most enterprises. Monoculture is dead and space has to be created to plant the seeds of the next innovation. Be the hare, not the tortoise.

Innovation means deep thoughts

Are you running a business or a philosophy course? You may indeed be asking some tough questions about your products and company but writing a thesis is unlikely to lead to innovative product development. Don’t disengage your brain but do start to use all the other faculties of sight and sound and touch. Make innovation playful and engaging, allowing ideas to fail without seeing them as failures. Both artists and scientists know that some of the best ideas seem to come out of thin air. However, for this to happen the mind must be primed for innovation. It should not just be a scheduled activity but a deep aspect of the whole company.

Innovation is a desperate measure

One of the biggest mistakes is to start innovating when you can smell trouble ahead. It’s probably too late by then. The free-flow of energy and ideas that create an innovative culture just get blocked and distorted when people are under stress because the company is in trouble. Excitement is innovative, stress is not. If you’ve reached this point then it is time for widespread corporate innovation rather than just product development.

Innovation is best handled by one department

It is a fundamental mistake to think that you can create an innovative company by just having one innovation department, be it marketing, research and development or a blue-sky group. For one, this is limiting the creative potential of the whole company, and as a consequence if the rest of the company does not feel ownership of the new ideas they will likely resist them. You do not want your colleagues playing tug-of-war with each other. You will never know at the start where that bright spark will come from so make sure the electricity of innovation is flowing through your whole enterprise.

Innovation is about new product development

It might be, but it doesn’t have to be. Innovation can just as easily be about making your product cheaper, finding new markets and distribution methods or making the product more flexible so that it will appeal to a broader audience. But guard against fixating so much on one successful product that it becomes stale and boring. The biggest leaps in productivity are often not so much in new products but in a change of business strategy. Creating a company as a network of innovative individuals means changes can come from any sphere of the business.

Innovation is about the future

When is the future? Next year, next week, after lunch? The future is always just in front of us. The world is random, chaotic, fast-moving and mutates out of all recognition from one day to the next. You either keep up or get out as there is no mercy out there. This may seem harsh but tinkering around with a successful product line is going to guarantee that it will be copied very quickly – and improved! Somebody will take the next innovative leap forward unless you do it first.

Top 5 Strategic Planning Mistakes Companies Make: Ways to Improve Business Alignment with Strategy

Strategic Planning Mistakes Companies Make

Strategic planning is a difficult proposition in many organizations, but getting it right can improve a company’s agility in an increasingly changing business climate.

Many organization find they do not get the desired results from their efforts in strategic planning. They often find difficulty in having strategies and plans motivate real action and provide value to the company. That follow-through — getting real business results — is a significant issue for many businesses.

Start High in the Company

Quite often the biggest issue is that upper management has not clearly defined the direction and priorities of the company in such a way that all other activities can be properly aligned with that direction. In other words, the rest of the company is not on the same page with the upper management.

One of the most important factors in getting the desired results is being specific at the highest levels of the company. No matter what the size of the company, it is important for the executive level to define not only in words what the vision is, but also to define the business-driven goals that they believe will bring success.

Defining these goals very clearly, and with very well-defined measurements, will provide the right target at which the follow-on strategies can be aimed. These should provide the entire company with a clear understanding of the focus and priorities of the company for the period covered by the goals.

Get Communication Right

Another issue that hits many companies is that they do not fully appreciate the amount of collaboration and communication that will be needed among all business groups to achieve the strategy. The result is distrust among business units which inhibits efforts to achieve the business goals.

Establishing the communication mechanisms and encouraging their use is one very important factor for success, and this starts with clear, open communication from the leadership.

Collaboration: Involving Key Stakeholders

Business units that ignore the direct input from key stakeholders will hit many snags when it comes time to implement the strategies. Many people like to think that they know their “customers” (internal or external), unfortunately, ignoring their need to provide input directly prohibits full buy-in of the results.

As the strategy moves down through the organization, and each business unit is developing strategies and plans to align with the overall business, involving key stakeholders is critical. These stakeholders will be working to align their own efforts as well, and their input will allow all groups have a more coordinated result.

Insure the Focus Starts with Business Goals and Metrics

Quite often projects that are initiated to respond to business needs jump into solution-mode without fully defining the business goals (i.e., metrics) which will provide proper focus to the efforts. Although they may begin with defining “business requirements”, these rarely provide clear target metrics for alignment.

The executive level goals and metrics become the basis for defining the specific goals and metrics for each project through involvement with key stakeholders. This insures alignment with the business as well as improving buy-in by the stakeholders in the overall success.

Proper Consultation

When using consulting, whether it is strictly among groups through collaboration or involving outside consulting resources, quite often the business will abdicate ownership to the resources with whom consulting advice is sought.

There is an excellent book by Peter Block called “Flawless Consulting” which details the importance of clearly understanding all roles in any consulting relationship. In essence, the consultant should be used to facilitate the company’s own efforts, giving some guidance where specific subject matter expertise is needed. But the business maintains ownership and decision-making responsibility.

Proper Alignment Drives Success

Given clearly defined goals and metrics, and providing communication of goals and progress, collaboration can be enhanced. These all work together to improve alignment of efforts to a company’s strategies.

Top Tips for Opening a Restaurant: Ten Ways to Make a Success of a New Eatery

patrick mackaronis restaurant success entrepreneurship

Patrick Mackaronis, current CEO and Founder of the Brabble social network, and former owner of Jr’s Restaurant in Long Branch, New Jersey, suggests the following ten tips for setting up a new restaurant.

Be Passionate about Food

To be successful a new restaurant owner should be passionate about food, people and detail.

Research the Market

Visualize your passion by asking key basic questions and researching the answers. Who will be my customers – will they be local, neighborhood people who will visit me daily or will I need to impress tourists and day visitors? Will customers want to visit my restaurant and eat my food often, and how much will they be willing to pay?

Prepare a Business Plan and Budget

Do the numbers – Assuming the food is costed correctly, how much will the restaurant need to turn to ensure a profit against overheads. Break it down to customers in seats. A wise restaurateur once taught that a minimum of 72 seats is needed to make it work. It is possible to be successful with more seats and with fewer – but plan for a variety of scenarios.

Inspiring Restaurant Décor

Make the eatery the place to be. It does not have to be trendy, but it should ensure that people feel charmed and inspired when they walk in. Budget for breakdowns, repairs, fix ups and a new coat of paint – to keep the decor fresh.

Train the Serving Staff

Make sure that all staff are thoroughly trained before opening. Treat them with respect, as happy staff are vital for developing a positive atmosphere that has customers returning for more.

Keep the Menu Flexible

Change things that don’t work and constantly improve things that do work – even the most loyal customer to a dish will be happy to try an improvement on it. Personalize the menu and develop signature dishes.

Buy Produce Locally

Keep it local and fresh – Ensure ingredients do not travel too far and that the customers know that everything is fresh. Use local small producers and encourage them to do something different and unique for the restaurant.

Treat the Customers Well

Be guided by the customers – listen to what they like and don’t like. Make changes when necessary, and personalize dishes for regulars.

Customers love to feel spoiled. Give something away for free with a meal, but cost it into the budget.

Mackaronis notes that having fun is vital to the success of the restaurant. Enthusiasm is infectious. Don’t let opening for business every day become a relentless task. Keep it fresh and fun, and the customers will come flocking.

Patrick Mackaronis is the CEO and Founder of social network Brabble. He can best be reached on Brabble, or on Twitter at @patty__mack.

Market Research Performance: Checking Industry Data

market research patrick mackaronis

There are a few key times in the lifeline of a business that an entrepreneur must take stock market-wise, and undertake some serious market research analysis. Some entrepreneurs may only have to do this once, but most will have to take on some form or another of marketing industry research once or twice a year to get a good grasp on what the market can bear, and how one’s business will fare. So with that in mind, here are the three situations that, when faced, every entrepreneur should embrace with regards to collecting market data, courtesy of Brabble CEO and Founder Patrick Mackaronis.

Perform Market Research to Analyze the Market

The most important question any potential entrepreneur can ask themselves is, “Will anyone buy my product or service?” More important than what the product is, whether it works or what benefits and features it possesses, if there is no one to buy, there will be no business to start.

Therefore, every new business owner needs to be able to answer the following questions in a business plan before setting up shop:

  1. Is there demand for the product or service?
  2. Who would be most likely to buy this product or service?
  3. How many people in the defined market area of the proposed business fall into the category of potential buyers?
  4. How can these people be contacted, and how will they know the business exists?
  5. Are there any competitors already meeting these people’s needs?
  6. If the answer to #5 is yes, what can this proposed business offer that the competitors cannot?
  7. How much can the people buying pay for this product or service? What value do they place on this product or service?
  8. What is the profit margin, if any?

Perform Market Research to Analyze Market Response

Most business owners add products or services to their lineup at some point or another as the business grows. Marketing research helps growing businesses to determine if this idea is a solid one by ensuring:

  • Entrepreneurs don’t end up with too much unsellable inventory;
  • Staff aren’t constantly turned away by potential customers because of lack of interest, want or need;
  • Products or services that the entrepreneur was unaware of don’t end up costing the business;
  • The new product or service doesn’t become a money pit; and/or
  • The company’s reputation stays solid throughout the introduction of the product or service.

Think of a major brand whose product or service was poorly researched that caused upheaval with the general public. Coca Cola’s removal of the original Coke from their product line in the 80s comes to mind, where long standing customers revolted and refused to buy the new product. Mackaronis states that eventually the company recovered from the faux pas, but its unlikely a smaller business would recoup their losses quickly or easily if such a mistake were made on their watch.

Perform Market Research to Check Advertising or PR Effectiveness

As time flows, so do customer wants and needs – and thus a business who isn’t able to change as well is one that cannot stay afloat. Veteran business owners need to review their marketing research and analysis just as much as the new kids on the block, to see if they are able to move with the flow of the economy and times, or if they’ll get swept up and destroyed because of lack of initiative. Therefore, Patrick Mackaronis suggests to think about the following questions to stay ahead of the game:

  • What do customers think of the product or service being sold?
  • How has that perception changed over time, and why?
  • Is the current customer base in need of a new product or service that would compliment what is already being offered?
  • Are there new customers to be attracted to the business, and what are their needs?
  • Are prices the same as they’ve always been, or have they also adapted?
  • What are competitors doing to meet the needs of similar customers?
  • How has aging or the economy affected customers?

Patrick Mackaronis is the CEO and Founder of social network Brabble. He can best be reached on Brabble, or on Twitter at @patty__mack.