Reason 10. Failing to incorporate early enough.

One problem that arises here is the so-called “forgotten founder”: a partner involved in starting the venture subsequently drops out. When the venture gets financing or is ready to go public, this partner returns, perhaps with an inflated view of what his or her contribution was, demanding equity. This problem can be eliminated by incorporating early and issuing shares to the founders, subject to vesting. As partial consideration for their shares, each founder should be required to assign to the new corporation all inventions and works related to the company’s proposed business.

Reasons 9. Issuing founder shares without vesting.

Simply put, vesting protects the members of the founding team who take the venture forward. If people remain on the team and are productive, their shares will vest. If they leave earlier, that stock can be retrieved and given to whoever is brought in to replace them.

Reason 8. Hiring a lawyer not experienced in dealing with entrepreneurs and venture capitalists.

Lawyers who have no experience working with entrepreneurs and venture capitalists will most likely focus on the wrong things while failing to recognize some of the more subtle potential traps. It’s better to hire someone who has played the game, who knows what’s standard and what isn’t, and who will get the deal negotiated and closed promptly.

Reason 7. Failing to make a timely Section 83 (b) election.

A Section 83 (b) election allows the tax computation to be made based on the value at the time the shares are issued, which is often pennies per share.

Reason 6. Negotiating venture capital financing based solely on the valuation.

Valuation is not the only thing one should consider when selecting a venture capitalist or when negotiating the deal. There are many other ways for venture capitalists to get compensated if they end up paying a high price for shares. These include requiring participating preferred with a high cumulative dividend, redemption rights exercisable after only several years, and ratchet anti-dilution protection with no cap.

Reason 5. Waiting to consider international intellectual property protection.

Patents are granted on a country-by-country basis (with a single application available for the European Union). In the United States, if an invention is sold or made public, there’s a year’s grace period to file a patent application. Everywhere else, if the invention is sold or publicized prior to filing the patent application, the invention is unpatentable in that country. For example, if the invention is publicly disclosed to a Japanese national visiting a trade show in the United States, then under Japanese patent law, if no patent application has been filed, that disclosure makes the invention unpatentable in Japan. The same is true with trademarks. A tremendous amount of money might be spent in developing a brand in the United States, yet when the product is shipped overseas it could violate trademarks of companies dealing in similar goods outside the United States. One must make intelligent choices of where they think their markets are, and how much money to spend at an early stage in order to insure that the brand is available in those markets.

Reason 4. Disclosing inventions without a nondisclosure agreement, or before the patent application is filed.

If patent protection hasn’t been obtained, or in cases where a patent is not available, the only protection is to maintain something as a trade secret. To do so, one must show that they’ve taken reasonable steps to keep it secret from competitors. In dealing with most people, it’s wise to require them to sign nondisclosure agreements. It needn’t be elaborate, but it should say that they acknowledge they may be exposed to trade secrets, and they agree not to use or disclose them without permission. Business plans should expressly state on the cover page that they are confidential and proprietary.

Reason 3. Starting a business while employed by a potential competitor, or hiring employees without first checking their agreements with the current employer and their knowledge of trade secrets.

The law is clear that if someone is currently working for a company, particularly if he or she is a key employee, they cannot operate a competing business. Even after leaving the current employer, one still cannot use or disclose the company’s trade secrets. They could face an injunction prohibiting them from working for the new employer until a number of months go by and whatever trade secrets they had are stale. It also helps to know whether potential recruits are subject to covenants not to compete. States vary in terms of how enforceable they are, but one shouldn’t assume they are not. One should also check to see what assignments of inventions might have been signed. Personnel files should be reviewed, and recruits should check theirs, to be certain that a covenant not to compete or an assignment of inventions wasn’t tucked into a signed non-disclosure agreement.

Reason 2. Promising more in the business plan than can be delivered and failing to comply with state and federal securities laws.

If someone promises to do something and knows that they can’t perform that promise, that’s considered fraud. In a business plan, one must make an honest appraisal of what’s doable and set forth their assumptions, so the person putting up money can judge whether they are realistic. Can entrepreneurs be sued by their funders for fraud? Yes. Trying to squeeze out a little extra valuation by fudging the numbers erodes credibility, makes investors less trusting, and ultimately impairs the ability to get subsequent rounds of financing.

Finally, anyone selling stock or other securities must comply with both the federal and state securities laws by either registering the securities (rare for a start-up) or meeting all the requirements for an applicable exemption. Ignorance of the law is no excuse.

Reason 1. Thinking any legal problems can be solved later.

There’s a tendency to think, “Once I get my funding, once I’m up and running, then I’ve got time to hire the lawyers; right now, I’m running as fast as I can to get my business plan done and raising money.” This is shortsighted logic. Many of the points made here are problems that can’t just be patched up later. Does that mean that one should devote all of their time, effort, and money to the legal issues? No. That’s a good reason to hire a competent lawyer. Excellent legal talent can be retained for relatively little money up front at the early stages. It will cost much less to get it right at the beginning than to try to sort it all out later and correct it.

Starting up a small business need not be complex, yet I found all too often a majority of people waited until the horse was out of the barn to visit the lawyer.  You will find it much less expensive and satisfying to sit down with the attorney and do pre-planning.  Why not use their expertise from helping other failures so that you do not fail in starting up a small business

Is your horse out of the barn?  Do you need help?  Got your Business Plan and SWOT Analysis in place?  Talk with our Coaching Staff and GET FREE INFO HERE.

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Starting Up a Small Business is a dream that many people have. How many immigrants do you know of that come to the

United States with

Just the Shirt on their back,	Hope in their Pocket	And Stars in their Eyes
The Statute of Liberty to people like this means Starting Up a Small Business.

Yet in Starting Up a Small Business there are risks entailed. Success and profit are not guaranteed by the U.S. Constitution or the American Dream. Success in business is never automatic. It isn’t strictly based on luck – although a little never hurts. It depends primarily on the owner’s foresight and organization. Even then, of course, there are no guarantees.

Starting Up a Small Business is always risky, and the chance of success is slim. According to the U.S. Small Business Administration, over 50% of small businesses fail in the first year and 95% fail within the first five years.

In his book Small Business Management, Michael Ames gives the following reasons for small business failure:

· Lack of experience

· Insufficient capital (money)

· Poor location

· Poor inventory management

· Over-investment in fixed assets

· Poor credit arrangements

· Personal use of business funds

· Unexpected growth

Gustav Berle adds two more reasons in The Do It Yourself Business Book:

1. Competition

2. Low sales

These figures aren’t meant to scare you from Starting Up a Small Business, but to prepare you for the rocky path ahead. Underestimating the difficulty of Starting Up a Small Business is one of the biggest obstacles entrepreneurs face. However, success can be yours if you are patient, willing to work hard, and take all the necessary steps.  As you know these steps include using a Business Plan and SWOT Analysis.

One fact reported by SBA this year has been that “8 of 10 small business start-ups are no longer in existence after five years due to lack of management knowledge and skills.” While I realize that “no longer in existence” does not translate into “absolute failure” it appears that the “8 of 10″ is extremely high. These are troubling statistics for anyone who is considering Starting Up a Small Business.

A shirt on your back, hope in your pocket and stars in your eyes is only the starting point in Starting Up a Small Business. To be successful you need the tools, resources and information that comes from experts that put together programs such as the Small Business Bootcamp. Why take a chance when you are Starting Up a Small Business? Reup for Bootcamp today.

Blunder 1: Amount of Effort Exerted

The single most important factor in determining who succeeds and who doesn’t is simply the amount of effort exerted. If you aren’t ready and willing to work – and work hard – being an entrepreneur is probably not for you. For starters, most people are used to working and 8-to-5 job, with a “boss” directing them. When you’re in business for yourself, you must have the discipline to work independently. You must maintain the same work schedule of the same number of hours virtually every day even if you don’t have anything scheduled.

Also, many people assume that when they own their own business, they’ll be able to work less and take more time off for recreation. Unfortunately, the opposite is true. When you run your own business, you usually have to work more hours, not fewer. You have to be willing to put in long hours and, if necessary, work weekends as well. This is especially true in the start-up stage.

Blunder 2: Inadequate Financing

A considerable number of people have unrealistic expectations when it comes to the funds needed to start a business. They often lack the necessary start-up funds and can’t come up with adequate financing. Most people wrongly assume the SBA will provide them with 100 percent financing based solely on their good ideas. But if someone has no cash at all, it usually reflects poorly on his or her ability to manage finances -something the SBA takes into consideration. Funds may be derived from cash savings, personal credit lines or family loans.

Blunder 3: Lack of Planning

Another fact rarely considered is that the majority of new businesses fail within a few years mostly due simply to poor planning or no planning at all. Most people who go into business enter a field related to their current employment or a favorite hobby. They don’t do a market study first to see whether the demand for their product or service is growing, declining or stagnating.

Blunder 4: Unrealistic Expectations

Many individuals assume not only that most businesses succeed, but that they’re lucrative from the get-go. This is definitely not the case. Generally speaking, it usually takes at least a year to develop a profitable business. The first year’s goal is usually earning back your investment. Even then, the money has to be reinvested in the business. In other words, in your first year, you should have other sources of income to live on.

Blunder 5: Inability to Commit

Even though most people would like to start their own business, only small percentages actually do it. When push comes to shove, most lack the self-confidence to make a decision and act on it. In order for the business to succeed, they must be able to gather information, weigh the facts and then make a prompt decision.

Blunder 6: Unwillingness to Take Responsibility

A business owner is 100 percent responsible for his or her mistakes. There’s always a risk of a business failure or less-than-expected financial return. If that should happen to you, you can’t blame it on someone else. If you would like to start a small business, you must thoroughly and objectively analyze the feasibility of your idea. Failure to do so can have a tremendous personal cost on finances, relationships and family ties.

Small Business Success means no blunders.  Blunders are the boulders, the pitfalls, the sticky mud that strews the path to success.  Small Business does not necessarily mean taking the path less trodden.  Small Business Success means taking the correct path whether other people have gone down it or not.  That is why you use experts to help you.  Do you know where to get your expert help?  I do and so can you by simply CLICKING HERE.

Starting a Small Business is almost everyone’s dream. People think that by starting a small business they can magically go to the end of the rainbow and they will have a pot of gold.

Oh if only it were that easy. I have had the opportunity to sit down and advise hundreds of people about starting a small business: Restaurants, Churches, Hair Dressers, Construction Companies, Franchises, Trucking Companies, you name it. Of these hundreds of people not one wanted to fail; they all wanted to succeed and make money. Most knew that it would take hard work. A majority knew that their business hope or idea could fail, but over 80% thought that they would be the exception and make a go of it.

JUST THE FACTS, MA’AM: Here are the facts about Starting a Small Business. About 80 percent of new businesses fail within the first five years. That’s a common statement that is often repeated in small business seminars and on web sites for entrepreneurs. But, is it accurate?   The National Federation of Independent Business estimates that, over the lifetime of a business, 39 percent are profitable, 30 percent break even and 30 percent lose money (with one percent in the “unable to determine” category).

Citing a U.S. Small Business Administration (SBA) study, the University of Wisconsin-Madison’s Small Business Center maintains that 80 percent of small businesses are usually still going six years after start up.

The SBA states that most businesses fail — some say up to 90 percent — because they lack good management. And, according to the Bank of America, the history of small business failures reveals that many firms fail, more specifically, because of inadequate working capital and poor cash flow management.

When people talk to me about starting a small business, perhaps two out of ten people who (20%) talked to me mentioned a business plan. Of that 20% less than a fifth knew what a business plan was, why you should have a business plan, and how to create a business plan. So for those starting a small business, out of every hundred people I talked to perhaps 4 were conversant with business plans or SWOT Analysis.

Why would you even need a business plan? What is a business plan? As you consider starting a small business, we’ll talk in the future about the business plan and other things you need to know when starting a small business. Today though consider your hopes and dreams; your aspirations and desires; you present situation and your future where you want to be. If you’re starting a small business, there is no pot at the end of the rainbow unless you are prepared. Without being realistic it is a lose/lose situation.

Starting a small business is not for everyone. It requires the willingness to put in long hours, sometimes with little pay. But consider the rewards: You, and I mean YOU, control your destiny. You can become phenomenally rich or wretchedly poor. You can achieve satisfaction and have to fight frustration all in the same breath. You can dream a dream and make that dream come to fruition. That is what starting a small business means–No if’s, and’s or buts.

How is your dream coming along?  Need help with that dream or Rainbow?  Go HERE to get FREE HELP to reach the Pot of Gold at the End of the Rainbow.