More than half of first-time entrepreneurs fail in their first business venture, a portion of those failures are due to legal pitfalls and unnecessary exposure to litigation. In this series, we examine 3 common mistakes that successful entrepreneurs avoid when starting up their businesses. This week, we focus on spending money.
Spend money early on to save money in the long run.
Most successful entrepreneurs will stress the importance of allocating startup funds carefully in the beginning because every cent counts. Operating on a lean budget can really help a business owner in a pinch, but it can also hurt a business in the long run. While it may seem sensible to stash your cash instead of hiring an outside expert or company to perform certain tasks or accomplish certain goals, the fact of the matter is that those experts and companies exist for a reason. You likely can’t perform that task or accomplish that goal by yourself.
Our firm often assists entrepreneurs and business owners who have elected to try and save money by negotiating deals on their own, using a template agreement or implementing a “handshake deal.” As a result, they pay significantly more after the fact to have our firm renegotiate a bad deal or review deficient contracts, or even litigate issues in court. Had they hired corporate counsel at the outset to properly draft their agreements or negotiate the best possible deal, they would have saved money in both legal fees and lost profits, and could have avoided court altogether.
This advice isn’t unique to legal needs. It applies to experts in other industries, such as tech developers, accountants, and marketing teams. It is always better to have something done right from the beginning at a reasonable cost than to have to bring someone in to clean up a mess at a higher cost.
Bottom line: you’ve got to spend money to save money.
Next week, we will examine the second way to avoid startup failure: choosing your core team wisely.
This post is not intended to be legal or tax advice. Formeller & Formeller LLP’s Chicago startup attorneys have helped numerous clients form and operate their businesses. Our skilled Chicago attorneys can help counsel you with employment issues and assist you with establishing proper employment hiring and employee management procedures. Please contact our law firm today for a free legal consultation if you would like to discuss forming a startup or existing business operational issues.
Click here to visit the Formeller & Formeller LLP website.