There are plenty of risks involved with starting a new business. Luckily, if you take the right steps to mitigate your risk, you can increase your odds of business success. Here are three tips to help you do that.

PURCHASE INSURANCE

The first tip is probably the most obvious. Purchase insurance. But what does that mean?

Long story short, you can purchase insurance to reduce financial liability to your business for specific things. You may consider some or all of the following policies:

1. General Liability Insurance: This policy will protect your business if you, your employees, or your products or services cause bodily injury or property damage.
2. Property Insurance: This policy will protect your business’ physical property against damage, theft, destruction, and the like.
3. Commercial Auto Insurance: This policy will protect your business’ vehicles against damage and collisions. If you don’t have vehicles, you might consider a non-owned policy to cover your employee’s cars if they are used for work purposes.
4. Workers Compensation Insurance: This policy covers employees who are injured on the job. (This is required in most states if you hire employees.)
5. Professional Liability Insurance: Sometimes called Errors & Omissions (E&O), this policy will protect your business if you provide a client with bad professional advice.
6. Directors & Officers Insurance: This policy will protect individual directors and officers if they provide bad advice to the company.
7. Data/Cyber Insurance: This policy will protect your business in case of data breaches, cyber hacks, and similar risks. It is becoming more and more important as everything moves into the cloud.
8. Key Man Insurance: If you or other people in your company are essential to the business’ operations, you may consider this policy to help the company if that person were to die.

USE CONTRACTS

In addition to purchasing insurance, it is always smart to use written contracts and to include provisions to allocate risk within those contracts.

For example, you can include a force majeure provision to limit liability due to acts of god. You can also include disclaimers and limitations of liability in your contracts to reduce the damages you may have to pay if you are found liable for breach of contract. You can also allocate certain risks to certain parties and require all of the parties to purchase relevant insurance policies and even name the other party as additional insureds on those policies.

Additionally, just having a contract in and of itself will help you reduce risk. The reason is that by going through the process of negotiating a contract, you and the other party are more likely to think through all the various “what if” scenarios. As a result, you are less likely to get into a dispute with the other party.

ISOLATE LIABILITIES

When possible, create new LLCs (or other business entities) to isolate liability. For example, if your business is going to purchase real estate, it is often a good idea to place the real estate in a different business entity so that liabilities resulting from the property won’t affect your main operations company.

For another example, if you are creating a joint venture with another business, you can create a new company which is co-owned by you and the other business rather than merging your two existing companies. That way, if things don’t work out, you can hopefully keep your original business going without too much harm.

NEED HELP CREATING A PLAN TO REDUCE YOUR RISK?

Another great way to reduce your risk is to rely on experts who have seen lots of things go wrong. And one place where you can find a lot of expert advice is within the Kauffman Foundation’s FastTrac program. By going through the online classes and tutorials, you can learn practical strategies to reduce your risk and improve your odds of success.

Learn more and register for free at www.fasttrac.org.

CONTRIBUTOR: Chris Brown, Venture Legal

TOMS Shoes. Patagonia. Warby Parker. Baron Fig. What do all of these businesses have in common? They’re each social enterprises.

Part of the challenge of becoming an entrepreneur is deciding what type of business you’ll start. It’s worth expanding that discussion to include social enterprise. After all, one of the keys to entrepreneurial success is gathering as much information as you can, then making a decision that best fits your vision and your short- and long-term goals.

Let’s take a quick look at social enterprises and how they typically work. Then, we’ll provide you some additional insight to help you decide if this business model is something you should pursue.

WHAT IS A SOCIAL ENTERPRISE?

Social enterprises are businesses that provide goods or services but also exist to solve specific social or humanitarian problems like hunger, lack of clean water, deforestation or disease. For example, Warby Parker donates a pair of eyeglasses for every pair sold, while Baron Fig plants a tree for every notebook purchase.

As Investopedia points out, “social enterprises exist at the intersection of the private and volunteer sectors.” And contrary to what you might think, not all social enterprises are nonprofits. In fact, social enterprises can exist in a variety of forms, including a B corporation, a LLC or even a 501(c)(3) nonprofit with a for-profit subsidiary.

The key is to ensure you have both a social purpose or mission and a sustainable business model. Starting a business is never easy, and social enterprises can introduce some specific challenges that you should try to account for in your planning. Use the following three-question checklist to help determine if your business will work better as a social enterprise.

SHOULD YOU START A SOCIAL ENTERPRISE?

WHAT IS YOUR MISSION? 

It’s imperative to define the problem you’re solving through your business. This is a good time to reflect back on your personal entrepreneurial vision. What’s driving you? What goals do you want to accomplish? If you find a social mission inextricably linked to those answers, it’s more likely that your business could thrive as a social enterprise.Alexa Simeone is a prime example. She founded Lele Bombe in 2017, a fair trade jewelry distributor that connects people to handmade wearable art created by displaced indigenous communities in Colombia. By connecting indigenous artists with conscious shoppers, Lele Bombe is able to support native communities of Colombia and help shoppers find the ethically sourced jewelry they’re looking for.Rather than start a jewelry business that distributes domestically, Alexa was driven by a desire to support underrepresented Colombian artisans and help preserve their culture. Through Lele Bombe, she’s built a bridge between these talented artisans and customers who, without this link, would be much less likely to support these particular makers.

“FastTrac helped me build a strong business foundation on which my dreams of empowering African women can grow,” said Liz Forkin Bohannon, CEO and co-founder of Sseko Designs. “It gave me tools and encouragement that empower me to empower others, and introduced me to valuable tools and relationships that helped get our business off the ground.”

HOW WILL YOUR BUSINESS OPERATE? 

Once you’ve identified your social mission, the next step is to think through your business model. This is where social enterprises can be particularly challenging, as business owners sometimes find themselves in a battle of profits vs. purpose.Let your purpose and your social problem be your guide. Then examine your business model and determine how you can satisfy your social mission while also being profitable. It’s important to remember that you don’t have to solve a global issue in a short period of time. In fact, it might be best to narrow your focus—a particular area of the world, for example—then broaden your impact in a way that supports, rather than hinders, your business growth and profitability.This is where it’s easy to get overwhelmed. And that’s where Kauffman FastTrac can help. The immersive online course is designed to help entrepreneurs work through each stage of the process when starting a business. And for those starting social enterprises, the self-paced curriculum can be an invaluable resource.”Without a solid foundation, I wouldn’t have been able to do this,” Alexa said. “FastTrac helped me to frame the market research in a way that really solidified the opportunity that existed for sustainable and fair trade programs. My ability to quantify that opportunity has led me to additional growth opportunities.”Another tip? Should you seek investors, do your due diligence to ensure that they’re in full support of your mission. That way, if a challenge does arise, it’s more likely that everyone will make decisions from a similar starting point instead of risking the enterprise’s integrity.

WHAT DETERMINES SUCCESS?

All social enterprises are united by a common need: to measure their impact. Refer back to your social mission, then decide how you’re going to determine success. If you opt for a one-to-one purchase model like TOMS or Warby Parker, a natural starting point is to keep track of how many goods are donated. If you’re working with a specific population like a community of artisans, you’ll want to track how many people you work with and what’s produced and sold as a result.Measuring impact and success not only helps keep your social enterprise accountable to stakeholders like investors, but it can also provide compelling statistics that support your story and message. Plus, over time, you’ll be able to identify success milestones and quantify cumulative impact, both of which validate the efficacy of your social enterprise.And remember: you have a partner in social enterprise and entrepreneurship with FastTrac. As you consider a business model that empowers others, we’ll do the same for you.

When you start a new business, you will almost always open a bank account. And to help streamline the process, here are three documents the bank will almost certainly ask you to provide.

INCORPORATION DOCUMENTS

The exact title of these documents will differ based on the type of entity you form and the state in which your form your business:

1. For LLCs, they are usually called Articles of Organization. They are typically just a page or two and will include information about your LLC such as the name, it’s registered agent, the name of the organizer, and sometimes more.
2. For corporations, they are usually called Articles of Incorporation. These are usually a bit longer than the documents for an LLC (usually about three to six pages). They will contain the same information as an LLC’s forms, but may also include information on your board of directors, indemnification, and more.

Regardless, be sure to save these documents when you form your business. If you can’t find your documents, you can obtain certified copies from your Secretary of State’s office. And luckily, you can do that online in many states today.

IRS EMPLOYER IDENTIFICATION NUMBER

Even if you don’t have employees, you still need an EIN. In many ways, an EIN is like a Social Security Number in that the government and other parties will use it as a unique number to identify your business.

You can file an SS4 to obtain an EIN by mail or fax. Alternatively, you can use the IRS’ online tool available here. Note that they have “hours of operation” for that website, so it isn’t available 24/7. If you use the online form, you should receive a copy of the IRS’ letter when you are done. If you don’t, you’ll get it in the mail a few weeks after you apply (but you should still get the number itself at the end of the online process).

Most banks will accept a screenshot of the online confirmation page, but some will require the letter itself.

CORPORATE DOCUMENTS

This is the one item that varies quite a bit from bank to bank. Some banks will require an entire copy of your governing documents (such as a corporation’s bylaws or an LLC’s operating agreement). Other banks will require just the cover page and signature page. And still others might not require this at all.

However, most banks will require some kind of business resolutions or meeting minutes. You (or your lawyer) can prepare your own or you can use a copy provided by the bank. In short, it is a written document authorizing the company to open a business bank account.

ONE MORE TIP…

You should always do your research before selecting which bank to use for your business. The key is to find one that operates the way you operate. If you like in-person relationships, find one that excels in that. If you like online banking, ask them for a demo of their website. If mobile apps are important, inquire about that.

NEED HELP STARTING YOUR NEW BUSINESS?

You can learn a lot about starting a new business from successful entrepreneurs that have come before you. One of the best programs to complete is the Kauffman Foundation’s FastTrac program. You can learn more about the free program and enroll at www.fasttrac.org.

CONTRIBUTOR: Chris Brown, Venture Legal

And not only that, but you shouldn’t try to do everything yourself.

At some point in your entrepreneurial journey, you’ll realize you need help. That’s when it’s time to enlist a professional services provider, whether you’re filling a process or operational gap or you need someone with specific expertise to take some work off of your plate.

Let’s take a closer look at figuring out when you need professional services before answering the all-important question: how do you find them? But first, here’s a quick primer on professional services.

WHAT ARE PROFESSIONAL SERVICES?

Professional services help clients with specialized, knowledge-based services and span a number of industries. Common examples of professional services include:

1. Accountant
2. Financial adviser
3. Lawyer
4. Marketing  consultant or administrator
5. Personal assistant

Both individuals and firms can be professional services providers. They can either provide you with service you desire or consult with you on finding a solution that will work for your business. The type of provider you choose will depend on the specific help you need, as well as your budget.

HOW TO DETERMINE WHEN YOU NEED PROFESSIONAL SERVICES

Deciding when to use professional services is somewhat dependent on where you are in your entrepreneurial journey.

If you haven’t yet started your business, we can’t stress the importance of assessing your personal entrepreneurial strengths. (Note: If you’ve already started your business and haven’t yet done this, it’s not too late).

By figuring out the skills and responsibilities in which you excel, you’ll be able to more easily spot possible gaps or needs and decide when you need to fill them. For example, if you consider yourself a creative thinker but you’re hopeless with numbers, you’ll want to put “hire a tax accountant” at the top of your to-do list.

On the other hand, if you know you are not detail-oriented, you may want to consider enlisting the help of a virtual assistant. Just keep in mind, there are costs associated with those services, so make sure they fit into your budget.

If you’ve already started your business, take a few minutes to examine your workflow, your company structure and your earnings. Are there gaps you need to fill? Any important knowledge or expertise you’re missing? Or are there ways you can work smarter, not harder? Answering these questions will help you identify your professional services needs. Then, you can focus on filling those needs.

3 WAYS TO FIND PROFESSIONAL SERVICE PROVIDERS

If that option doesn’t yield optimal results or you want to broaden your search, try these three resources:

1. Small Business Administration: The SBA is a veritable powerhouse of information and resources. A good starting point is the SBA’s free business counseling, available through several local partner organizations. Consider these groups a knowledgeable sounding board that you can use to explain what types of professional services you need, then get recommendations on next steps.
2. Economic Development Councils: If you haven’t yet connected with your local economic development council, now’s an ideal time. With national entrepreneurship rates on the rise, many economic development councils have dedicated specific resources—or formed partnerships—to help entrepreneurs connect with the people and programs they need. Try a quick Google search for your city + economic development council to get started.
3. 1 Million Cups: Since the Kauffman Foundation launched 1 Million Cups in 2012, the coffee-fueled meet-ups have spread to more than 180 communities in 40+ states and one U.S. territory. The informal, presentation-focused gatherings are a great time to hear from other entrepreneurs, but 1 Million Cups is also an insightful resource for tools including professional services. Head to the 1 Million Cups website to find a community near you.

Remember: you may be your company’s only employee, but you’re certainly not alone. There’s no shame in enlisting help from a professional services provider. In fact, you’ll likely find that filling some of those gaps helps reinvigorate your focus and helps your business become more successful. How’s that for motivation?