Frequently Asked Questions (FAQs) On Starting A Business- Part 2

In the month of November, we looked at various topics focusing on ending a business year, writing an annual review and beginning a new business year. These articles were geared towards providing budding entrepreneurs with important insights that will help them end the year on a solid foundation and facilitate a smooth transition into the New Year.

Throughout my career—which has spanned over 40 years—working in Arts & Culture, the film industry, media finance and more recently the African entrepreneurship ecosystem; I have interacted with a lot of people who have sought my advice and mentorship on the subject of starting a business.

Last week, we began a two-part series of questions I’ve been asked over the years with corresponding answers drawing my own life experiences. It is my hope that as we conclude today, these insights will help people who are hoping to start a business in the coming year as well as new entrepreneurs who might be mystified about some of the foundational building blocks of their businesses. 

Q:  Do I need a lawyer to set up my business structure?

A: There are two professions every business will need: an accountant and a lawyer. A good lawyer will provide important support to all aspects of your business from compliance, copyright, trademark, formal business incorporation. The question is not if you need a lawyer, but when. It also depends on what type of business entity you are setting up.

When I structured the 7 Pillars of TEF Entrepreneurship Programme, I wanted to ensure that all the selected entrepreneurs registered their businesses and opened a business account, thus separating the personal from the professional. This was easier said than done. There are 54 countries in Africa, all with their own legal jurisdictions and varying degrees of an enabling environment for start-ups! While in some countries a startup could register their company within 2-6 hours, in another it took 2-6 months!

As a business owner, it is important to seek legal advice when considering the type of business you want to set up. A business entity could be a sole proprietorship; a partnership; a corporation; or a limited liability company. Suggest you do thorough research and I recommend Entrepreneur.com as great place to start. A popular option is a sole proprietorship; it’s easy to form and you have complete managerial control as the owner, but you are also responsible for all financial obligations of the business. 

Finding the right lawyer also requires you to do your research. When I was looking for a lawyer to produce my first feature film, I must have interviewed over 10 companies. A good lawyer will help you with contracts - preparation of standard contracts for clients, customers, vendors, and review contracts you will need to sign. They will help with the setting up of the right business structure including taxes, help register your products and services for trademark and copyright and advice on the right business entity. When hiring a lawyer, ask some basic questions: what is their experience? Are they well connected so they can draw on other areas of expertise? Do they know about your industry or sector? Can they give you the time you need, especially as a start-up to explain the legal jargon? And of course, their fee structures.

Based on my film production experience and five years as CEO of TEF, I would highly recommend getting the right legal advice at the start of your entrepreneurial journey.

Q: How do I seek for funds for my business?

A: Don’t let money stop you from following your dream to start a business. Money follows great ideas. If your unique product or service finds a customer or a client, then you have your source of first money for your business, because you are generating revenues from your product or service. Across the African continent as I found in the five years managing the TEF Entrepreneurship Programme, there is no shortage of capital. But there is a shortage of investible businesses. Make your business investible and explore anyone of the following options of funding for your unique, well developed, market tested product or service:

• Create a detailed business plan for the reasons set out above.
• Bootstrapping – keep your initial business costs down.
• 3 F’s – family, fools, and friends for loans with the intention of repaying them back!
• Meet your local bank manager. I know that taking a loan from a bank is not an option for many African start-ups, given the high interest rates. But over the five years, I noticed how more, and more commercial banks were setting up an SME help desk. They want to and need to secure start-ups and SMEs as their customers. Build a relationship with the bank manager and learn what they are looking for in return for their loan.
• Look for angel investors
• Explore crowdfunding your business idea
• Leverage the saturated micro-loan market
• Find a strategic partner
• Venture capital

There are no quick answers, you must study the funding ecosystem and find one that fits your business needs, because the capital is out there waiting for the right business.

Q: Should I plan to pay myself?

A: The answer to this question is in the business plan and the financial projections of what it’s going to take run your business, when you will break even. Remember it takes 6-12 months to get the business going, so you may not be able to pay yourself what you are worth but pay enough to get by, to meet your basic living requirements. It’s all about planning.

Q: What challenges should I expect during my first year of operation?

A: ‘Many’ is the short answer. Just Google this question and you will see what I mean! But seriously, remembering why you embarked on this journey in the first place – your mission and vison will sustain you.

Again, I recommend you read House that Jack Ma Built and Marc Randolph’s That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea from cover to cover. Your vision and mission will sustain you and will determine your strategies, your company culture and values.

The first year of a start-up is about survival, but it’s also about building and learning. In the first year you will set up the company, get the right legal structure in place. You will develop your product/services and define the market for this product/service. You will secure your customers and clients for the product, because without a paying customer, it is still an idea. You will develop your marketing strategy for your product/services, manage cash flow, hire staff, secure funding all while dealing with self-doubt, fear of failure. These be challenges, but they are the foundations on which you are building your business. The important thing to remember, you are not alone, every start-up anywhere in the world faces that same challenges and the internet now enables peer to peer learning.

Q: What resources are available for me to learn more about business growth?

A: I have touched on this question a bit through my book recommendations in previous questions. A lot can be learnt from reading about the lives of those who have passed through similar paths and have succeeded. Another important way you can equip yourself with knowledge is via open source learning platforms. These platforms include Coursera, edX, OpenCulture, LearnVest, Moz and even YouTube. Also, as stated earlier, attending business seminars, workshops and meet-ups will also boost your knowledge reserve and help with your confidence as you embark on your entrepreneurship journey.

With this, we have come to the conclusion of this series. To read the other articles that have been shared this year, see the links below:

5 Key Elements That Must Factor Into Your New Year Business Plan

5 Key Things That Must Be On Your End-Of-Year Business Checklist

5 Guidelines to Write A Detailed Annual Business Review

Frequently Asked Questions (FAQs) On Starting A Business- Part 1