I'm starting a small business: any advice?
Hi all! I'm starting a (very) small business in the near future, and I am looking for some advice (or just encouragement or reality checks, anything helps). For clarity, I'm in the US and want to make/sell products of my own design without screwing myself over through lack of planning.
More details for those who want them
I've come up with a primary product idea, and the first prototypes have been made and are being tested by trusted friends in my industry. I work for a company who is willing to buy the finished product from me and market/sell it as a distributor, and there is already precedent for employees having exactly this relationship with my employer, where they make things "off the clock" and sell them to the company for distribution.
My main concerns are:
- Liability - I don't want to get sued and lose my house. I plan to make my business an LLC to help with this.
- Privacy - I would rather not have my personal address out there for anyone to find if they decide they don't like my product. I've heard that paying a company to be my registered agent can help with this, but I don't know how easy/safe/expensive this is.
- Financial sustainability - I don't want to lock myself into really expensive overhead issues by having other companies handle administrative tasks (like getting my tax ID and filing my LLC application) that are easy enough for me to do myself, however -
- Time investment sustainability - I don't want to spend so much time chasing down paperwork issues that I come to hate/not have time for making my products.
- Keeping options open - I'm not sure at this stage if I will end up continuing to make these products myself long-term, or if I will eventually try to sell the product design to a third party. I already have a third party in mind, and I think I have a good chance of getting them on board if I choose to. I've assumed that I'll need to patent my product to have even a chance of selling the idea later, but -
- Patents - they're expensive! Or so I've heard. Is it really that bad, and do I have to deal with a lawyer? Are there lower cost resources that won't end up stealing my idea or giving me a pittance in exchange for it? I'm new and dumb and exactly the kind of first-timer that I can imagine getting a lump-sum that feels very high, only to find that I undervalued my product. Or, on the other hand, I could over-value the idea to the point that I foolishly turn down a good offer and never get it sold.
I also plan to make additional products that don't pertain to my industry in the same way, which I might sell on etsy or something. I've done this a bit before, and it went just fine. This is just the first time that I've had the potential to make enough money to matter for tax purposes, and the first time that I'm selling a tool that costs enough and could be distributed widely enough for there to be an increased chance of someone becoming upset if they break something with it and try to sue me or some such nonsense.
Has anyone here ever tried to start a small business like this? Or interacted with the US patent system?
Any advice or anecdotes are welcome!
I'm in the process of starting a small business! I'm planning to do set up in January. I used to work for an attorney who did business formation, so I'm somewhat familiar with the process. Here's my list of stuff to do:
The good news is that most of these are renewable yearly or you only need to do them once, so you can hopefully focus on making your stuff and getting it out the door! I suggest learning about shipping well in advance.
Holy cow thanks for all the info!
I hadn't heard of this, I'll have to look into it. Otherwise, this list looks much like my own, so I'm glad to see I'm on somewhat the right track.
That's a good heads up. I'm actually planning to meet with a local small business development organization, I'll have to see if they can give me recommendations.
Thank you, and good luck with your new business!
My charity uses a registered agent. It’s safe and not expensive. However, registered agents technically have a narrow scope: receiving documents from the Secretary of State and other legal process serving. The agent may prohibit its address for use as a business address. Of course, small organizations have been known to ignore this; as long as they receive most/all mail digitally, the RA doesn’t notice.
There are various full-service compliance companies that will maintain a “virtual office” for your LLC and handle a majority of compliance tasks. These are convenient but pricey. (Some will let you pick and choose which services to offload vs. handle yourself.) In your case, a P.O. Box or CMRA address may suffice for paper mail. Financial accounts often request a “physical address where the majority of business activity occurs” as an identity verification/fraud prevention mechanism (KYC), which if you don’t have an office might end up being your personal address, but that information wouldn’t be public.
It’s quite a muddle. The business compliance industry really squeezes small-scale enterprises. I advise speaking to a transactional attorney familiar with business formation in your state. I’m sure the development corp you mention is a great resource.
Thanks for the details on this, I kinda had the right idea about them. I should really figure out the attorney situation, too.
General advice: winning mostly means not losing for long enough. Avoid over extending. Almost everyone I know that has lost their shirt did it because they over-extended on a deal that went sour. You can be 100% right and still get squished if you can't ride it out.
That's some sound advice. I've seen it in other people's businesses, but I will definitely try to keep my eagerness in check when/if large deals appear. Thanks!
An additional and separate note about registered agents: there are many, many companies out there that offer a registered agent service. It's important to know that the registered agent is the party that may receive things like renewal notices and service of process. This means that if you get sued, the registered agent will be served. It is important that if you are going to use a service for this role, they be a responsive company that will alert you as soon as possible, and also that they're generally proactive. If they're going to file your annual report as well, for example, you want them to do that before it's due, not a month late... Pick someone with a good reputation, not the cheapest option.
If your company is formed on your state it could be you as agent. If you form a Delaware C-Corp company make sure you don't make too many shares or you get a huge tax bill. You'll very likely want at least an LLC, maybe S-Corp. C-Corp is only needed if you want to raise money.
On my first company the best advice was from my grandfather (who'd done multiple companies): get an attorney and accountant first.
This is definitely a good plan, might be worth checking with a CPA to determine how taxes would work since I think rules surrounding LLCs are state-dependent.
I will definitely need to do that. I have a good friend that's a CPA, maybe he can advise me. Thanks!
What sort of product are you looking at? A chemical formulation could be protected as a trade secret, and for some items you might be able to protect the production/process parameters, but most items I suspect you’ll have to either patent or copyright it. Keep in mind that there’s a zillion Chinese companies that could make a cheap clone. You’ll need to make it as difficult for them to do so.
It's a physical product that would be trivial to replicate, but from my (admittedly inexpert) research there aren't any patents for something quite like it. Fortunately, the customer base is niche enough that it might not be advantageous for a large player to steal it, and I have a unique level of access to the customer base and my distribution channel that means it will mostly go from my hands to the customer's without much travel or advertising needed. I don't need a huge customer base for my own definition of success, so I think I can get where I want to be faster than anyone is likely to find out about it and copy it. Plus, there's a ton of distribution loyalty in my line of work, so I'd make sales even if a cheap alternative arose. The only reason I'm even considering a patent is to give myself the opportunity to sell said patent later if I wanted to get out of the manufacturing part of the business and focus on other projects.
You can do the provisional patent filing yourself for very cheap (<$500). That sets the -date for registration. Gives you 12months to get a real one ($25000?) and if you don't makes it so other folk cannot either because of your prior art.
I had heard about the provisional patent thing, but didn't realize it could be so cheap. That's awesome.
Please contact a patent attorney if possible and discuss options if you think you really have a corner locked down :)
Edit, it's likely cheaper than you think for a consultation
That's a good thought, thanks!
I have a small side gig that's starting to scale up quite dramatically this year and most of the last few years I've been working in sales and supply chain management with customers/suppliers that ran small businesses.
I can't speak to the admin side where you are and it's honestly not my strong suit.
In terms of operations, I'd say the single biggest employee investments would be a good secretary/assistant. I can't tell when/if that will be feasible in your case, but it's been the biggest productivity multiplier for our operations. As tempting as it is to offload this sort of stuff onto software and AI tools, I know that there's a growing resentment to getting correspondence that's clearly LLM generated or calling a company, only to talk to a chatbot.
As the owner and primary operator of your company, think about what your time is worth. Is it worth handling every email. Or coordinating booking a big meeting. Or answering every call. 60% of those tasks are inconsequential. 30% is busywork. However, your business lives or dies on catching the 10% that matters.
Some of my biggest contracts started as calls or messages that I would have filtered out as spam, but the people on the front desk were with the company longer than me and knew how to follow up to properly screen for legitimate leads. Same goes for customer retention. If you are attending crisis event that is directly affecting customers, there is nothing more powerful than having someone to answer calls or pre-emptively notify the people affected that there will be disruptions.
Also, try to avoid building off a single product line or even customer type. Even if your product is the best thing in the world, unless you lock reliable customers into long term contracts; it helps to have a little bit of diversity in your niche that can supplement revenue. This isn't even about growth, but a simple matter of resiliency and discovery. You don't know what you don't know and there's always a chance that the better path is one you haven't considered yet. Also, it stops you from getting bored. My personal venture started far more niche but only got steam after expanding out in to new customers, products and directions I would have called insane a year ago.
Lastly, if you are going to be in manufacturing or consumables, costing kills. Between geopolitics, tariffs, petrochem and inflation; now would be the worst time to fry and forecast where your prices are going. You could buffer this out by going in very high and then scaling back as you get more efficient.
And if you are coming in over competitors in price, you can compete by offering value where they can't. Individual attention. Customizations where feasible. Faster turnaround times. Basically, never complete on what makes other people the best. Double down on what makes your offering superior or target the pain-points people have with the competition.
Aww, thanks! Also, I'm very much team snake rake.
You can search trade mark databases in most countries for free. While the laws differ in different countries, the general tests for a “good” trade marks are:
it is distinctive and capable of acting as a “badge of origin”. That is, when people see it, the think of you as the source. Descriptive trade marks or words/phrases that other businesses would have a legitimate need to use are no good. (“Smartphone” is never going to get registered, “Galaxy” is a good TM for phones)
can’t be similar to currently registered trade marks, for similar goods and services claimed.
Basically, when you file for a trade marks, you choose a word/phrase/image and the class of goods or services you want. Generally you want to claim a “class heading”, as that will give you the broadest protection, but they means you will be more likely to butt up against other registered TMs.
Also, be aware that just because the IP Office might grant you a right, it doesn’t stop other companies taking you to court. Apple does this a lot for cases they would 100% lose, but they can destroy small businesses with legal fees and time.
TL:DR, try and be as unique and non-descriptive as possible.
Good idea, thanks!