Today I want to talk to you about some serious online business financial mistakes that I way too many entrepreneurs making.
I want to thank one of my YouTube colleagues and another lawyer, Aiden Durham, for the inspiration for this video as she recently posted a video entitled Two Huge Money-making Mistakes.
The basic idea of the video was this. She (Aiden) gets a lot of comments and, frankly, I get a lot of comments on my channel as well, from people who say something around the likes of:
“Hey, Jim, I'm trying to start my online business, and I really need to get my LLC in order, and I need to file my trademark. I'm not sure where to start. I don't have a lot of money. I can't hire a lawyer. You know, I recently lost my job. Money is tight. So what do I need to do to make sure this happens?”
My comment to these people almost universally is, number one, you don't need an LLC or a trademark to start your business.
All you need is you.
Number two, why are you wasting your money on things that aren't going to push your business forward, if you're not at the point where you actually need those things yet?
A lot of people get stuck on the notion that they need to have these legal protections in place before they do business. It really keeps them from moving forward with their online business.
What is going on with entrepreneurs who are just getting started, is that they are scared to start and therefore they rely on “having to get their legal house in order” as a crutch.
Therefore, they're not moving forward with their actual business.
People who are new to business, and online business in particular, tend to get fixated on something. For example, I know a lot of lawyers who are trying to get their law practice started, and they're focusing on everything… except getting their law practice started.
Let me tell you what I mean by that.
They focus on making sure they have the right logo.
They focus on making sure they have the right business cards.
They focus on making sure their website is amazing (which is a never-ending job).
They focus on getting down their systems and procedures.
They focus on organizing all their legal templates.
Do you know what none of those things do for you when you're just getting started with your business?
None of those things are what I would call money-making activities.
So What Should a New Online Business be Doing?
As an online business owner, when you're just getting started and you are focused on making sure you have built in all the proper legal protects, you must understand that this is just keeping you from building your business.
You can spend literally weeks, if not months, trying to figure out how to set up your LLC, researching all the laws, figuring out which organization do you need to form, figuring out what should go into your operating agreement, what shouldn't go into your operating agreement, and all of these things.
What do you call your LLC? What address do you use? These are all little things.
I call these things distractions.
You should be able to set up an LLC in less than it takes to drink a cup of coffee. It's not hard. (If you are struggling, my LLC Startup course that will help you get unstuck).
Because when you are so focused on starting an LLC that it distracts you from working ON your business, then you aren't making any sales.
And that's because setting up your LLC is not going to put money in your bank account.
Filing a trademark is not going to put money in your bank account.
But Don't You Need a Legal Foundation?
I get it.
There's a lot of people out there who just feel like, “Well, I can't start a business until I have this legal foundation in place.”
I don't disagree with that. Yes, a legal foundation is important once you're ready to have the legal foundation.
If you were going and building a house and you went to the store and you said, “You know what, we really need a foundation for the house,” and so you went, and you hired a bunch of guys, and said, “Let's get out there and let's build this house.”
But you don't have any plans, you don't have any drawings, you haven't hired an architect, you haven't done all these other things that you need to do, and you just went out and rented an excavator and started digging a hole in the ground to build the foundation, that would be a joke, right?
Yes, you need a foundation to have a house or a building, but if you don't have plans for what that house is going to look like, don't have the proper permits in place to do what you need to do on the land, the house is never going to come together.
So if you go out and start this LLC, let's say that's what you want to do, you start this LLC, but you're not making any money, you don't have a plan for your business, first and foremost, you're never going to get anywhere.
And I think it's really funny, and Aiden mentioned this in her video, and I think it's completely accurate, is that so many people focus on forming an LLC and maybe even registering a trademark.
But what they forget, or what they maybe failed to realize, is that your trademark isn't even valid until you're in business. You have to be selling something or your trademarks not valid.
Your trademark is a hundred percent dependent on the fact that you are in business, selling things in commerce. And if you're not doing that, then your trademark is never going to register anyway.
I get that it is important to focus on these legal things, but it's not the end-all, be-all.
For every single business I have started in the last five years, and there's been a number of them, both online businesses and things I've done with my law firm and different things like that, in every single instance the way I've started the business is:
I'm trying to fail as fast as possible.
I know that sounds stupid, and that sounds ridiculous, and you're probably thinking, “Jim, I don't get that. Why are you trying to fail as fast as possible?”
The reason I'm trying to fail as fast as possible is I want to figure out what does work and what doesn't work.
When you're running a business, you have put yourself out there first. You have to get out there, and you have to actually start selling something, or testing a product, or working with people in your ideal market.
And you have to figure out what they're going to buy and what they're not going to buy. That's how you start a business.
You don't need an LLC to do any of that. You don't need a trademark to do any of that. Hell, you don't even need a website to do any of that.
If you want to start a business today, and I highly encourage those of you who are reading this thinking, “How do I get started as fast as possible,” to pick an idea, start a business social media profile, use the platform that you enjoy the most.
If it's Instagram, go to Instagram. If it's Facebook, go to Facebook. Or if it's YouTube, go to YouTube. (Sidenote: I love YouTube). If it's podcasting, start a podcast.
Whatever that platform is, every single one of these is basically free.
As long as you have a smartphone, you can start a podcast, you can start a YouTube channel, you can start any business you want.
My iPhone is a more powerful computer than I ever had when I was first getting started in business.
So stop making excuses.
After you make a few sales…
Once you've earned a little bit of revenue, the next logical step might be to set up a website. For 10 or 15 bucks you can register a domain name, and there are tons of free templates online for WordPress, and you can get a hosting account for again, five, 10 bucks a month.
So for under 50 bucks a month, you can be in business. You can have all the channels that you need to start reaching out to clients, and you can be good to go. That's how I've started every business that I've done.
Years ago, we needed more of a website presence, and I had to figure out how to do that, and it was a lot harder back then than it is today. You can literally, in one weekend, have a website up and running with free tools like Canva or PicMonkey, or even some of the Adobe Suite tools that are free.
You can get a logo drafted. And you don't need to pay a lot of money for a logo. You don't need to pay a web designer thousands of dollars to set up your website. You don't need to pay a lawyer a lot of money for your LLC or your trademark.
What Legal Steps Should you Take?
What would be money well spent in terms of the legal aspects? Well, I would do some digging on your state, city, county, local level, see if you need any type of permits.
Maybe you need to file a DBA, which is a doing business as. In other states, it's called a fictitious name. Those are typically 15, 20, $25 to file those to make sure nobody else is using the same name that you want to use in your business.
If you're going to be doing one-to-one client work, you probably want to have a client contract in place for that work, and you can purchase templates online for a couple hundred bucks.
So, all in, with all this stuff for under 500 bucks, certainly for under a thousand dollars, you can have everything you need to get your business up and running, and you're good to go.
Starting a business is hard and it's scary.
Putting yourself out there is hard and scary.
This is something that you can do. You don't need to spend a lot of money on the legal aspects to do it. You can find most of the information you need on free resources like YouTube, or even on Facebook.
At some point, you are going to need the legal, but you just don't need it right now.
Just remember where you're at in your business. Remember where you want your business to go, and remember… the most important thing that you can do as you're getting started in your business is to get customers who are willing to pay you.
Because once you've got cash coming into your business, then you've got a business. Until you have money coming in which effectively validates your business idea, you don't have a business.
I don't mean to be harsh, and I'm not trying to be harsh. I want to see all of you succeed, but I also know that success comes with making smart choices at the beginning.
If you're wasting your time worrying about legal and you don't have a business yet, you're probably not going to get there.
Here's another video right here that talks more about when you may or may not need to set up that LLC for your business.
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