All new business ventures begin with an idea. It may involve buying a struggling business, rebranding it and turning it into a success. It may involve starting a company from scratch.
In any case, an idea is only the starting point. There are a lot of factors that entrepreneurs need to consider before committing to a new business. This is also known as conducting due diligence. What does due diligence for startups entail, and why is it so important?
Due diligence on products and services
Whatever product or service a startup intends to offer, it’s important that all angles are covered in terms of research. Is the service or product something that people really need? Can the quality of product or service match or exceed rivals? Are the price points sustainable? Are there any health and safety checks that need to be conducted before launching?
Are the right people in place?
Startups have the potential to take off very quickly. For a business owner, this can be overwhelming. Part of startup due diligence involves ensuring that you have the right people in place. If you have a business partner, do you have a partnership agreement? Are your employment contracts for workers airtight? Are your Human Resources staff ready to deal with issues that may come up immediately?
What is the right legal structure?
Another thing to consider is what legal structure your company will take. If you intend to only capture a small, niche market, then a partnership may be enough. However, if you intend to expand quickly, then you may need to think about incorporating, as this offers personal liability protection and tax advantages.
As you can see, there are numerous aspects involved in starting a new business. To get off on the right footing, it will be highly beneficial to seek legal guidance.