09/ 07/ 2004
by Jim R. Sapp
While you may be able to handle most of the issues that will arise as you start a small business, you will want professional assistance for more complex issues, particularly legal and accounting issues.
Use a two-step approach to find a good attorney and accountant. First, carefully select a firm by getting a personal reference and then examine the firm’s Web site. The Web site can give you information on that particular firm’s areas of expertise and their specialty.
Legal and tax issues are already complex, and they get more complex by industry. Many “gray areas” will need to be interpreted and analyzed. If the firm you’re checking specializes in construction companies, but you’re in the retail business, it may not be a good fit. You don’t have the time or money to pay someone to learn about your specific industry, so find a professional who is servicing your business sector already. If your company is highly specialized, a business trade publication may list professionals who will understand your specific needs.
When you have settled on one or two firms, conduct a face-to-face interview with the candidates before you hire. Interview the specific individual who will service your business. Ask questions, such as where they went to school and what their area of expertise is. Other good questions include:
- What is your hourly billing rate?
- How often do you increase your rate?
- Can I talk to one or two other small-business people you work for?
- What types of work do you most enjoy?
Remember to make your final selection carefully. It is expensive to switch firms!
Hire an Attorney for Complex IssuesIt may be prudent to hire an attorney when you first start your business. An attorney with small-business expertise can assist you in completing the documentation necessary to incorporate your business, especially if you have some unusual circumstances or need special bylaws. Further, it’s important to have the name and address of counsel for a loan document or any leases you need to have reviewed. This doesn’t mean, however, that the lawyer has to do everything.
You should do as much as you can yourself; however, a small-business lawyer should review the complex issues. To begin, write a list of exactly what you want the attorney to do for you. For example, you may understand the monthly rental fee and term of your building lease, but you may want to ask the lawyer to “explain items 10 and 12 in my building lease,” or “help me understand the CAM charges and the tax section, so that I’ll be clear on what I owe.”
While there are many exceptional lawyers, their image precedes them for a reason. Be careful about using a “superstar” firm or any firm with more than six to eight attorneys; you probably cannot afford their rates. Select a smaller firm or a one-person office, preferably someone who has expertise in your area of business. Go in and say, “I am starting this company and here is what I want.” Have officers, stakeholders and addresses all written up. The more preparation you do, the lower your cost will be.
You can fill out the state and federal papers yourself; there is no need for a lawyer to charge you $200 for filling out forms. Then the incorporation papers will come back to your address with state and federal ID numbers. You can handle any renewal information needed by the state and save expenses there too.
Remember, lawyers make their money by invoicing you. Use them only as necessary. I have found that most business owners can do about 80 percent of the work themselves and hire a lawyer to do the rest.
Hire an AccountantA competent accountant who understands new businesses is probably the most valuable professional consultant you can hire. A good accountant can give you pertinent advice on taxes, accounting systems, depreciation and all the other “numbers stuff” you need to know for your new company. The more successful your business becomes, the more difficult it will be to keep the government’s tax fingers out of your checking account. A good accountant will help you keep what is yours in the bank, and he or she can be a great adviser and mentor.
Find a good small- or medium-sized firm in your vicinity -- you'll get personal service and pay for less overhead.
I also highly recommend using a non-traditional calendar year for your business. All accountants are overbooked at Dec. 31 and April 15. Why not set up your accounting so that your business year ends on June 30 or Sept. 30? Many accountants will offer discounts of up to 40 percent if you use a non-traditional year-end.
Your accountant should be able to recommend an off-the-shelf software program for use in your office. They know the systems that work for small businesses, which systems are good for inventory and which are better for retail or professional offices.
You may need more highly specialized software for your particular industry; just be sure you can justify the expense. Many times, you can find off-the-shelf systems that are adequate for your first few years of operation. This is preferable to buying expensive software that is so sophisticated you only use a fraction of it. Be lean and mean when you start out.
The accountant is your tax adviser and tax preparer. Who is going to do your business accounting and books on a day-to-day basis? Even the smallest business may need assistance.
The best solution is a part-time controller, who will probably cost several hundred dollars a month. There are many talented, experienced people who can give you advice and accounting assistance, with rates that are half those of a large firm. This person can do month-end closing and write checks; they may also be able to help with software installation or advise you on computer purchases.
You may think, “I can do that myself.” That might be true, but look at the big picture. You’re the leader of the pack. Cash rules the business world, and you won’t be helping your company generate more sales by balancing the check ledger in QuickBooks. Delegate that job to the controller.
A few words of caution: Always open and review bank statements yourself. Do not allow your front office staff to balance the checkbook. It’s usually over their head, it’s none of their business and embezzlement does happen. Finally, do not allow your controller (or anyone else in the business) to sign checks. That is your job.
JIM R. SAPP is an international business consultant and speaker with more than 25 years experience as a business owner and entrepreneur. He is founder and director of the American Small Business Institute, and recipient of both the “Entrepreneur of the Year” award and “Blue Chip Enterprise Award” for inspirational achievement in business. His book Starting Your First Business is available from www.sappbiz.com or by calling 800.570.5436.
