How-To Structure a Start-up the Right Way

Every entrepreneur is motivated to get their product or service quickly to the market in the hopes of making millions and have it be successful. However, if the business is not structured the right way from the beginning it will make it difficult or may present challenges down the road to manage its growth. The right structuring builds the foundation and the corporate DNA. Structuring errors often cause companies to fail. When the company continues for several years, often showing great promise, and then the structuring flaws, built in during the start-up phase, cause it to collapse. Structuring problems scare off investors if you need future investments for growth or want to launch an Initial Public Offering (IPO) near the start. Experienced investors know how difficult, and expensive, these are to fix.

At the early stages of the business, most entrepreneurs are in a reactive mode and fly by the seat of their pants, while trying to learn at the same time. Creating a successful start-up that leads to fast growth requires having a structure with well defined operating procedures. When you have systems in place, you are more proactive then reactive in your business. This allows you to manage your growth more easily before it manages you. Most entrepreneurs implement Standard Operating Procedures (SOP) as they go but forget to document the processes. When it comes to expanding and hiring employees, there is a lack of documentation for the right way to do things. This reduces future efficiencies and performance, which eventually effects the company’s bottom-line. An operational consultant can assist you to develop efficient operations that are scalable and provide proper documentation moving forward. The investment you make in outside professional advice is usually returned three folds in time and monetary value.

Once you have validated your idea using a business canvas and it seems a feasible venture. The next step would be to plan out what you will need and how you will operate. As a new business owner you must consider all the critical to customer (CTC) needs in your business. At a minimum this will include the set up of the following systems:

• Company Structure (Bus. Registration Type & Taxes)
• Administrative functions
• Operating policies and procedures
• Financial System
• Information Technology Systems
• Marketing & Sales Systems
• Distribution logistics (Product or Service)
• Human Resource Systems

In the above list we talk about business functions as being “systems”, which is the way it should be looked at as these systems will guide you to take the correct actions to bring certain results. The owners of successful businesses have developed Operational Support Systems (OSS) using industry best practices. The objective of these systems is to support and make efficient all the activities of the organization. Well structured, they also relieve management of many day to day routine activities, giving owners more time to be strategic thinkers. In order to stay LEAN, the business should only invest time and money into resources that will yield immediate results to build up a steady cash flow, while servicing their target market.

Structuring the business the right way is critical to its survival much like building a strong foundation before you start building a house on top. No entrepreneur is able to predict the future. However, if you are able to strategically build in all the “what if” situations into your standard operating procedures, your business will be nimble enough to adapt to new opportunities or change quickly without the unpleasant pain of restructuring down the road.