New entrepreneurs can find themselves stepping on landmines when they start their businesses, but the first monthly Jersey City Tech Meetup of 2021 featured a panel discussion filled with advice on how to avoid the pitfalls involved.
The discussion, called “The Entrepreneur’s Journey: How to Start a Business,” was necessary because many people are jumping into the entrepreneurial journey after quickly discovering the need for self-sufficiency in a crashing economy, and for living a life of purpose, panelists said.
Entrepreneurs know that starting your own business is not all fun and games (although there is plenty of fun to be had!). There is a huge learning curve when it comes to business entity formation: accounting, building a team, fundraising, scaling and more of that stuff they didn’t teach you in school, organizer Ben Yurcisin stated.
The panelists for the event included:
Clark Smith, a technology sector lead at the New Jersey Economic Development Authority (NJEDA), which focuses on helping build strong and dynamic communities, creating good jobs for New Jersey residents and providing pathways to a stronger and fairer economy.
Lloyd Ortuoste, cofounder of #Baonanas, a desserts-oriented brick-and-mortar business with two Jersey City locations (#Baonanas Harborside, at 200/210 Hudson Street, and #Baonanas HQ, at 181 Monticello Ave). Ortuoste and his fiancée first started selling banana pudding online in 2015 via Instagram during their college years.
Megan Eloff, founder of the travel company Paramour Pursuits. Originally from South Africa, Eloff is also a “recovering” restaurateur and current feminine empowerment coach. She now lives in Uruguay and joined the meeting from there.
Adam Sternbach, an associate at McCarter & English, an East Coast law firm headquartered in Newark that offers an array of services, including assistance for early-stage businesses and entrepreneurs with navigating business launches, and help with related challenges.
Matthew Barbieri, CPA and partner at Wiss & Company, an accounting and consulting firm with offices in Florham Park and Flemington. The firm also assists early-stage businesses and entrepreneurs with their business launches.
A sampling of the highlights:
- Ortuoste – Burning out, taking on too many projects and losing focus are common mistakes by early-stage entrepreneurs. Making key hires, growing intelligently, sticking to your core values and leading with your heart are often critical to achieving early success. “One of the secrets to being in business with my fiancée is that we have specifically defined responsibilities for collaborating. I suggest putting together an organizational chart and drawing up an operating agreement.”
- Sternbach – Forming a legal business entity early on is critically important for liability protection, so your personal assets are protected in the eyes of the law. This holds true from a business record-keeping standpoint. It is also a must, as you begin to commercialize your organization and take on employees, to formalize your business and separate it from your personal finances. Also, not every company should seek outside capital. … The more complex your business is, the more important it is to seek outside help to structure your business appropriately from the start.
- Barbieri – Do not commingle the funds in your personal and business accounts. Find a trusted adviser to supply you with appropriate guidance, especially when it comes to tax-related issues, and do this early on. Be careful when you are issuing shares to your cofounders, and even more so if you plan to take in outside capital at some point. An LLC is a flow-through entity, and a portion of the profits and losses will impact the founders tax-wise. Earlier-stage organizations typically do not need formalized or complicated accounting systems. You can run on an Excel or QuickBooks file. Some would disagree with me on this point. Also, ask yourself, “What are the parameters for allocating income or loss? How do you take money in or out of your business? And how do you make sure to capture your capital account?” In the early days, you should expect to generate losses. Take 15 minutes early on to determine what will happen with your taxes at the end of the year.
- Smith – Startups need to consider sales taxes and labor issues. States can come after you if you don’t handle these properly. Also, “I recommend bootstrapping as long as you can, without raising any outside capital. You also must be careful about who your partners are. Once you get market validation for your business, that’s when you go out to seek investment. Try to run your business off of revenue as long as you can before bringing in outsiders.”
- Eloff – “I got into the restaurant business when I was 24. I originally wanted to bring what I learned about food trucks in the U.S. to Cape Town, South Africa, but that proved too complex. My burger business taught me a lot of hard lessons. My partner was much older than me, and his philosophy was not to borrow capital from any outside sources, just purchase new equipment when you are ready for it. Finding the right people to talk to, doing your own research and getting second opinions is so important. Avoiding the finances is not good just because you are afraid of it. Forcing myself to learn accounting on my own was a very important decision. Staying curious sets you up for success because you keep asking questions, and that helps. Delegating too much can hurt you because if something goes wrong and you don’t know how to fix it, that can be a problem.”
A Sampling of Additional Panelist Advice:
- Be extremely careful about adding a business partner when forming a partnership, and who that partner is.
- You can’t just make someone a partner without it likely becoming a taxable event.
- If you have something today that you didn’t have yesterday, you likely also have a taxable event.
- Be clear what the business goals are before taking on an additional partner, and make sure they line up with your partner’s views by discussing them in advance.
- It can be especially tricky to go into business with family members or friends, for obvious reasons, but many people still do this, with varying degrees of success.
- The vast majority of new businesses fail; and even with successful businesses, the managerial teams often change over time.
- There are different skill sets that can be best for the overall organization, but these often depend on where you are in the business’s life cycle.
- Early on, it is especially important to know how much minimum revenue you need just to survive and stay in business.
- Pivoting your business can be critical to survival and ultimate success, especially these days, given the challenges stemming from the pandemic, among other barriers.
- It is important to be passionate and excited about your business, as that helps drive inspiration and creativity for many entrepreneurs.
- Consultations with mentors and business coaches is often a key resource for business owners and entrepreneurs to tap into and learn from.
- If you do decide to take money from angel or other early-stage investors, don’t squabble over decimal points when coming to terms with them – especially if you need that money to stay afloat.
- Make sure that your company’s intellectual property is legally owned by and assigned to the company, as opposed to being the property of just one of the founders.
- Find a lawyer who is experienced in the process of raising money to assist you in navigating that challenging journey.
You can watch the full session here on YouTube.
Next meeting: The Jersey City Tech Meetup will cover the “Clubhouse Craze” at its first-ever hybrid live and streaming event (February 23, at 6:30 p.m.). It will be held at Headroom LGBTQ+ Lounge, 150 Bay Street, Jersey City.