The Single Most Important Step to Starting a Business

Posted on June 10, 2008 by David Gass 1 Comment

The single most important step to starting and maintaining a business is “Compliance”. Compliance is defined as “keeping a business registered and up-to-date with all required agencies and directories to inform the public and lending institutions that you are open for business and how they can contact your company quickly.”

Compliance encompasses several factors. There is one business credit bureau that states they do over 2,000 automated and manual checks on a business to determine if that company is properly registered and doesn’t appear to be a fraudulent company. I met with a small business friendly bank last week and they confirmed they too will do similar, if not exactly the same checks as the credit bureau to protect their investments from unworthy businesses.

With over 2,000 different checks a credit bureau, lending institution or your customers and prospects could perform, it’s impossible to list all of them here. However, I will share a few very common ones. Keep in mind that these are just the beginning. Every company should run their business through a complete Compliance Check to improve their chances of obtaining capital, attracting investors, bringing on more clients and recruiting talented staff.

The first check is simple: Call directory assistance and make sure your company is listed. Even if you think you are listed, call anyway and make sure they have the right phone number. We have seen businesses ten years old that had the wrong phone number listed with directory assistance. Imagine the amount of business they lost just by having the wrong phone number. I was at a conference a couple months ago where the CEO of Zappos.com spoke. This is a company that will do a billion dollars in revenue this year. He said that every morning it’s someone’s responsibility to call their phone numbers and check their websites to make sure everything is working. It’s the small things that matter.

Another item to check in compliance is your licenses and permits. Check with multiple individuals at the city, county and state offices regarding what license and permits you need. Sometimes you will talk with one person that says you don’t need a license and then someone else says you do. It’s best to talk to a few people to make sure they are correct. In addition, you want to make sure that you use the proper address for your licenses. Don’t use a mailing address for your license or permit. You need to use your physical location address.

Another area of compliance is making sure you can use your company name. You should do a couple checks on your company name to make sure no one else is using the name and/or trademarked the name. Just because you incorporate a name doesn’t mean you can use it. I had a client a few years ago that wanted to form a corporation and build credit with a name that had been trademarked and used by another company. I told him he should choose another name. He insisted that because he was in Oregon and the other business was in Utah he didn’t need to worry about it. A year later he came back to me and said he wished he had listened to my recommendation of using a new name. The other company sent him a letter from their lawyer telling him they own the name and he needs to change his. He said it cost him over $100,000 to change all the signage, brochures, business cards and letterhead.

Over the last 15 years of working with small business owners, talking to credit grantors, seeing what causes issues for small business owners and my own experiences with my business ventures, I have created a program called the Business Compliance Check. The program will research your company to determine if your business is Credit Ready™ and in compliance. I have joined many of the online database websites that track the information banks and other lending institutions and credit bureaus use. Our staff will then put together all the research into a 50-100 page report that provides critical and recommended action items you need to accomplish in order for your company to be compliant. It also looks at a corporations records to determine that all Secretary of State information is filed properly.

This Compliance Check should be done yearly for every business to ensure they are not just in compliance with local and state authorities, but also to protect their corporate veil, improve their chances of obtaining financing and the ability to attract new customers.