Starting a new business is tough. The Small Business Administration estimates that half of all new businesses fail within the first five years after their creation, and only about one third survive 10 years or more. In addition to the economic and operational risks that every business faces, there are a number of legal and general mistakes made by small businesses which can and do have significant effects on their success or failure.
Failure to adopt a well-thought-out business plan
Most businesses start because the founder perceives there is a need in the marketplace that isn’t being met or can be met more cheaply. Where businesses fail is by not determining the market for their product or service, the costs and profitability potential, and whether the business will generate sufficient cash flow or will need capital from outside the company. Any business endeavour needs to have a well thought out plan.
Failure to address employment issues
Hiring the right employees is crucial in a small business, where a bad hire can have huge business implications. But in addition to finding the right people for the job, small businesses need to be aware of the legal relationship between the business and the employees, compliance with various regulations, and the impact and enforceability of employment agreements and restrictive covenants.
Failure to do a buy/sell agreement
Any small business that has more than one owner needs to have an agreement that covers items such as governance and management, profit -sharing, the addition of new owners, and solving disagreements. It is more likely than not the ownership group of the business will expand or change, and, much like a will that provides for an orderly disposition of assets upon death, having a well-considered agreement among the owners can head off or limit disputes down the road and promote harmony among the owners.
Failure to protect intellectual property and trade secrets
Intellectual Property (IP) is the most valuable asset of a startup. Patents, trademarks, and copyrights are the three essential components of intellectual property. It is crucial to not let anyone claim a right to your IP. Strict non-disclosure agreements are a way of ensuring this. Startups often neglect the protection of intellectual property and suffer later.
Many entrepreneurs lump all types of intellectual property together, but it is important to distinguish the different types and determine how best to protect each type early in the operation of the business. Patents protect ideas or concepts which are novel and non-obvious. In order to claim patent protection, you must obtain a patent and, importantly, must file the application for the patent no later than one year after the idea is published, used in public, or offered for sale.
Trademarks protect words, designs or phrases which serve as the “brand” for a product or service. Trademarks are automatically protected under state and federal law simply by using them, although registration provides additional benefits.
Copyrights protect creative expressions fixed in a tangible medium, such as prose, music, and video. Like trademarks, copyright law protects works automatically and registration is not required, but copyright registration can provide significant benefits as well.
Lastly, trade secret law protects commercial information which is not disclosed to the public (a good example is the Coca-Cola formula). In order to maintain trade secret protection, the business must maintain the secrecy of the information by not widely disseminating the information and requiring those with access to the information to agree not to disclose information.
Failure to avoid costly litigation
Litigation should generally be considered as a last resort. It is expensive and a drain on the time and efforts of any involved employees. Before getting involved in litigation, any small business should try to temper the emotions that are caused by a dispute and consider the costs and benefits of the litigation, just like they would any other business decision, and determine any collateral effects of the litigation as well.
Failure to hire legal services
In the rush to start up their business, entrepreneurs mostly focus on everything except the legal considerations of operating their business. This point may seem self-serving, but working with a lawyer on legal issues is at least as important as working with an accountant on financial issues. Experienced counsel can help a small business spot and avoid legal issues before they become destructive to the company.
Not tracking expenses
Another common mistake commonly made by the startups is not keeping track of their expenses, small or large, throughout the year. Many businesses try to collect all receipts only when tax returns must be filed! What is not documented is not deduced, hence, it’s like leaving money in the open. There are many options available to manage and record expenses. Entities can also hire accountants in order to manage these records.
Lack of documentation
Each interaction, whether minutes of meeting or anything else, must be on record. It is crucial to have all documents in proper order at all times. Legal due diligence can make or break a crucial deal of business.
Don’t have proper agreement of the founders
It is important to have a solid founder’s agreement because it is worth thinking about how you and your co-founders could face failure. The agreement of founders must contain all the essential clauses, such as adjudication rights, property, and the functions and responsibilities of each founder, including conditions of employment and wages.
Mixing revenue and capital expenses
One of the main confusions for those who present business for the first time is about expenses. What expenses are considered capital/assets expenditures and what are called deductible income expenses in the P&L A / c. The most valuable items that will last significantly more than a year are known as capital/asset/equipment expenses. Therefore, be careful when you are accounting for all those expenses.
432,000 business applied for FG payroll support, 70,000 shortlisted
70,000 Nigerian businesses have been shortlisted for the Payroll Support of FG’s Survival Fund Grant Scheme.
70,000 businesses in Nigeria have been shortlisted from the 432,000 businesses that applied for the Payroll Support of the Federal Government’s Survival Fund Grant Scheme. Many states did not meet their quota and plans are ongoing to seek an extension after the portal closed 5 days ago.
Mr. Tola Johnson, the Project Coordinator of PDO and Special Assistant to the President on Micro, Small and Medium Enterprises (MSMEs), confirmed this to the DailyTrust.
Nairametrics had earlier reported plans by the FGN to roll out a N2.3 trillion stimulus package and survival fund for Micro, Small, and Medium Enterprises (MSMEs) to stay afloat amid the economic challenges imposed by the pandemic.
The survival fund includes payroll support for three months and a guaranteed off-take scheme among others, all under the National Economic Sustainability Plan (NESP).
What they are saying
Commenting on the latest development, Mr. Johnson said, “As at the day the portal closed to applicants for Payroll Support Scheme, we had 432,000 businesses that applied. However, we have shortlisted 70,000 that met the requirements. These businesses have uploaded over 400,000 staff for us to pay for three months.’’
Mr. Johnson pleaded for an extension, noting that though the portal closed on the 15th of October, 2020, many states did not meet their quota
“The Project Delivery Office, which I head, is taking this plea for an extension to the Steering Committee headed by the Minister of State for Industry, Trade and Investment, Ambassador Mariam Katagum.
“To know whether to extend the date for online application into the payroll support scheme will be based on the data available to us.’’
He concluded by emphasizing the need for BVN and digitalizing the process, noting that business owners will not be paid directly. Only their staff will be paid subject to the provision of BVN.
Why it matters
The support is a kind gesture by the FG, aimed at alleviating the impact of the pandemic on MSMEs. It is a way of averting massive job loss, creating income for the staff, and stimulating the economy, as the impact of MSMEs in developing the economy can not be overemphasized.
AGSMEIS: CBN expands beneficiaries to 14,638
The CBN has extended the number of beneficiaries under the AGSMEIS to 14,638 applicants.
The Central Bank of Nigeria has extended the number of beneficiaries under the Agri-Business Small and Medium Enterprise Investment Scheme (AGSMEIS) Loans to 14,638 applicants.
This information is contained in a communique from the last MPC report of CBN verified by Nairametrics. The communique also revealed that 250 SME businesses, predominantly the youths, have also benefited from the Creative Industry Financing Initiative.
In addition to these initiatives, the CBN is set to contribute over N1.8 trillion of the total sum of N2.30 trillion needed for the Federal Government’s 1-year Economic Sustainability Plan (ESP), through its various financing interventions using the channels of Participating Financial Institutions (PFIs).
A few months ago, the CBN announced that it has unveiled a framework that will integrate a non-interest window in all its intervention programmes aimed at supporting businesses and households that have been impacted negatively by the COVID-19 pandemic. Nairametrics had earlier reported on how to access the AGSMEIS fund.
Why it matters
Given the impact and accompanying harsh consequences of the pandemic, coupled with the present regime’s focus on diversification of the economy, this intervention is therefore aimed at achieving the diversification goal, reflating the economy, creating more jobs and income, managing inflation, and setting the economy on the path of recovery.
CBN in the latest communique of its last MPC meetings also revealed that it has disbursed a total of N3.5 trillion in interventions in the wake of the COVID-19 pandemic as of September 22, 2020. The breakdown of the disbursement includes:
- Real Sector Funds: N216.87 billion
- Targeted Credit Facility: N73.69 billion
- AGSMEIS: N54.66 billion
- Pharmaceutical and Health Care Support Fund: N44.47 billion
- Creative Industry Financing Initiative: N2.93 billion
In terms of project distribution, a total of 128 projects that comprises 87 real sector funds project and 41 health-related projects have been funded. In like manner, about 120,074 have received funding under the Targeted Credit Facility.
N75 billion Nigerian Youth Investment Fund to be rolled out before end of October – Minister
Youths are expected to come up with brilliant ideas that will enable them to access between N250,000 and N50 million each.
The N75 billion worth Nigerian Youth Investment Fund (NYIF) will be rolled out before the end of October 2020. This was disclosed by the Minister of Youth and Sports Development, Mr Sunday Dare, in a statement on Wednesday, according to NAN.
The statement, which was issued by the Minister’s Assistant Chief Information Officer, Olatunji John, explained that the ministry challenged youths to come up with brilliant ideas that would enable them to access between N250,000 and N50 million of the N75 billion Nigerian Youth Investment Fund for sustainability.
He stated, “The programme is about to be rolled out before the end of this month. President Muhammadu Buhari approved N75 billion in three years because he believes in the dream of youths, aimed at lifting 10 million Nigerians, including youths out of poverty before 2023.”
What you must possess
While urging the youths to take advantage of the opportunity, Dare stated that prospective applicants must show clearly that they have the market, resources and manpower to access the fund.
“The process for accessing the fund would be fair to all youths aged 18 to 35, regardless of their ethnicity or social status,” he added.
According to him, the move became imperative “because building a youthful population that is empowered and successful, is one of the cardinal objectives of this administration.
“For the first time, this country is investing directly in youths. So, government is taking a good risk on our youths, which it hopes will awaken their creative and genius innovative ideas.”
The Minister recalled that apart from the Federal Government investment fund, the ministry had initiated other youth-centered opportunities such as the Digital Literacy, Entrepreneurship, Employability and Leadership Skills (D.E.E.L) and Work Experience Programme (W.E.P).
Others, he said, included the Digital Youth Nigeria (DY.ng) and Nigeria Online Youth Assembly (NOYA) programme, all carefully crafted to address unemployment and employability of youths.
Back story: On October 1, 2020, Nairametrics reported that the Central Bank of Nigeria (CBN) announced that the NYIF would soon be disbursed.
The apex bank made the announcement via its Twitter handle on Thursday, while the nation marked its 60th Independence anniversary.