As corporate America continues to downsize, small businesses and start-ups have picked up the slack. Today, small businesses employ nearly half of the U.S. workforce, and popular T.V. shows such as “Shark Tank” and “The Profit” fuel the fires of aspiring entrepreneurs who hope to make it big. Unfortunately, many entrepreneurs don’t successfully protect their big ideas and could lose all or a sizeable chunk of their businesses. So, if you think you have the next big idea and hope to succeed, listen up. The following five steps will help ensure your new business survives and thrives.

Step 1: Protect Big Ideas. Secure patents to protect inventions and ideas

When it comes to intellectual property rights, securing a patent for a new idea or invention should be a top priority. I get it, you have a great idea, but cash is tight right now. However, are you willing to forgo getting a patent and risk someone with plenty of cash taking your idea and fast tracking it to market? Failing to get a patent isn’t something money will fix later.

In addition to patents, you should keep any proprietary information regarding your product and business processes close to the vest. Designate those details as confidential and protect them through employment agreements, non-disclosure agreements and confidentiality agreements. Safeguarding the information through passwords is another cost-effective step.

Step 2: File for a federally registered trademark to protect branding

Entrepreneurs should get a federally registered trademark, which typically offers broad protection. On top of the name of your product or service, you can protect the logo and tagline. In some cases, you can protect product packaging, if it’s creative and distinctive enough, as well as non-functional.

For example, the non-functional distinctive appearance of a product, such as the pink in Owens-Corning insulation, is protectable trade dress. When you see pink insulation, you think of Owens-Corning, right? That’s because the brand is so dominating in the insulation market, the company has protectable trade dress in its pink-colored insulation.

Step 3: Be the first to market with crazy execution

After you have secured your patent and trademark rights, or if for some reason you can’t protect your intellectual property rights, then it’s vital to bring your new product or service to market first – and execute the launch well. That way, any potential competition will be forced to play catch up. Remember, the best defense is a good offense.

One of the biggest reasons new businesses fail is when the entrepreneur fails to execute or manage their company well. Many of the people who get shot down on “Shark Tank” don’t get a deal for that very reason. You probably won’t get many shots at getting financing (or get on “Shark Tank”), so you need to execute well from the start.

Step 4: Resist giving away equity in the business

Many fledgling entrepreneurs mistakenly promise to give up a piece of their company, or equity, to someone in order to get the business off the ground. For example, say you hire a developer to create software for your company in return for a piece of equity in the business, and you don’t document the agreement.

What could happen is the entrepreneur and the other party (the software developer in this case) end up disputing who owns what pieces of the company AND who owns the copyright to the software that was developed. The copyright assignment should be in writing, otherwise the developer may likely end up owning the software. This scenario could get even worse for an entrepreneur who owns a company with the software as its only asset.

Step 5: Assemble a solid team to support your dream

There are two key business attributes I typically find are indicators of an entrepreneur’s or start-up’s long-term success. The company should be operating with a good business model that makes money, and it should have a good team in place to move the business forward.

Depending on the type of product or service in question, your key players may include a/an:

• Intellectual property and/or technology attorney to help you protect the various types of intellectual property mentioned in steps 1 and 2 above. He or she can also provide guidance regarding domain names and website and eCommerce agreements.

• Corporate attorney who knows how to set up the appropriate corporate entity structure to maximize protection of the business owner and his or her assets.

• Accountant to handle the books and address tax implications associated with the business.

• Financial modeling expert to ensure your financial metrics are on the mark and who understands the cost of a new customer vs. cost of goods vs. price of goods/services sold as well as margin.

• Product development specialist who knows the process involved with getting a big idea to market and how to efficiently source materials necessary to create and deliver the product or service.

• Marketing guru to draw the attention of potential customers to your product or service.

• eCommerce specialist who understands the intricacies of selling products and services online.

Many entrepreneurs end up wearing many hats to save money when they start out. Just don’t short-change yourself –or your big idea – by taking on a task that is out of your wheelhouse. Hire the best you can afford when you secure financing, so you have time to focus on the areas of the business where you excel the most.

Photo Source: DollarPhotoClub

For more information on this topic, please visit our Trademark Management service page, which is part of our Trademarks practice.

Klemchuk LLP is an Intellectual Property (IP), Technology, Internet, and Business law firm.  The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution. 

Klemchuk LLP hosts Culture Counts, a blog devoted to the discussion of law firm culture and corporate core values with frequent topics about positive work environment, conscious capitalism, entrepreneurial management, positive workplace culture, workplace productivity, and corporate core values.