In this episode, we dive into the theme for this season: building and starting a business. Tune in for the key ingredients crucial for starting a business successfully. Throughout the season, we will be joined by industry professionals who help get businesses off the ground. Each episode will equip you with essential tools to ensure your business has a solid foundation from the start.
Listen to the full episode using the player below, or by visiting one of the links below. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
Transcript
*The below transcript has been edited for readability.
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto, legal issues simplified through real client stories and real-world experiences, creating simplicity in 3, 2, 1.
Brad: Welcome to season 15 open Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd.
Michael: Let’s get this season started, Brad.
Brad: All right.
Michael: As a business and health care law firm, we represent clients in multiple business sectors, especially health care. This season, Brad, we are diving deep into the exhilarating and terrifying process of opening a business. Our theme this season is Starting a Business.
Brad: So Michael, should everyone who’s already started the businesses where they just tune out and not listen to season.
Michael: Brad, that’s a terrible questions. Not a way to start this season. Of course not. No matter what season of business our audience is in, there will be pearls that will help maybe even [00:01:00] some improvements that they may want to make on their business.
Brad: Okay. Well, I did hear a vocabulary word used earlier in your opening was “seasons of a business”. Can you explain to our awesome audience, what does that mean?
Michael: It’s a great question, Brad, and I’m excited because we will be explaining this in some ways throughout all of 2024. There are four seasons of a business, and there’s also four seasons of a year, Brad.
Brad: It’s good to know.
Michael: We are going to dedicate an entire podcast season to each season of a business to kind of time with a calendar year for 2024. And we will have the seasons of a business are the building season, the operating season, the scaling season, and the buying and selling season. And so, this building season is where we’re going to camp out in season 15. And so, this will be where we’re living when we’re talking about starting a business. [00:02:00]
Brad: Awesome. This is excellent news. And I guess we’re about to get started, but do you have any juicy new things that you need to throw out before we get going?
Michael: I’m glad you asked, Brad. Have you ever heard of the various TikTok challenges?
Brad: Well, first off, it’s well established that I do know that TikTok is not a clock anymore, so that’s good. That’s good for me and the audience, apparently. But now that I know that about TikTok, I actually have heard some of these strange TikTok challenges.
Michael: I mean, there’s a vast list of challenges that have started on TikTok, where basically influencers are trying to attract engagement from their
Brad: Audience. Yeah. So did you start a speed typing TikTok challenge as part of your audience engagement?
Michael: First of all, that’s a brilliant idea. If I were active on TikTok, I’m sure that if I did that, it would attract a huge following.
Brad: Oh, most likely.
Michael: But I also, Brad, I don’t want to embarrass my [00:03:00] followers by asking them to live up to my typing skills.
Brad: It makes sense. Yeah.
Michael: No, Brad, we’re talking about other things. There is actually a huge backlash that’s growing a lot of media attention because there are some really stupid challenges and not the kind of stupid like 13-year-old boy stupid. Actually, there’s those too. But these are the kind that have led to deaths.
Brad: Okay. Well, one would assume that keeping your audience, we want to do that and you did not want to engage them in challenges that actually lead to their death. But I guess this is where we’re going right now. So what are some of these death defying examples?
Michael: Well, so one is the blackout challenge. And if that’s not clear enough for you, Brad, it’s also referred to as the choking challenge. And this dares people, but it’s really kids that are doing this to allow themselves on video to be choked to the point of temporary unconsciousness. In an article I [00:04:00] read last year, this challenge had led to over 20 deaths just in a few month time period.
Brad: All right. Well, this is horrible. You would hope that someone would tell these kids or other TikTok influencers, that’s not very smart to deprive the brain of oxygen.
Michael: Have you ever heard of the Benadryl challenge?
Brad: No, but I’m afraid to ask.
Michael: It is what you might think, Brad. The dare calls for people to take a copious amount of over-the-counter Benadryl to induce a hallucinogenic high.
Brad: What could possibly go wrong, Michael?
Michael: I know. What if you combine that with the choking challenge. Yeah, the side effects of the Benadryl challenge are seizures, comas, and yes, even death.
Brad: All right, disclaimer for our audience, please do not try either of these examples.
Michael: Okay. Have you ever heard of the beezin challenge?
Brad: No, but that, I mean, it kind of sounds nice. What is it?
Michael: [00:05:00] Beezin is the act of rubbing Burt’s bees lip balm onto the eyelids before going out for the night.
Brad: Is this to attract bees? I mean, is that one of those – no, don’t answer that, Michael. Tell the audience why would someone do this?
Michael: So audience, we need to first pause to celebrate the first dad joke of season 15. Well done, Brad. You’re welcome. No, Brad, it’s not to attract bees, but it makes about as much sense as the real answer, which is that I guess people believe that the menthol or the peppermint balm will enhance the alertness or heighten the buzz when you go out for the night. And yes, Brad, the side effects are there, as you might suspect, they’re anything from inflammation or irritation to vision loss.
Brad: Well, at least with this challenge was dying. Do you have any more examples for our nice audience that’s still with us?
Michael: There’s a ton more, but the last two [00:06:00] that I’ll talk about are pretty famous. Have you heard of the Tide Pod Challenge or the One Chip challenge?
Brad: Yes, to One Chip, no, to Tide Pod. Well, what is the Tide Pod challenge? I’m afraid to ask here.
Michael: I know the Tide Pod challenges some variation of people eating the Tide pod laundry detergent, Brad. And the creative ones may even cook them in a frying pan first and then start chewing them up, and they let the soap kind of spew from their mouths,
Brad: You know, I guess when we were little – you know, if you curse, you kind of have to get your mouth washed out, but do they have to curse first before they eat this Tide? Or do you even know
Michael: It’s Dad Joke number two. I’m glad you didn’t use one of my words to go with a 13-year-old boy humor, so we’ll go there. Okay, Brad, let’s move on. The one Chip challenge is actually backed by a company Paqui.
Brad: Okay. Yeah.
Michael: They sell a bag with a single chip in it, and [00:07:00] it contains some mixture of the hottest peppers in the world.
Brad: Oh, fun.
Michael: Yes. And the challenge calls for a person to eat just this one chip and see how long they can go without consuming food or water.
Brad: All right. And as someone who actually ate a Ghost Pepper once, which was a lot of fun, audience members, that didn’t really seem as bad as the other ones you’ve talked about so far.
Michael: You know, I think the Ghost Pepper got less left back in the eighties and nineties, Brad, because these are like a lot of science where they’re mixing peppers together to create these special blends that are super hot. And so, these chips are so spicy that it has led to the death of several teenagers
Brad: Death by spicy chip. I absolutely did not see that coming. I mean, we had the Tide story and they’re surviving that, but a spicy chip. All right, this is really getting ridiculous. How has this helping getting our audience ready for the starting of a business? [00:08:00]
Michael: That’s a fair question. The journey, Brad, to starting a business requires a mixture of bravado and maybe even some stupidity.
Brad: Okay.
Michael: The journey can be terrifying and do sometimes lead to death, death of the business.
Brad: Well, I guess that was a nice transition from Deadly Stories to starting a business.
Michael: Pretty proud of that.
Brad: Alright. Let’s see. Going, Michael. Okay.
Michael: Today, let’s kick the season off, Brad, because we’re going to journey through different elements of starting a business throughout this season. And we’ll do kind of what we’ve done in the past with a little different angle and turn inwardly and talk about our story of starting ByrdAdatto as far as starting a business. But really for the purpose of giving the audience an overview of the things that we’ll be exploring in a little more depth throughout the season, to kind of just see the big picture of what all happens and [00:09:00] what we went through when we started ByrdAdatto.
Brad: Ooh, fun. This is going to be fun. Audience members, for you to kind of see behind the curtain. And let’s kind of start where 99% of the businesses don’t. No, I’m kidding. Maybe they do, but let’s start with the beginning which is really starting with the business plan, Michael. Yeah.
Michael: I really think that people that don’t plan are the ones that are whatever, the expression plan to fail. And there’s so much that goes into it. It’s not necessarily the MBA version of a business plan. It starts with picking your partners. And I will say, Brad, you did a phenomenal job at this.
Brad: Thank you. I think there’s a compliment there.
Michael: Yeah. I’m really proud of you for that. But the other thing that I am proud of, and I’ll, I’ll skip ahead because we’ve been spending time really focusing on our vision since the day we started our firm. And we still spend time on that. We’re always saying where are we trying to go? [00:10:00] And today some version of our vision is that we’re trying to create a modern law firm that’s really connected or spent – the foundation of it is on our relationships and through education. Yeah.
It wasn’t that level when we began because it was keep the lights on. But we really did at a more granular level focus on, okay, we’re starting from scratch, and how are we going to deal with getting the lights turned on? And getting the lease and all the details. We spent a lot of time on planning it out, and we tried to synthesize it in a really short business plan so that we had a framework that we could rely on. And what I think proved really well for us is that it helped us stay focused. We had a lot of things coming our way in our first year that were really exciting, and [00:11:00] if we were chasing the shiny objects that we were very tempted to chase, I think it would’ve distracted us from being successful in carrying out the plan.
Brad: Yeah. And that focus is a great point, Michael, is that, it was able to us to realize we were a business and health care firm, and we were sitting in the transaction area of the law. And that ability, it was in the plan, but in some capacity, but we knew that that focus had to stay that way. And the other part, which I’m proud of, we actually sat down with pen and paper and built out a budget as to what do we need to just start the business. You know, that’s going back from buying the furniture and everything and all the elements that you needed for that. And then obviously, building out that first year of what we needed the budget to look like. And that was not easy, but that was part of that plan.
Michael: Yep, absolutely. And yeah, there are a lot of details, and it makes, [00:12:00] as you know, I’m not the detail guy. I don’t enjoy that, but I do recognize and appreciate the importance of it. One of the details is, if you’re going to start a business, you need to have a business entity. So talk a little bit about the things that went into us deciding to form ByrdAdatto PLLC.
Brad: Yeah, and fair question. And audience members, some people just, they’ll start a business and hang up a shingle and they won’t go form an entity. They’re a solo. I mean, they don’t have any – they are the entity, the entity is them. But we chose just because we’re lawyers, that we wanted to form something. And in that process that we went through, the first element was to make sure to be formed the right type of entity. And for our audience members know, we talk about CPOM a lot, “corporate practice of medicine”, which is tattooed to Michael’s back. But besides corporate practice of medicine, there’s the corporate practice of dentistry, or the corporate practice of law, which is in many states, meaning that those with a particular license are limited as to [00:13:00] who can be their partners. And in your case, unfortunately for you, it had to be me.
But in other cases, the states that we’ve talked about where they dilute that a little bit. But here in Texas where we are located, we had to form a Texas professional entity. But in doing so, we also said, okay, before we form this entity, Michael, what type of tax election do we want to go through and how do we choose that? So we went through entire process of really vetting an accounting firm who was going to help us. And we wanted help with tax elections and bookkeeping, and helping us review our financials because we felt like, although we understood it, it was not the highest and best use of our time. So once we figured out, number one, law-wise, we had to be a professional entity. And number two, our CPA, when we met with them and told them our big picture; with those two elements coming together, we formed that professional limited liability company, and we decided to be taxed as a partnership for a host of other reasons I won’t bore their audience with, but that was the outcome.
Michael: I’ll add to that too, the picking [00:14:00] the CPA and the accounting firm, it really proved to set us up for success because we started from the beginning tracking revenues and expenses in the right way because we had professionals that could help us make sure that our, term we didn’t use a lot before, but we use a lot now, chart of accounts and our QuickBooks, that we can have accurate financials because we – well, we didn’t do it ourselves which would’ve been a disaster.
Brad: And audience member, Michael loves saying chart of accounts. I mean, he just walks up and down the hall – we can ask people offline, they’ll agree. He just loves that word.
Michael: It’s really just when I want to impress someone. And so yes, we did learn the meaning of that term. And the other thing too, we were partners in another firm that was taxed as an S corp. And so, we had to learn what does it actually mean to be a partnership, and not just in terms of this is the [00:15:00] strategy or the reasons it’s good, but what does life look like throughout the year when you’re in a partnership versus –
Brad: And audience members, if you’re wanting to, we also had a co-employment issue that we had to go through, which required us to be a partnership. So there was a lot of different moving pieces for that. But Michael, I guess that keeps rolling us through. And we started with the business plan and we know which direction we want to go to, but we actually sat down with the banker one day and said, okay, we’re putting on our big boy pants and we want to start our own firm and we need money. And although audience members, Michael has 17 homes and 50 cars and all that other stuff, he didn’t want to spend his personal money. And because of that, we went to a bank and we need to get a loan to start a business. And when you do that, you do need to show up with a business plan. You do need to show up with a plan of action. And that was the first off that the banker was asking us. But I still remember as we were sitting there visiting with our banker and [00:16:00] he said, “Well, that all sounds great, but are you willing to guarantee it?” And that’s that first moment that you can have as an entrepreneur, no matter what business you’re going into, realizing, oh, this is the real deal, and I’m being asked to bet on myself and not only bet on myself, I’m asked to guarantee that I’m going to take this money and be able to give it back. And having that relationship with that bankers a huge part of it.
Michael: Yeah, for sure. I mean to your point, other than the 17 home reference, the first thing is it takes cash to start a business. I mean, there’s obvious expenses of you need furniture and you need the things to be able to open the doors. But then when you start running a business, most businesses aren’t generating revenues for some time period. In a professional services firm like us, we were like, okay, well, we’re going to start on day one, but [00:17:00] we’re not even sending bills out until 30 days plus from the first day we’re open. And so, what are we going to do for cash or working capital?
Brad: Yeah, and we don’t ask our employees to work for free.
Michael: Yeah, there’s a legal problem with that. And in our case, yes, we needed a bank to help fund the startup. But there are challenges with that. You got to pick your banker, and it was not easy.
Brad: No, we vetted a lot.
Michael: Yeah. I mean, we had some problems too, because we were extreme. We were established. Our team had been working together for many years. We had a proven track record, and yet banks have their own kind of boundaries or red tape they go through to underwrite. And they’re like, “Yeah, that’s fine, but you’re a startup.” And so, several banks that view things that way, that was an obstacle. [00:18:00] Well, how else can we show you that this is the business that we will have? But we found a relationship where someone was willing to see, yeah, we think this is a good risk worth taking despite you, actually, Brad. Yeah. I mean, that’s what he told me.
Brad: That’s what he told me about you. And audience members, understand one thing is a lot of people get worried about line of credit versus loan. And I think what we may do is just get a banker on and really dive deeper on that. But to your point is that cash flow’s essential for that start of a business.
Michael: Yep. Well, okay, Brad, so let’s move on now. I’d like you to talk about kind of the employment decisions we had to make.
Brad: And as you referenced a few seconds ago, yeah, we had a team in place. And for a lot of startups, you have an idea in your brain and you have to go and then find the people to help to make it happen. And in our particular case, we were blessed to have an awesome team with us already. And so we were, [00:19:00] from day one, we were able to walk out with a team of great attorneys and individuals who believed in what we were trying to accomplish. And that made real easy. because we didn’t have to find a team. But as any business, we have found many new team members since then. For our audience, at this moment, when we started, there was only seven employees. And now we’re north of 30 now, so in a very short window of period of time, which is nine years coming up in February, we grew. And so, that’s an important element.
But the other piece I think a lot of people forget, or they gloss over and maybe because again, we’re attorneys, we realized there are certain things that we didn’t want to do, and we knew there’s certain things that we wanted help on. And payroll was something that you and I were familiar with. And we knew we had to pay our people, we knew we had the cash down from the bank, but we didn’t want to go through the whole process of doing the payroll and benefits. And for us, outsourcing that piece was a huge [00:20:00] element to help grow the firm, including finding someone to help us with the HR issues and tracking PTO and other elements that you need to run a business, and we realize that shouldn’t be us, and we just need to find a vendor to work with on that.
Michael: I’ll just add from a bigger picture, our strategy, part of our business plan was we have a small team that’s focused on servicing clients, and so we went heavy at the startup of outsourcing a lot of these needs. Because we found that we could get really great expertise, and we used a fraction of them, even though they had multiple clients as well. And so, I think there’s a case to be made for any startup to really look at the outsourcing element for these different disciplines you need to be able to run a business.
Brad: That’s a great point. And so now Michael, we’ve got our business plan, we’ve got our taxes done, we’ve got cash coming in, we’ve got this awesome team; one of the [00:21:00] things that you’re need to do is get those clients to come to the front door. And that comes to marketing, Michael.
Michael: Yeah, absolutely. And again, we outsourced this, at least the help. And for us, it was first, understanding what is our strategy. You have a branding strategy, you have a business development sales type strategy. And we worked with a company, a firm that helped us build a website. Obviously, for us, that was really important. A lot of our client base and our audience finds us digitally. And back when we started, the website was the one and only, social media was just barely getting rolling.
Brad: Social, what?
Michael: Yeah. Yeah. And so the things like getting your website, your brand, your logo, all that stuff is a process. It’s kind of fun. But we want to have it in place [00:22:00] and wanted to have it in place so when we opened the doors, people could find us. And how are you going to be able to accomplish that? And now, of course, social media is a must for a business kind of to go with their website.
Brad: Yeah. I think the other add-on, I think was really important for you and I, going back to the focus, we had a feeling or a belief of who we were. And you have to be very careful of hiring an outside marketing company who then tells you who you are. And it’s good for them to vet you and talk to you, and then you don’t want to be someone else. And in our case, luckily with this marketing company, we spent a lot of time with them, telling who we believe we were. We weren’t some old stuffy law firm with the gravel and then the blah, blah, blah. Like all those things you see in every law firm, we would definitely want a more modern look. And not only did that come through with our website and the way we marketed. But if you walk into those, whoever want to visit us here in the Dallas office, we redid the entire lobby so that [00:23:00] it had a different look to it that most law firms don’t. I mean, a lot of people come in, they think this is a business, which as we’ve said many times, we’re entrepreneurs trapped in lawyers’ bodies anyway. But I think that’s an important element of what is your focus and don’t lose track of it from that perspective.
Michael: You won’t find the scales of justice here.
Brad: Yeah, none of that stuff.
Michael: Okay. Well, a related part of the marketing strategy is trademarks. Talk a little bit about the things that a startup business should think about on that front and what we did.
Brad: Absolutely. And so any business you’re starting out, you start thinking about what does your logo and other things look like, your name. And so from a trademark perspective, you’re trying to lock down the goodwill and the customer loyalty, and other aspects are brand recognition, brand protection, and that’s where that comes from. So it could be your word or a slogan, or the symbol or some type of design element. And all those are important pieces to launching. [00:24:00:00] So the next follow up question we often get is, well, then I want to trademark it, Michael. And for us on day one, we didn’t trademark anything because there is for – I’ll get boring real quick and get out of it as fast as I did. But there’s a idea of is, are you actually using it in commerce? And if you are, then you can actually trademark. If you’re not using in commerce, you have to say, I tend to use it. I tend down the road, and then you have to then use it. And we realized, again, going back to the focus, at the time, we didn’t really see a need for that. But fast forward to, in August of 2019, we decided to trademark the Access+ which is as a mark that the ByrdAdatto actually owns.
Michael: Yeah, and it was you know, made a lot of sense for us at the time because we were really investing into the Access+ relationship. That’s one of our ways we work with our clients. And so yeah, we have our first trademark.
Brad: And we talked about this for a few seconds ago, [00:25:00] but we’re bringing on these team members, especially in a professional entity, there is a need to get insurance, Michael.
Michael: Yeah. You know, people don’t want to get bored by that pretty quickly. It’s insurance. I get it. It’s a cost that you have to confront because every business has maybe some insurances that are musts that they have to have. And there’s several that are maze that you may want to consider to mitigate your risk. So for example, if you sign a lease, your landlord’s going to require certain types of insurance to be carried: general liability, commercial liability type policies. And if you’re providing professional services, you may be required to carry some form of malpractice, which were things that we face. But there’s so much more than that. There’s employment related policies, there’s cybersecurity-related policies. And the consideration when [00:26:00] we were putting our business plan together is, what are the risk factors that could blow all this up, that would blow our plan, or even worse, blow the business and what are some things we can do to mitigate that?
Brad: Yeah. And audience members. the other piece is to think about is not only that, but there’s disability insurance that you need to acquire, obviously health insurance on the benefits side. And then depending on what you’re doing for your buying someone out or not, there may be keyman or insurance or key disability insurance. So, just keep in mind that there’s a lot that comes with that insurance talk.
Michael: Absolutely. Brad, let’s go into commercial and on the other side, talk about a few legal insights before we wrap up our, our episode today.
Brad: Awesome.
Access+: Many business owners use legal counsel as a last resort, rather than as a proactive tool that can further their success. Why? For most, it’s the fear of unknown legal costs. ByrdAdatto Access+ program [00:27:00] makes it possible for you to get the ongoing legal assistance you need for one predictable monthly fee, that gives you unlimited phone and email access to the legal team so you can receive feedback on legal concerns as they arise. Access+, a smarter, simpler way to access legal services. Find out more, visit byrdadatto.com today.
Brad: Welcome back to Legal 123s with ByrdAdatto. I’m your host, Brad Adatto, with my co-host, Michael Byrd. Now Michael, this season, our theme is Starting a Business. And we’ve been camping out on building season, this building season, and there’s a lot that goes into that. And I’ll say for our audience members who might have thought about tuning out, I mean, once you start building a business, sometimes it’s kind of like a house. You build the house, but sometimes you have to remodel. And so even when you’re further along, sometimes there’s some tweaks that you need to do inside your business. But there are a lot of things, Michael, that go to starting a business. And unless, as we promise our audience, what are some legal observations [00:28:00] that you would have for them?
Michael: The biggest picture observation I would have, we talk about the seasons of a business, and we’ll be spending time throughout the year is that these seasons connect to one another. And so, the things you decide to do or not do in the building season will impact you in the operating season, in the scaling season, and in the buying and selling season. And so, by doing these detailed things to set up your business correctly, it’s you’re setting the foundation to the house – using your analogy, so that you may be doing touchups but not as necessarily big remodels or lesser remodels in the future. And so if you think about the operating season, which we’ll talk about next podcast season, we’ll talk about a lot of things that can go wrong, the crises that happen when you’re running your business, and oftentimes, those are [00:29:00] amplified by things that were not done or shortcutted during this building season.
Brad: Yeah, and that’s the same thing that happens in those last two seasons when you’re trying to scale or you want to sell, that because you did certain things in the beginning, you sped through the startup of your business and didn’t realize the impact that’s going to have on your seasons as you progress. But Michael, we’re almost ou of time, so what are some final thoughts you have?
Michael: Well, I’m sure Brad, that doing the one chip challenge or the choking challenge brings a huge adrenaline rush. I’m guessing
Brad: I was about to say that.
Michael: I don’t know. I don’t know why they do it, but I’m guessing it does. And starting a business brings a rush, and we went through that. It brings so many emotions. And I can remember the buildup and both those would be like, I woke up at two in the morning and was awake, wide awake thinking about all the things. And so, it’s so important to navigate these emotions with focus we talked about [00:30:00] and making sound decisions that will give your business a chance.
Brad: Awesome. Well, audience members, next Wednesday, we will continue in the building season. We’ll have Jessica Nunn in our studio to discuss building a business plan. Thanks again for joining us today. And remember, if you like this episode, please subscribe, make sure to give us a five star rating and share with your friends.
Michael: You can also sign up for the ByrdAdatto Newsletter by going to our website at byrdadatto.com.
Outro: ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. The views expressed by guests are their own, and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues. [00:31:00]
