3 Surprising Legal Insights for Foodpreneurs Launching Startups in 2021
This is what happens when a business lawyer collaborates with a food industry business transformation leader.
Lessons for Foodpreneurs Launching Ventures in 2021
Adam Hijazi is a thought leader among foodpreneurs and Noel Bagwell is a small business law thought leader. One of us is Canadian; the other is from the U.S. We’ve never met, in person — only virtually. Ours is a real COVID-19 friendship story. Earlier this year, we bonded over our mutual pursuit of entrepreneurship.
Our shared interest in solving real problems for entrepreneurs produced the insights we want to share with you. For both of us, the pandemic’s devastating impact on our favorite restaurants has been heartbreaking. Still, we’ve noticed the current crisis is producing many innovations.
Exciting food and hospitality startups are launching in spite of the pandemic. We want to see these fledgling foodpreneurs succeed. So, we’re sharing with you these insights.
Foodpreneurs Need an Imperfect Plan
When food-based startups consider whether they’ve done enough to prepare to launch a new business, like most entrepreneurs, they are often perplexed. For example, one might wonder, “At what point does selling homemade lasagnas become a legit business?”
When we started our businesses, initially, we both felt a similar sense of confusion. Feeling a bit lost at sea is normal. What we found, however, is that having a well-written business plan will have a transformative effect. We recommend getting a good business-plan-writing guide. Use it to write a solid business plan.
One’s plan need not be perfect. In fact, if one waits until their plan is perfect, they’ll never get started. What foodpreneurs need is an imperfect plan — a plan that’s good enough to get started.
A business plan serves two primary purposes: (1) keeping teams focused and on track to reach their enterprise goals, and (2) helping businesses get the funding they need to launch and operate their business. Don’t obsess over details like length or formatting.
“From [the U.S. Small Business Administration’s] point of view, a business plan needs to be whatever length is required to excite the financing source, prove that management truly understands the market, and detail the execution strategy.” (SBA)
Our advice is: just do your best. Then put your business plan in the hands of two professionals you’d like to work with — a business lawyer and an accountant. These two key discussions will help shape your business plan. Ask each of them for their opinion and advice. Listen. Revise your plan, if necessary.
This exercise will build a strong understanding of what the business’ goals are. Sometimes, repeating this process is necessary. Don’t be discouraged! Each iteration of the process is an investment in your knowledge and future success.
When one’s lawyer and accountant agree they are ready to get started, that’s the time to pull the trigger. One deserves to feel confident and courageous as long as they’re following a good plan and good advice. To borrow a quote from our business mentors, “prolific beats perfect.”
The Right Lawyer Improves the Odds of Foodpreneurs’ Success
If you feel like starting your business with support from a lawyer is unaffordable, you’re not alone. Most entrepreneurs have felt that way. In fact, 80% of small businesses don’t hire a lawyer, even when confronted with a significant legal event. This is a disastrous trend.
Given that two-thirds of small businesses fail within a decade (and that number is much higher within the restaurant industry), small businesses need more support, if they’re going to improve rates of long-term business success.
“According to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of their fifth year, roughly 50% have faltered. After 10 years, only around a third of businesses have survived. Surprisingly, business failure rates are fairly consistent.” (LendingTree)
Improving cash flow and building better teams are two of the biggest problems small businesses face. “29% of failed startups point to cash flow problems as a central issue. … 23% of failed businesses cite having the wrong team as a main reason their business folded.” Id.
A business with the right legal support provider is less likely to have problems with cash flow or attracting the team members essential to their success. The right business lawyer will make your business more profitable, and everything profitable, ultimately, is affordable — including legal support.
Discovering the Perfect Risk vs. Reward Recipe
“Nothing ventured, nothing gained.” “No guts, no glory.” These and similar maxims are often repeated, because they remind us that reward follows risk. Not all risks are created equal, though. To be successful, you need the right risk-to-reward ratio — what we call an “optimal risk profile.”
Foodpreneurs with an optimal risk profile take measured, calculated, smart risks in order to accomplish their goals. From time to time, their goals are likely to change and priorities will shift. So, their approach to risk, likewise, should be dynamic.
From the earliest days of planning, launching, and operating a food startup, one needs a preventive business lawyer to help them identify and manage legal risk. A layperson simply is not trained and skilled at managing legal risk. Wise foodpreneurs will delegate to others those tasks that fall outside their area of expertise.
When one’s business lawyer has an intimate knowledge of their business, and they have a close, trusting relationship with their lawyer, the lawyer will be able to forecast and help them manage legal risk. This is the perfect recipe for a stable business that isn’t exposed to unnecessary risk.
Foodpreneurs Need The Right Support Team
If there’s a single takeaway (pardon the pun), here, we think it might be that, in order to succeed, foodpreneurs — like all small businesses — need a great deal of support. Having a good business plan is important, but even that is not enough. From Day One, you need a support team.
Modern society praises executives, creating the impression that they alone are primarily responsible for their companies’ successes. In every team venture, however, success depends on bringing people together and aligning them towards a common goal. That is a business leader’s true purpose.
Foodpreneurs are leaders of food industry innovation teams. They’re more than just outstanding chefs, bartenders, or bakers. They’re businesspeople, too. To be a great businessperson, one needs the support of a diverse team of business professionals.
Building these teams starts with having the right legal counsel. Lawyers are problem solvers and relationship managers. If you get your relationship with your lawyer right, every other relationship in your business is easier to manage. Solving problems gets easier, too.
The marketplace is tough and can be just as rewarding. If you want to thrive, you’ll need allies. We’re here for you. Connect with us via Linkedin. Links to our profiles are in the Authors section, below. If we can be a resource for you, nothing would make us happier. We can’t wait to see what you’ll start in 2021!
Noel Bagwell is an award-winning preventive business lawyer and founder of ExecutiveLP®, an innovative virtual law firm known for delivering profitable, preventive legal support to small businesses. In particular, Profit from Legal™, exclusively available from ExecutiveLP®, helps businesses establish positive ROI from legal support. Noel is the author of How to Structure Your Business for Success and co-host of The Honest Lawyer Podcast™.
Adam Hijazi is a foodpreneur and former Director of Operations for the King Street Food Company and hospitality business consultant. His insights come from years of extensive practical experience leading organizational culture change in the hospitality industry. As a business transformation leader with a track record of delivering results, Adam’s commitment to, and passion about, building inclusive teams, motivated to deliver excellence, shines through in all that he does.