How Your Business Model Impacts Your Legals

How Your Business Model Impacts Your Legals

I recently had a discovery call with a woman who wanted to start a business selling eco-friendly products. She would sell everything from reusable cups, straws, bags, healthy snacks, teas, biodegradable nappies, and more.

After she came up with her idea, this lovely lady smartly decided to start her business journey by investigating any legal requirements that might affect what she could or couldn’t sell, before jumping all-in.

This is a great example of how to approach a new business idea so I am sharing it with you here so that you can apply the principles to your own business preparations.

Business model first

When we started chatting, it became clear her business model would be critical to her legal requirements.

The wholesaler suggested that she operate as a co-op, as that is their typical market.  However, she was more interested in setting up an online shop, which would require negotiating a drop-shipping arrangement. In this case, being a stay at home mum with 2 little ones made the co-op model less attractive than the online shop drop shipping model.

Co-ops require:

  • personal interaction with the local community
  • physical space to store goods for collection by the community who are part of the bulk order
  • demands on your time and labour that may impact on family life

With a co-op model, all profits are ploughed back into co-op development and management. It is difficult to get paid for the effort you put in in terms of marketing, labour and management.

Plus, a co-op does require community input. That is not to say that it is not a valuable and sustainable model when well run. Co-ops also have different tax and set up requirements from private businesses.

There’s more involved than you may think

Operating a business selling items supplied by this wholesaler would require:

  • an understanding of the wholesalers general business
  • a discussion with the wholesaler about different ways to distribute the products other than the co-op model
  • negotiating an online store model (which is what would suit this stay at home mum!)
  • terms and conditions of supply and delivery.

Pre-business agreements

At this stage, putting a 2-way Confidentiality Agreement in place is the perfect way to allows both parties to discuss business plans, development, objectives, and information with the shared understanding that neither party will abuse the information or share it with third parties in a way that will cause harm to either party.

Then, the next step was to reach an agreement about how the business can be established that will meet the values and objectives of both:

  • the lovely lady who wants to sell eco products to her community and beyond while being home with her little ones;
  • and the wholesaler who is currently supplying to co-ops.

Legals to set up the business

Next, she was to consider the following activities and legals to protect her business interests:

  1. Trademark search of proposed business name.
  2. Registration of new business name.
  3. Development of a website – ensuring that the contract with the website developer was clear and met requirements in relation to time-frame, outcomes and delivery.
  4. Preparation of Website Terms of Use, Privacy Policy.
  5. Development of a marketing plan – ensuring the contract with the marketing specialist was clear about what outcomes were being paid for.
  6. Wholesale supplier agreement to outline supply expectations, shipping and time-frames.
  7. Terms of Sale to outline business, sales and refund processes to customers.

Don’t wing it

The bottom line is – starting a new business is exciting, but you winging it will, more often than not, land you in hot water very fast!

Having a plan of action as well as working out how you want to do business (business model) is the key factor in giving your business idea the best chance of long term success.

If you have an exciting business idea bubbling around in your mind and would like to discuss how best to bring it to life, please book in now for a consultation and let’s get you on your way – the right way!

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