Startup and business founders are often so forward-thinking or even visionary that they often overlook key details. One example is with business registration, especially in the Philippines. After founders get their big idea, they may be in such a rush to acquire users or customers that they forget to complete their necessary business permits and requirements.
This gung-ho mentality will always backfire – it’s only a matter of when. Founders need to remember that their business is at its heart a startup: They need to start properly, if they wish to achieve the scale that they one day dream of reaching.
Here are three reasons why you should have your business permits and other requirements in order as you start your company:
You will lose business without the proper permits. Some founders may feel validated when they’re able to win a few contracts without the necessary paperwork. But you will inevitably hit a wall. The vast majority of established enterprises will need your certificate of registration and official receipts or invoices in order to enter into any business relationship with you.
There’s also no work-around here. If you don’t have the proper requirements, the enterprise will work with someone that does. This loss is thus compounding: You not only lose out on potential clients, but those clients will end up working with your competition. Your loss in market share will be your competitor’s gain.
You will have little legal grounds in the event of a dispute. Even without proper business documents, some founders will create ad-hoc contracts for potential clients to sign. The legality of these documents is dubious. How can a business that does not officially exist in the Philippines have business dealings?
The dubious legality of these business contracts will only hurt you in the end. In the event of a dispute, such as the client refusing to pay you, you will have little recourse to enforce the terms of the contract. You have set your company up to be on the losing end of any disagreement with clients, suppliers, or partners.
You will have obstacles to scale. The best venture capital firms across the world typically have shared services that include everything from public relations to human resources. Invariably they also have legal and admin professionals who help portfolio companies get the proper business permits in their respective countries.
Why would a venture capital firm – who is ostensibly focused on generating a return – spend resources to help investee companies file their business permits? It’s because venture capitalists understand that you need to start right if your goal is to end right. To eventually IPO as a company or be acquired by a much larger enterprise, you need to demonstrate a rare kind of operational excellence, which begins with having the necessary documentation from the start.
Business registration is not an opportunity cost.
Even in consideration of these reasons, some founders may still balk at the idea of having to go through the motions of registering their business. The requirements are extensive, after all. They will need to gather many documents and other items. They will need to interface with many different agencies. They will need to stand in line.
Founders are no strangers to inconvenience, of course, but they’ll inevitably think of all the other brand- or business-building activities that they could be doing during this time. They think of business registration, in short, as an opportunity cost.
This view is short-sighted. Over the life of their company, they will need to choose business functions that will be done in-house, and decide on others that should be outsourced. Business registration is no different. There are plenty of reputable organizations that can help you process your necessary requirements.
At FullSuite, for example, we’ve processed thousands of business registrations for individuals, sole proprietorships, and corporate partnerships, and we are just one fraction of the entire industry. Point being: There is no excuse for not registering your business, as there are plenty of options available to you.
However founders ultimately decide to handle their business registration, they must first have an attitude change. Things like business and product development are sexy. Things like processing payments are definitely not sexy. But as a founder you must realize there are many business details that are unexciting that are no less important to your overall success – your business registration is only the first of many items in this category. Such items will not grace the front-page headlines, but they will help you trace your path to there.
Maggie Po is the chief strategist for Full Suite, a finance concierge for Singapore’s top companies catering to their fundraising, runway management, and mergers and acquisitions needs.