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13 - 16 : The Complete 35-Step Guide For Entrepreneurs Starting A Business

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13. Consider the Steps You Should Take to Protect Your Intellectual Property

It is important to protect your company’s intellectual property (IP). Ever wary of minimizing burn rate, startups may be tempted to defer investment in intellectual property protection. To those who have not tried to protect intellectual property, it feels complex and expensive. Too often, startups end up forfeiting intellectual property rights by neglecting to protect their ideas and inventions.

Some simple and cost-effective techniques can minimize the anxiety, yet help protect core assets.

Companies sometimes think that patent protection is the only way to protect themselves. Technology startups frequently ignore the value of non-patent intellectual property. While patents can be incredibly valuable, it does not necessarily ensure that a company’s product is a good product or that it will sell well. Trade secrets, cybersecurity policies, trademarks, and copyrights can all be forms of IP that can be protected.

Here is a summary of the types of intellectual property protections available:

  • Patents. Patents are the best protection you can get for a new product. A patent gives its inventor the right to prevent others from making, using, or selling the patented subject matter described in the patent’s claims. The key issues in determining whether you can get a patent are: (1) Only the concrete embodiment of an idea, formula, or product is patentable; (2) the invention must be new or novel; (3) the invention must not have been patented or described in a printed publication previously; and (4) the invention must have some useful purpose. In the United States you obtain a patent from the U.S. Patent and Trademark Office, but this process can take several years and be complicated. You typically need a patent lawyer to draw up the patent application for you. The downside of patents is that they can be expensive to obtain and take several years,
  • CopyrightsCopyrights cover original works of authorship, such as art, advertising copy, books, articles, music, movies, software, etc. A copyright gives the owner the exclusive right to make copies of the work and to prepare derivative works (such as sequels or revisions) based on the work.
  • TrademarksA trademark right protects the symbolic value of a word, name, symbol, or device that the trademark owner uses to identify or distinguish its goods from those of others. Some well-known trademarks include the Coca-Cola trademark, American Express trademark, and IBM trademark. You obtain rights to a trademark by actually using the mark in commerce. You don’t need to register the mark to get rights to it, but federal registration does offer some advantages. You register a mark with the U.S. Patent and Trademark Office.
  • Service MarksService marks resemble trademarks and are used to identify services.
  • Trade SecretsTrade secrets can be a great asset for startups. They are cost effective and last for as long as the trade secret maintains its confidential status and derives value through its secrecy. A trade secret right allows the owner of the right to take action against anyone who breaches an agreement or confidential relationship, or who steals or uses other improper means to obtain secret information. Trade secrets can range from computer programs to customer lists to the formula for Coca-Cola.
  • Confidentiality AgreementsThese are also referred to as Non-Disclosure Agreements or NDAs. The purpose of the agreement is to allow the holder of confidential information (such as a product or business idea) to share it with a third party. But then the third party is obligated to keep the information confidential and not use it whatsoever, unless allowed by the owner of the information. There are usually standard exceptions to the confidentiality obligations (such as if the information is already in the public domain). See The Key Elements of Non-Disclosure Agreements.
  • Confidentiality Agreement for Employees and ConsultantsEvery employee and consultant should be required to sign such an agreement, as discussed above.
  • Terms of Service and Privacy PolicyIf you are a company that conducts its business on the internet, it is important to have a terms of service agreement that limits what users can or cannot do on your website and with the information on your site. Closely related is your Privacy Policy, which sets forth what privacy protections are available to your users. The new European GDPR rules may also need to be addressed.

14. Become a Strong Salesperson

If the business is to become successful, you must become a great salesperson. You are going to have to learn how to “sell” your business—not only to customers but also to prospective investors and even to potential employees.

It’s important to be positive, trustworthy, and to learn how to listen. You must practice your sales pitch, get feedback from a variety of people, and then refine your pitch. Even if you are not naturally an extrovert, you need to show confidence, follow up, and ask for the sale.

15. Understand Financial Statements and Budgets

It’s important to keep on top of your expenses and learn how to thoroughly understand financial statements and budgeting. Many startups fail because the entrepreneur isn’t able to adjust their spending to avoid running out of cash. Establishing a detailed, month-by-month budget is crucial, and this budget must be reviewed regularly.

Understanding your financial statements will also help you answer questions from prospective investors. Here are some financial statement questions you can expect to get from investors:

  • What are the company’s three-year projections?
  • What are the key assumptions underlying your projections?
  • How much equity and debt has the company raised, and what is the capitalization structure?
  • What future equity or debt financing will be necessary?
  • How much of a stock option pool is being set aside for employees?
  • When will the company get to profitability?
  • How much “burn” (losses) will occur until the company gets to profitability?
  • What are your unit economics?
  • What are the factors that limit faster growth?
  • What are the key metrics that the management team focuses on?

16. Market Your Business Like Crazy

To succeed in business, you need to continually be attracting, building, and even educating your target market. Make sure your marketing strategy includes the following:

  • Learn the fundamentals of SEO (search engine optimization) so that people searching for your products and services online might find you near the top of search results.
  • Use social media to promote your business (LinkedIn, Facebook, Twitter, Pinterest, etc.).
  • Engage in content marketing by writing guest articles for relevant websites.
  • Issue press releases for any significant events.
  • Network continually.

forbes.com

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