An idea becomes a concept then a prototype and before you know it, a startup is born. When you start a business, your goal is to eventually earn a return on your time and investment. However, no startup operates in a vacuum. There are laws and regulations that will define what you can and cannot do.
Startups often operate on a tight budget. There’s a strong temptation to delay compliance with regulations until a supposedly perfect day in future when they will have the time and resources to do so. This would be a poorly informed decision. Instead, compliance should be embedded in every process and product from the moment the business is launched.
The following is a look at the reasons why this is vital.
1) Reduces Risk
Successful businesses are the result of pushing limits, exploring new frontiers and taking risks. Nevertheless, not all risks are the same. Some risks can destroy your business even when it’s an otherwise profitable operation selling a popular product. There’s perhaps no greater risk to your enterprise than a failure to comply with laws and regulations.
Tax evasion, violation of employee rights, incorrect waste disposal, absence of safety measures in the workplace, are examples of noncompliance that pose grave danger to your business. In the worst case, it could lead to the revocation of your business license, a shutdown of the company and even prosecution of shareholders and employees.
By embedding compliance considerations in policies and procedures from the start, businesses substantially reduce their exposure to such unnecessary risks.
2) Higher Profits
You have to spend money in order to set up the procedures and structures required to comply with relevant laws. For example, if you are in the business of selling tobacco products or alcohol, you may need to purchase an ID scanner like Minor Decliner to ensure you don’t sell to underage persons.
Some startups will skimp on compliance expenditure in the belief that it’s a low priority cost that can be addressed when the business is more established in future. This can be a costly miscalculation. Noncompliance is in fact much more expensive than compliance. You may be slapped with fines, penalties and lawsuits all of which will eat into any profit the business makes.
You are better off spending on compliance early (incidentally, much of which will be a one-off expense) than losing your earnings later when regulators come calling.
3) Good Reputation
Laws and regulations define how your business relates to its stakeholders i.e. customers, employees, shareholders, the local community and regulators. Laws are meant to ensure every party’s interests are protected. When your business satisfies and even exceeds compliance expectations, it earns a good reputation among these stakeholders.
That translates to motivated employees, good relations with the community, investor confidence and customer admiration. The result is your business attracts good talent and grows its customer base which ultimately means more money.
Research has shown that customers are often willing to pay extra for goods from companies that are perceived to be upstanding members of society and that contribute positively to their communities. The converse is also true i.e. noncompliance leads to a deteriorating reputation which negatively impacts the business’ relationship with stakeholders.
Compliance isn’t as expensive as it may seem nor should it be viewed as a crippling burden by budding entrepreneurs. For the average startup, compliance costs will be a fraction of their small balance sheet.
Often, you won’t need to hire lawyers or subject matter experts to guide you. There’s plenty of freely accessible and easy to understand material on the internet that can help you identify the legal and regulatory requirements pertaining to your industry. There’s therefore no reason why compliance shouldn’t be incorporated in products and processes right from the start.