Problems Related To Advertising
If you want to start a business, you may initially face several basic problems. The main issue is the raising of the required financial capital to carry out business activities such as production, marketing and sales. A pre-set budget for the advertising campaign is very important because without money you cannot effectively advertise your product or service. Even simple classified advertising requires a budget to ensure testing and adjustments to the advertisement, until you hit upon a winning design.
Prominent and successful advertising media such as direct mail, newspaper ads, TV spots and radio can be very expensive. Internet advertising is also a popular option, but can also require a substantial budget. Even if you have the best service or product in the world to offer, you cannot sell it successfully without advertising. If you use an outside sales force, you can sell without advertising. However, this again is an expensive option.
Why Form an Advertising Group?
If you are working on a tight budget and you want to raise money to advertise your product both online and offline, the best option is to form an advertising group. You need to put together a Limited Liability Corporation or LLC, the best way to form an advertising group. A Limited Liability Corporation has the benefits of a corporation and the simplicity of a sole partnership. Its purpose is to combine the finances of investors enthusiastic to fund and profit from the advertising of goods and services. The benefit of having an advertising group is that no single investor carries the burden alone and the investment risk is shared.
Advertising groups can be active investors. The group takes all the advertisement-related decisions; the risk and reward for this decision-making is shared. This lessens your burden as the business owner. It is an opportunity for your business to establish a board of interested directors, with the responsibility for the group’s success. This also makes the investors involved in the selling and advertising aspect of your product or service, while keeping them away from the business process. For instance, you can incorporate your start-up business, hold all the stocks, incorporate the advertising group, retain 10% of the stock and give away the 90%, in exchange for investment capital. In this way, your business remains focused on operations and order fulfillment, while the advertising group specializes in selling and advertising the products and services.
You should ensure that you are in legal compliance with the state, city and federal authorities, including the SEC and FTC laws regarding stock sales. In order to overcome the costs involved in the legal and accounting services, you could offer the accountant and attorney 5%-10% ownership in the advertising group, in exchange for their services.
You can also retain complete ownership of the company and share the advertising group’s ownership as well. Your core business will remain intact even if the advertising group fails.
