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LC052: Refunds + Return Management for Startups


launchpeer - August 7, 2018

Today’s question:

Today’s question comes from from Michelle. My startup involves users buying and selling items and services to each other. We would like to improve customer experience by providing customers with refunds if payment problems arise. How do we handle the compensation process? Do we need a bank account? How complex does this process need to be?

Jake’s answer:

Before we dive into Michelle’s question about how to handle returns, I want to make two important points – get incorporated and get a business bank account.

Get Incorporated

The first step is to get incorporated. When you start a business, that’s the first thing you should do. You don’t need to hire an attorney, you can go on LegalZoom or even do it yourself.

Any legal or financial troubles you can get into need to be as separate from you as possible. You don’t want the faults of the business to fall on you as an individual. I would recommend getting an LLC or doing some research and finding what’s best for your situation.

Get a Bank Account

Get a company bank account. It’s time consuming but it’s something you need to do. It’s much easier to do this when you’re just starting out than having to do it retroactively. This also goes for taxes. You do not want to have to pay back taxes because you weren’t following proper business guidelines.

How to Handle Returns Upfront

This process can get complex fast. If your platform doesn’t have this built in (something like Shopify, then building it into your code is generally not an easy thing. Doing the process manually to start works fine and minimizes your financial overhead.

The hope is that not a lot of people will need returns or refunds, if they do, that could be a sign of something more serious. Even large ecommerce companies still handle returns manually. It should be a feature on your roadmap, but it’s not necessary when you are starting out.

If there’s one major takeaway from today’s episode it’s that if you can do something manually in the early stages of your startup then you should do it rather than building it into your application.

If you can do something manually in the early stages of your startup then you should do it rather than building it into your application. Click To Tweet

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