Small businesses are popping up everywhere. Maybe it started with a great idea. Maybe it was passed down from one generation to the next. Maybe it was the right place and the right time. Whatever the reasons your client began their small business, they took an opportunity, added a large dose of hustle, and committed themselves to building a sustainable enterprise.
That it’s a small business doesn’t mean that its legal and business challenges are small. Here’s where your role as a lawyer and business advisor comes in.
The legal needs of an entity evolve based on its point in the business life cycle. As their lawyer, you need to anticipate what issues lie ahead for your small business clients and prepare them (and yourself) accordingly.
It can be an exciting and inspiring time, but the startup phase is where most neophyte enterprises fail. Start by helping small-business clients determine how they structure their business – LLC, sole proprietorship, or corporation. Each option can vary by state, and each has different ramifications in terms of taxes, decision-making, and investments. At this point in the business lifecycle, your clients may need help registering their businesses or applying for licenses and approvals. When your clients ask, “What am I missing?” You should be there to help fill in the blanks.
Does this role take you into a practice area you’re less familiar with? You can lean on resources to help you get up to speed quickly in new areas of law to support your clients’ diverse needs. Be prepared to counsel your clients on startup issues, and you’ll be rewarded with ongoing business as you build a trusting relationship.
Expert attorney-editors have designed a playbook just for you, with steps backed by expert insights to help you better advise your clients at every stage of their business.
This is the heavy-lifting phase of a business lifecycle. According to Forbes, “the growth phase is where (a) business solidifies its stance in the marketplace.” This phase will require investment. That investment may be:
- Financial: using outside capital from investors. This may be completely foreign to small business owners but can prove critical to their sustainability. They’ll need your guidance to usher them through the complicated world of equity, investment capital, and taxes.
- Staffing: including needs in hiring, firing, onboarding, and wage and hour laws. Helping your clients to establish sound employment practices will help them recruit and retain critical employees to move the business forward.
- Expanding production with expensive equipment or assets. Your help reviewing or creating contracts, RFPs, or purchase orders can save money and headaches for your clients.
This list of potential growth investments is by no means exhaustive, but it gives you a quick view of how many opportunities may be available to your client – and where they may need your advice.
A mature business is more predictable than those in other phases. It has a stable cash flow, seasoned employees, and a dependable book of business. While that may not mean corporate jets and high-rise offices are part of the picture, a business has its greatest sense of security at this stage. Small businesses that reach this stage should work to maintain their success. That may also mean others see that success and want a piece of the action. And that can mean legal challenges become more common.
Your clients will look to you for legal advice on things like intellectual property challenges, wrongful termination, or customer disputes. It may also be a time when business owners start to think about reaping the fruits of their hard work. Maturity is the most lucrative time to sell a business. You may be called on to assist with estate planning, succession planning or stock purchase agreements.
As with the other phases, your value comes in coaching clients before issues happen or preventing them from occurring at all. Financial losses at this stage can eliminate the security and profitability that comes with a mature business.
Do you have clients in the decline/renewal stage? Unfortunately, they may not know it. If your client’s revenues have declined for the past three quarters, the business may have entered the decline phase years ago, says Forbes. Decline can be brought on by a number of factors: new technologies that make a key product obsolete, a large competitor entering the market, or a major financial setback.
Even as a business may be ending, your legal advice is still important. How will your clients cash out? The same legal issues with estate planning, succession planning, and stock purchase agreements from the maturity stage may apply here, albeit with smaller payouts. A declining business may also need to limit its liabilities, meaning its contract obligations will need extra attention. Ultimately, you’ll help clients decide whether to cease operations or sell their business. It’s an emotional time and your clients will appreciate your clear thinking as they navigate through this stage.
Sometimes, business owners choose to reinvest in their businesses. This requires an influx of cash to support new products, key employees, or new technology. Help your clients to examine their assets, opportunities, and threats to ensure renewal makes sense.
Be a trusted advisor
Client relationships are all about trust, and clients want to work with someone who listens and understands the unique needs of their business. Small businesses represent a unique opportunity for law firms to grow their clientele. As they advance through the business lifecycle, they’ll depend on your counsel to meet their legal needs as part of their overall business goals.