It’s extremely challenging to own or manage a small business. Without the economies of scale larger companies enjoy, managers may need to wear many hats and be on top of a wide variety of issues just to keep operations running smoothly day-to-day. Let alone pushing for more ambitious plans like driving growth or moving into new markets. But just because it’s a small business doesn’t mean that its legal and business challenges are small.
That’s where your role as a lawyer and business adviser comes in. The legal needs of an entity evolve based on where it is in the business life cycle. As their lawyer, it’s important to anticipate what issues lie ahead for your clients and prepare them (and yourself) accordingly. You have a lot to offer, not just as a legal expert but as a trusted adviser at every stage of their company’s journey.
If this role takes you into a practice area you’re less familiar with, lean on resources that exist to help you get up to speed quickly in new areas of law to support your clients’ diverse needs.
Trusted guidance at every stage:
Start-up
It can be an exciting and inspiring time, but the start-up phase is where most budding enterprises fail. Helping clients determine how best to structure their business – e.g. as a sole trader, a partnership or a limited company – is vital, as each option has different ramifications in terms of tax treatment, decision-making, and ability to access funding.
As well as potentially needing help registering their company, there’s a raft of other considerations to attend to. This could include applying for licenses and approvals, drafting contracts or crafting employment policies. There may be regulatory requirements they need to adhere to from at the outset or IP considerations that should be nailed down early on. When your clients ask, “What am I missing?” you should be there to help fill in the blanks. If you become their go-to source of guidance on start-up issues, you’ll be rewarded with ongoing work as their business and your relationship develops.
Growth
This is the heavy-lifting phase of a business lifecycle. Many of the start-up stage issues mentioned above will be amplified as operations expand and more investment is required. That investment may be:
Financial: using outside capital from investors. This may be completely unchartered territory to small business owners, and they’ll need your help to usher them through the complicated world of investment options, transaction negotiation, documentation and tax implications.
Staffing: including hiring, firing, onboarding, and many other employment law issues. Helping your clients to establish sound employment practices will help them recruit and retain critical employees to move the business forward.
Equipment or other assets: As your client expands production or their headcount increases, they may need to work with a more diverse range of suppliers, and they could incur significant capex. Your input in reviewing contracts or advising on lease agreements can save your clients money and minimise the risk of headaches.
This list of potential growth investments is by no means exhaustive, but it demonstrates just how many opportunities may be available to your client – and where they may need your advice.
Maturity
A mature, well-established business is more predictable than those in other phases. It typically has a stable cash flow, seasoned employees, and a dependable book of business. There may be a greater sense of security, but small businesses must still work hard to maintain their success at this stage. Major market forces may disrupt their business. Rivals may see their success and want a piece of the action. And that can mean legal challenges become more common.
Your clients will look to you for advice on issues like intellectual property disputes, protection of confidential or commercially-sensitive information or M&A approaches. It may also be a time when business owners start to think about reaping the fruits of their hard work. This may be an opportune time to sell a business, so you may be called on to assist with the exit, including share transfer agreements, succession planning or estate planning – both on behalf of the business as an entity and by the individual(s) concerned.
Distress/transformation
Even previously successful businesses can falter, especially when economic times are tough. Decline and distress can be brought on by a number of factors, such as new technologies that make a key product obsolete, a large competitor entering the market, a major financial setback or challenging trading conditions.
Business owners may choose to reinvest in their businesses and/or effect a radical transformation. This could require an influx of cash to support new products, key employees, or new technology. It will need careful handling in terms of the way any restructuring is carried out and associated employment issues. Help your clients to examine their assets, opportunities, and threats to ensure regeneration makes sense and to minimise any liabilities.
If they choose to exit the business at this point, your advice is still important. How will your clients cash out? Will they cease operations or sell their business? The same legal issues with share transfers, succession planning and estate planning from the maturity stage may apply here, albeit with smaller payouts. A struggling business may also need to limit its liabilities, meaning its contract obligations will need extra attention. It’s an emotional time and your clients will appreciate your clear thinking as they navigate through this stage.
Curate trusted relationships
Client relationships are all about trust, and clients want to work with someone who listens, understands the specific needs of their business and foresees the myriad of issues that could arise, both now and looking ahead. As they advance through the business lifecycle, they’ll depend on your advice to meet their legal needs as they strive to hit their business goals.
At the same time, small businesses represent a unique opportunity for law firms to expand their client base and benefit from their clients’ success as they develop. They can be a significant driver of your growth. Read our recent post on how to manage and build on the growth of your firm.
