Three Phases of a Small Business – Part 1: The Emerging Company
by Scott Koski

Three Phases of a Small Business – Part 1: The Emerging Company

Small businesses open across the country every day, and in total make up about 98% of US based companies. There are challenges to owning or managing any business, the most significant of which are those involving a newly emerging business/startup.

Startup businesses face a great deal of uncertainty in infancy. There are many things to consider when developing a business plan such as:

  • Company structure
  • Protection of personal assets
  • Funding sources
  • Trusted advisor groups

These items need to be addressed at a high level in order to navigate through the startup process. It takes diligent execution and planning to eventually achieve the goal of operating a profitable business.  Let’s explore these in greater detail.

  1. Company Structure – Sole Proprietor, Partnership, LLC, S-Corp, C-Corp, Trust, Etc.
  2. Protection of Personal Assets – Understanding the management of risk and the inherent amount or risk associated with different company structures.
  3. Funding Sources – Investigating funding options is a critical component to any new company.  Small Business Administrators and economic development agencies can help guide and consult in this process.  Equity lines of credit and previously held 401K plans can be a viable option for initial personal investment, while additional capital can be raised from outside investors.  If a decision is made to allow outside capital investors, it is of the utmost importance that you do as much research on a potential investor as they do your emerging company.  The right mix of personalities can go a long way in determining the ease of decision making and perpetuation decisions within the company.
  4. Trusted Advisor Group – A strategic and qualified trusted advisor team is also necessary to identify early in the startup process.  These advisors should consist of but are not limited to a Certified Public Accountant (CPA), Insurance/Risk Advisor, Lawyer, and Banker.  All of the members of your advisor team will serve important roles throughout the startup process.  These professionals will assist greatly in areas such as forecasting contingency funds, installing insurance and safety programs, preparing tax and financial information, and providing cash management advice for the company.

We all see emerging companies come and go; some succeed while a majority of them do not.  The ultimate goal of any startup should be the perpetuation of that company.  Whether the company is perpetuated to family, employees, investors, or even sold, the company lifespan is extended.  Arrival at this point is difficult, but utilizing a team of qualified advisors and making strategic operational decisions along the way will do a tremendous service to your company and its employees.

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