Small Business Owners are required to perform multiple tasks to acquire the capital or funds required to grow, expand and hire new employees. One of the most challenging tasks of being a Small Business Owner is to ensure that you have the resources required to improve operations and efficient services. Without taking the time to improve the quality of the products or services you provide, you will eventually come to a point where there is a need for you to churn clients.
However, if, you take the time to negotiate good loan agreements, private placement memorandums, develop intellectual property portfolios, form strategic alliances and partnerships with key suppliers and customers, then you can find ways to grow at a faster clip. Unfortunately, to avoid some of the inherent business and legal risks you may need to be careful with how you negotiate and sign a personal guaranty, ensure that there are key security provisions to allow the Small Business Owner to maintain control, making sure that you allow for employee compensation to be based on essential performance metrics or objectives, and development of key competitive advantages.
The following is a list of the top five methods for each Small Business Owner to place themselves in the right position for growth, scaling and innovation:
1) Limiting the amount of debt and personal liability of each owners or guarantor;
2) Ensuring against loss of operational controls by using non-dilution provisions, developing multiple classes of equity with different voting rights, maintaining the key board seats to ensure that you or capable and trusted executives and officers are in key employment positions;
3) using robust intellectual property acquisition strategies and strong enforcement mechanisms or policies to develop barriers to entry and follow through products and services;
4) developing good equity ownership plans (ESOPs) and performance based compensation plans; and
5) developing good operational manuals, guides, checklists and forms to assist with efficient delivery of products and services to clients.
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