A 2018 survey conducted by CB Insights showed two of the top five reasons startup businesses fail are lack of capital and not having the right team in place. See how three local service providers seek to educate and support their clients in these arenas.
“As long as [businesses] are making money every month, I don’t think accounting is typically high on the level of importance,” says Tessa Keena, senior manager at Hungerford Nichols
. Keena serves as one of two leaders in their specialized accounting services department. In her role, she focuses on the accounting and business advisory needs of the firm’s clients.
When working with early-stage companies, one of the first conversations she has serves to identify the key people or partners a business will be working with. “A lawyer, a banker, insurance agents — all the key people that will be critical partners to helping the business, plus the accountant, are probably the most important roles to have on your leadership team. If you think about it, if you don’t set [your business] up properly from the beginning, especially from the legal side, you’re setting yourself up for legal issues,” she says.
Looking beyond the registration piece, there are even more complex legal elements that small business owners may be unaware of.
“Often what people will say is, ‘I’ve got an idea and I don’t know what to do with [it]. How do I protect it?’” says Grand Rapids native David Oppenhuizen, attorney and sole practitioner at Oppenhuizen Law PLC
. With over 10 years of industry experience, Oppenhuizen’s primary focus is on intellectual property, more specifically patent, copyright, and trademark law.
Weighing the cost of early investments
It probably goes without saying that a common challenge for early-stage businesses is the lack of capital. Additionally, determining what services may be needed can leave business owners confused and overwhelmed. Oppenhuizen and Keena have both seen these elements in play, but communicate how proactively addressing these items can save time and be more cost-effective in the long run.
Specifically related to inventors, “[T]he first thing you need to do is a patent search, which involves a search of millions of existing patents and published patent documents to determine how likely it is that the invention is patentable. If that looks favorable, then often the next step is to [apply for] a provisional patent. [This] is an optional step but it’s a cheaper and [a] lower barrier to entry than going right into a non-provisional utility patent application. That just gets you started. The entire patent application process itself can last anywhere from two to four years,” Oppenhuizen explains.
As it relates to intellectual property assistance, Oppenhuizen says, in addition to being time-consuming, the patent application process can be expensive but can be managed. “The costs are incurred on a step-by-step basis. That [works] out well for people. [The process] allows them not to have to pay all at once. As long as things are progressing on the business side with the product, then that justifies further pursuing the patent.”
Being willing to get hands-on with your financials can also help reduce your initial financial investment. “[Accounting services can] be a costly option at the beginning. We try to encourage the client to do some of the work on their own. We will provide some guidance and if they have the time, ability, and want, they will do a majority of the work. We will give them guidance on how-to. If not, we can do the work for them,” says Keena.
Working with businesses to help them develop and maintain commercial insurance programs, Lindsay Kronemeyer also has experience with educating and empowering clients. As an account executive at Lighthouse Group
, Kronemeyer handles policies including property, workers’ compensation, and general liability, particularly within the construction and property management industries.
“I find that new businesses starting out really don’t understand risk transfer and it’s so key within [the construction] industry,” she says.
“When you’re newer, sometimes, the sticker shock can be surprising if it’s a coverage you’ve never looked at before,” she adds. “It’s always good to be educated about what your industry’s doing and what your potential exposures are. We want [our clients] to have enough of an understanding and then find someone they trust to work through the process.”
Simplifying the technical elements
Due to the technical nuances and industry jargon, it is common for business owners to enter into these conversations without any working knowledge of what’s needed or what to expect.
“The terminology can throw people off,” says Keena. “We like to try to guide people and help them understand. It can be a foreign language.”
“That is a challenge, that’s for sure,” says Oppenhuizen. “The essence of what I do and what I help people out with is to make sure no one is inadvertently copying someone’s name or invention, which would amount to patent infringement. What we’re trying to make sure [of] is that as [someone] is starting up a business, that they are not exposing themselves to liability. The last thing a start-up needs to be dealing with is receiving a cease-and-desist letter and defending that when they should be focusing on their product, marketing, [and] customers.”
Kronemeyer seeks to help people understand more about risk, liability, and coverage options that may be new to them. “Sometimes we don’t see the smaller or newer companies understanding the importance of [the ancillary coverages] and where they’re going to kick in to provide coverage. It’s about educating them on the benefits. Providing claims examples has been a great solution,” she says. “Giving tangible examples and explaining [it] simplifies it for them to understand.”
Benefits of proactive engagement
Once the foundational elements are addressed, the scope of protection provided may be impactful in unexpected places. For example, proactively working through these items can assist business owners with securing financing and protecting their online presence.
“There’s so much e-commerce today. There [are] a lot of situations where the first [contact] someone may receive may not be a cease-and-desist letter, it might be [that] the entity claiming infringement may contact Amazon and say ‘so-and-so is infringing on my trademark’ and then Amazon will take the listing down. Or if you’re selling something on your own website, they may contact your website hosting company and try to get them to take your whole website down. When that’s your main or only source of business, that can be pretty dramatic and create a real emergency situation,” says Oppenhuizen.
In addition to the potential operational disruption legal issues can pose, the cost of fighting the claims can present another challenge for businesses. “People can expect to spend five, 10, 20 times more in attorney’s fees if they’re in a reactionary situation rather than taking the proactive steps to make sure that they’re not infringing on anyone else’s rights,” Oppenhuizen says.
“By not doing [what’s needed] in the beginning and coming to us later, you end up spending more,” Keena says. “What we see is [people may] go for six months to a year or more without having that oversight and support and things are somewhat of a mess with their financial statements. [Then] there’s more to clean up.” For example, not properly maintaining financial records can lead to problems both internally and externally, such as when seeking financing, filing taxes, or responding to an audit.
Educating yourself in advance
“There are definitely local options to start with first before having to go into working directly with an accounting firm. There are a lot of organizations, [including] Grand Rapids Opportunities for Women
(GROW), that we’ve worked with for many years, and the Economic Development Foundation. They provide resources to help you get started,” says Keena.
“The recommendation is to have it in the back of your mind that you should go towards working with an accounting professional. As we can see with the tax laws and the changes that are constant in Congress, there’s a lot more to it than just doing a tax return. [Have] a relationship with an accountant just to have someone to turn to,” she adds.
Oppenhuizen recommends taking some small but important steps to protect yourself before moving forward with your ideas or business registration. These tips include not falling in love with a name before confirming its availability and consulting with an attorney before publicly sharing your idea — for example, through a crowdfunding campaign.
“As far as patents go, it’s difficult to do your own patent search but people can do an initial search [through] Google Patents
and attempt to see if someone has already come up with the same or a similar invention. They can do the same thing with trademarks at the U.S. Patent and Trademark’s
website.” Though these search engines cannot provide all of the variations or nuances, it can provide individuals with some preliminary information.
“It’s always good to be educated about what your industry’s doing and what your potential exposures are. We want [people] to have enough of an understanding and then find someone they trust to work through the process,” Kronemeyer says. “Reach out to an insurance agent or get information when things are changing. Things are always changing and you need to stay up on that.”
Building Bridges is a series focused on the diverse entrepreneurial community within the West Michigan region. Throughout the year, the series will highlight the unique problem solvers and change makers who seek to positively impact the growth of the economy and local ecosystem. Building Bridges is supported by Grand Rapids Opportunities for Women (GROW).
Leandra Nisbet, Owner of Stingray Advisory Group LLC and Co-Owner of Gold Leaf Designs LLC, has over 14 years of experience in leadership, sales and marketing, and graphic design. Through these organizations, she assists businesses with creating strategies for growth and sustainability through: strategic planning, marketing concept development/implementation, risk management solutions and financial organization. She is actively involved in the community, sitting on several Boards and committees, and has been recognized as one of the 40 Under 40 Business Leaders in Grand Rapids.
Contact Leandra Nisbet by email at email@example.com!
Photos by Chantal Pasag of Pasagraphy.