By Alaina Benjamin
Executive Summary
There are over 13 million small businesses currently. [1] And attorneys for small business can get expensive, with the average small businesses’ legal expense being around $7,600. Small businesses do not always know where to start when it comes to paperwork and legal requirements; however, mission minded businesses normally do not have the extra resources nor extra capital to retain or even consult with an attorney. startup SMALL is a remote legal platform that targets mission minded-startups and small businesses. We are a platform for startups and underserved entrepreneurs who need transactional help. We will offer transactionally focused drafted documents, information, and assessments so that clients can ensure that their business and paperwork align with their business. We strive to be an accessible, simple, and efficient solution for those businesses and entrepreneurs operating at a resource deficit.
1. Problems to Be Addressed
There are over 13 million small business in total, and only about 1/3 of these businesses make it to year 10. startup SMALL strives to target mission-minded startups and young businesses. I have had the opportunity to work at the Equitable Entrepreneurship and Innovation Law Clinic at Michigan State University College of Law. In the clinic, I worked with businesses at varying levels draft transactional legal documents. Often these entrepreneurs did not have proper funding or were underserved in some way. We would often have to turn these potential clients away as the clinic was maxed out at capacity for clients.
startup SMALL’s ideal clients would be a new entrepreneur, who is mission minded, and considering pursuing something in the nonprofit or LC3 world. The client would be passionate about fixing a need they see without our society or providing a benefit to society.
The pain of this area is that they can often experience founder’s burnout, as they normally start out with lower funds and not many resources and can often get overwhelmed. Mission minded businesses can also struggle with funding and income, they often end up with less funding and an unsteady income. They can often not run the business like a business and are not concerned with the bottom line,[1] they can often put their social initiatives at the forefront whereas their business initiatives fall in the background. Nonprofit companies also experience many gains. Some gains that they experience include the following: the ability to have a separate entity and tax status, their tax-exempt status, and accessibility to grants and government funding.
A way that startup SMALL targets these mission-minded companies is to address the areas for pains and gains. This includes providing proper documentation for state and federal registration, information surrounding proper entity and tax types, agreements for employees and independent contractors, and that the businesses are exercising due diligence in researching and complying with potential grants and funding. Another key point for nonprofits is to continually stay organized and up to date through their different entity stages.
startup SMALL was created to be client-focused and based on a need we saw within the professional community, specifically those of mission-minded small businesses and startup companies. We strive to provide our clients with transactional documents that allow them to walk throughout stages and transitions with semi-custom agreements and strive to help them remain organized throughout the different business stages.
2. Our Solution
startup SMALL will start out as a for-profit online legal technology and services company, and depending on our market testing and growth opportunities with client bases we may add of 501(c)(3) or 501(c)(4).
startup SMALL is planning to provide our potential clients with transactional, standard agreements along with information and assessments. Our clients pay for a subscription to our website which allows them optional,
quarterly 15-minute phone calls with an advisor, along with an unlimited chat function and access to assessment and forms. We want to be accessible anytime anywhere, unlike an attorney! We noticed that these founders and entrepreneurs tend to be overworked and operating on a time deficit—a benefit to our platform is the convenience of it being an online resource to access anywhere when they are available. Our clients also do not have to worry about meeting with someone between 8:00 am-5:00 pm during traditional working hours. Our clients also have access to chat with an advisor about document options, assessments, and finances via our website. Our advisors will not be providing specific 1-on-1 legal advice, though will be able to provide our customers with financial assessments, along with the factual implications of the decisions they could potentially be making. We walk alongside the entrepreneurs in helping to choose entity types and the correct documents both state and federally through an entity and goals assessment and then a standard template agreement. We also help them chose their tax type whether it be a 501(c)(3) or 501(c)(4) nonprofit, along with helping them process and better understand potential funding sources, and grants that they may have already received. They also have access to standardized templated employee and contracting agreements.
A unique feature that we provide them is our customized, digital filing cabinet that is available to each of our clients and users. The digital filing cabinet allows each of our users to organize and categorize any business-related documents or contracts they may have been given. This allows us to better customize the client experience for them and allows them to remain organized and have all their documents in one place digitally stored.
Success for our clients would allow them to be educated on potential entity types, tax status, and funding sources available to them. Our clients would feel informed enough to make confident decisions about the status of their business. Our clients would also be able to remain organized digitally and professionally with the digital filing cabinet.
3. Business Discussion
startup SMALL was created out of need and desire that I noticed from my interactions with entrepreneurs and mission minded companies. While no solution is a one size fits all, we took our experiences with and insights we know about this type of entrepreneurs and founders and worked to dream up the best solution. We know that they are go-getters and often your traditionally diy-er; they are operating on limited funds yet have resources available to them through our government; they are limited on time, and often overworked; and they tend to not be the most organized individuals. We believe that our solution is feasible and starts with a design and assembly stage. We need to design and create our technology, marketing materials, and or assessments and information. Through our research, we believed we have set ourselves competitively and yet affordable for our target market. We have the opportunity of a large market share, and we hope to capture 10% of that market share consistent with statistics of a start-up company. [2]
A. Desirability
We plan to have a more targeted launch and focus on the mid-west small businesses and startups. This is where we are from and where we know! We currently have roots in Indiana and Michigan, just in Indiana there are over 41,000 nonprofits registered and in Michigan there are over 52,000 nonprofits registered. [3][4]
I have exposure working directly with underserved small-businesses and startups. Since 2016, all of Michigan’s law schools, apart from Western Michigan Cooley, have created transactionally targeted clinics for small business. However, all these clinics have a waitlist and are not able to provide relief to these companies often for longer than a year, and sometimes not at all.
When I was in the clinic over the course of the Fall 2022 semester, we had encouraged many businesses to apply for our waitlist, as we are at capacity and do not provide immediate relief. I also had the privilege of speaking to entrepreneurs and legal entity formation and tax types at Wayne State and none of them had a regular legal service they used due to costs, time, and legalese.
The current solutions that these businesses are trying is often using the founders, who are already burnout; they just continue to operate limited in their growth; or the hire an attorney normally at an excessive cost, this option seems to be less likely as there are not a lot of mission minded, small business law firms.
We believe our two largest competitors in the market are attorneys and other digital competitors, like Legal Shield or Legal Zoom. We are not usage based; Legal Shield limits its clients to a certain number of documents for each category. In the process of scouting our digital competitors, we noticed that they often presumed that the businesses were established and had an established structure, they presumed somewhat a legalese. There are over 4.4 million businesses started each year that do not have this presumed knowledge, [5] and these companies presumed that the businesses already established were done so correctly.
We differ from attorneys or a traditional law firm in that we are not hourly, and we strive to be more efficient with our client’s time—we have no required meetings, they can access or information any time anywhere.
B. Feasibility
startup SMALL’s platform will be created through a website. We plan to work with our own domain knowledge and a professional website designer to build the website. The website will include the following: an about us page, an FAQ page, a sign up now page that would house the application, a pricing page that would state what is offered and pivot back to the sign up now page, and a client portal that would house the login. In the client portal we would need a chat feature, a page with assessments and links to those, a results page, a scheduling page, a documents page, and our digital filing cabinet with a document uploading feature.
Our key tools include the information needed to create the assessments based on their business genre, type, mission etc. A key resource is the standardized documents that they will have access to upon signing up for our service. I think the most important key resources we need is the knowledge about businesses, business formation, entity types, state and federal filings, contractor agreements, and employment agreements.
I, as the founder and the person responsible for insuring we carry out our goals, am an important individual for ensuring the business is operating. While having other employees will not be imperative in getting the business off the ground, it would be beneficial and the ideal solution. Ideally, we would have another fresh law school graduate with an interest in business and legal tech. This would be helpful in brainstorming ideas and serving alongside me as an advisor. Depending on the actual growth of our business we may potentially need to add someone in support staff/marketing and another advisor.
There are regulatory risks and compliance issues that our business could face. Because we will be collecting amounts of data there are data privacy and security laws that are company must abide by insuring protection of material and confidentiality. We also need to continually track laws and regulations surrounding copyright and the content hosted on our platform is the most accurate and up to date.[6] Since we will be taking payments recurring or through a one-time fee, we must also comply with FINRA regulations, and the anti-money laundering and anti-fraud laws. And we must ensure that as we grow our business with employees that we are classifying our workers correctly and following labor laws.
Given our status, we do not plan on adding a sister law firm initially; however, this is a possibility in the future. The Model Rules of Professional Conduct give insight regarding the formation of the attorney-client relationship under Rule 1.18. We need to ensure that we are not giving specific legal information or advice out to the clients[RAS1] , and that they cannot presume that we have formed an attorney-client relationship with them.[7]
C. Viability
We are not a usage based, nor hourly based company. We plan to make money via a subscription-based service in which there is a plan or plans that can be paid on a monthly recurring auto-subscription for a year or lump sum covered for a year. The subscription is $59 a month, or the lump sum fee of $500 for the year.[8] These numbers were calculated looking at competitors in the digital stage and finding a number close to the average. We do offer more than our competitors; however, given our clientele we strive to remain cost conscious.
If we are on track with growth and numbers after year 1, we will plan to create a sister law firm that we outsource the legal work to, and users of our platform will receive legal services at a 25% discount from the normal flat fee rates the law firm would charge, we will need to verify this feature with the relevant state bar associations and get approval on a state-by-state bases. This would encourage our users to have a subscription and use us for their legal needs.
The initial funding, we anticipate needing is marketing costs, insurance, technology, taxes, payroll, and the costs to develop the educational materials. We plan to obtain that funding through a round of funding through friends and family.
4. Proof of Concept
I think that early testing is important to really knowing how to assist and best inform our target market based on their needs! We have made some informed assumptions in the idea that the businesses would really buy into to our idea as a viable contender versus an established legal service platform or an attorney. Some of the most important things in terms of making or breaking are ensuring we are fulfilling the need that these businesses have and providing them with an accessible, actual, and efficient solution to their burnout, disorganization, and questions.
I think a great way of testing those assumptions is partnering with 2-3 local nonprofits, or startups that I have met through an entity such as the Michigan State University Burgess Institute. Our goal here would be to work alongside them as they experience the different stages of our business. We would have these testers walk through the application process and the onboarding process with our company. We could then work through revising the questions to better answer what we need to best serve them. We could then walk them through a month of chatting with an advisor as well as a 15-minute optional phone call and some document and information explaining stages. This would basically be a 30-day trial process of our service for the businesses. We could then meet with them to get feedback and provide them an unbiased, anonymous forum to submit the feedback based on their experiences and what we could do better.
5. Process Improvement Plan
startup SMALL wants to operate with a process improvement strategy in that we want to focus on maximizing value and eliminating waste.[9] We plan to do this by prioritizing the value of each task, ensuring quality across the entire process, and producing all that the client truly needs. Providing our clients with simple, and accessible communication and documents is one of the things that will provide the most value to our clients. We plan on insuring that we are doing this through actively soliciting feedback from our users and ensuring that we are meeting their needs. Feedback, data, and information are the primary key performance indicators that we will need to continue to monitor for continuous process improvement. Some examples of key performance indicators we could track include client acquisitions each month, along with yearly retention of clients. We also plan to have quarterly planning meetings within our company to insure we are all aligned and striving toward the same goals.
6. Technology Plan
The solution we have involves technology initially in the form of a website. We are planning to have our platform be accessed through a website that will have assessments, information, and populated forms that our consumers are able to access. We will also have individual business profiles for our clients to use after they subscribe. Though this business profile they will be able to chat with an advisor and store their business documents and information via the digital filing cabinet. I have a degree in Marketing with an emphasis in Digital Marketing and have domain knowledge on website designing and building and thus the costs include that knowledge. Our domain name will cost about $10 per year, and our website hosting will cost about $200 per year, the SSL Certificate will cost about $60, and professional web design will be about $3,000. This number was calculated through researching and averaging the numbers of traditional websites.[10] Thus, in total the website will be about $3,060 up front with about $210 in recurring costs. However, the recurring costs may need to be evaluated depending on advances in technology and we are mindful that they may need to be revisited.
We will also need a Zoom or Microsoft Teams account for the advisors to conduct the optional, 15-minute quarterly calls. Microsoft teams is currently free for a basic call; however, for the Microsoft 365 Business Basics it is $6.00 per user per month and the Business Standard is $12.50 per user per month. Due to the ability to manage customer appointments, webinars, and added security we believe the best option for a Microsoft account is the Business Standard account at $12.50 per month per user. [11]
We will also need the technology for the advisors to be able to complete the calls in the form of laptops. We have appreciated Apple’s accessibility and cross platform capabilities. The MacBook Pro with the M2 Chip is $1299 currently.[12]
7. Marketing Plan
Our target market is start-up businesses, innovators, and entrepreneurs—particularly those who are mission minded. In some marketing testing and experiences, I have had through Michigan State University’s Equitable Entrepreneurship and Innovation Law Clinic, I have had the opportunity to discuss this need with our company’s target market. We plan to go to venture summit conferences and conventions, as well as network at different markets and collaborative spaces targeted at start-up companies. Michigan State has the Burgess Institute of Innovation that would be a great place for us to begin networking and marketing. Both Wayne State University and Michigan State University also run Venture Summits targeted at Entrepreneurs in the Fall. These will be events that we will target to network, market, and gather insights as to what help and assistance these businesses may need.
We plan to also send out automated feedback and rating forms after each interaction that our clients have via the chat function or phone call, to ensure that we are fulfilling their needs and providing them with quality interactions.
We also plan to run targeted digital ads at business owners, or those interested in entrepreneurship, at roughly $500 a month.[13] And we will continue to network with the local nonprofits to build the relationships with them and pitch our idea to them.
8. Financials
We first identified our assets in the revenue we will be receiving. There is a very large market share that we have the capability of reaching (41,000+ 52,000= 93,000 nonprofits between Michigan and Indiana). Nonprofits have a growth rate on average of 1.4% annually,[14] thus 1,302 new nonprofits will enter our target market each year. We are planning on capturing 2% market share within the first year of both the 93,000 businesses and the 1,302 new businesses.[15] We presume to be conservative that they will pay the one-time, discounted rate.
I have $20,000 of investable money in my personal accounts, and plan to raise $50,000 through a friends and family round, to be paid back in year 2 and 3 on a 7% interest rate.
We then identified our liabilities. We presumed $100 per month for business insurance, and thus $1200 a year. In Year 1 we utilized the technological numbers stated above and the marketing numbers stated above. We stated $10,000 for research and development based on industries numbers and the time and investment to create the information. We also listed out salaries based on research personally we have done when looking for jobs. In Year 1 we presumed the support staff would be part time. In Year 2 we increased our marketing by 10% and decreased our R&D by 20%-- we also added another advisor and a full-time support staff employee. In Year 3 we increased our marketing by 10% and decreased our R&D by 20%.
We also stated our start-up costs by adding together the insurance through R&D sections.
10. Conclusion
startup SMALL was created from a need within the nonprofit and mission minded world. We noticed that these startups were not entirely sure how to stay organized, informed, and relevant with their filings and documents. We provided for them through a platform the ability to chat with an advisor, store their documents, and gain imperative insights about their businesses and what statuses and documents they should be implementing. The need and the market are large, and that is why businesses should just start with startup SMALL.
11. Post-Script: Comments on GPT Use
Chat GPT was something that I had no real knowledge of before this class, so I must note that it is not the first research tool that I go to. However, based on the exposure and knowledge I had acquired about it through this class I decided to use it on a portion of section 4B Feasibility. Under section 4B, I had used it to better navigate the potential compliance and risks that face the company. I performed two search queries within Chat GPT.
The first inquiry was, “What are regulatory risk for an online platform?” The software provided me with a helpful introduction definition of what regulatory risk for an online platform refers to. It then provided me with a numbered list of common regulatory risks that online platforms face. Each of the five risks stated what they were and why they are a risk. They all provided more generally what regulations could be broken or harmed by these risks. I thought that overall, this was a general answer and provided me with the knowledge to do deeper research about specific risks and laws if I need to.
The second one was, “What is the model rules of professional conduct role about the formation of the attorney client relationship?” The software provided me with brief insight about the MRPC and then pivoted to a specific rule about the formation of the attorney client relationship. The software also expounded on some potential exceptions and additions with the rule. I felt overall that the answer was complete and was helpful in answering my specific yet still more generalize question. I also thought that based on the response if I had had more specific questions after reading it, that the prompt would have given me enough information to ask Chat GPT about them.
I thought the Chat GPT was helpful if had a generalized direction I was looking to go! I felt as though it also provided me with a sufficient and helpful answer on my more specific question. One concern I have with the usage of Chat GPT is the accuracy of information with relatively to the consumer. I just took Chat GPT as fact and did not feel the need, or necessarily motivated enough, to fact check the information it had provided me.
Notes [1] Unit4 Communications, Top challenges for nonprofit organizations and how to overcome them, Jan. 16, 2013, https://www.unit4.com/blog/8-challenges-for-nonprofit-organizations [2] British Business Bank, How to calculate market size, 2022 https://www.startuploans.co.uk/business-guidance/calculate-market-size/ [3] Cause IQ, Nonprofits in Indiana, 2023 https://www.causeiq.com/directory/indiana-state/ [4] Lindsay Moore, Fundraising halved during pandemic. Michigan nonprofits get $35M boost from State, Feb. 17, 2023, https://www.mlive.com/public-interest/2023/02/fundraising-halved-during-pandemic-michigan-nonprofits-get-35m-boost-from-state.html [5] Commerce Institute, How Many New Businesses Are Started Each Year? Data Reveals the Answer. 2023 https://www.commerceinstitute.com/new-businesses-started-every-year/ [6] “What are Regulatory Risk for an Online Platform” prompt. ChatGPT, 14 April Version 4, Open AI, 14 April, chat.openai.com/chat [7] “What is the model rules of professional conduct rule about the formation of the attorney client relationship” prompt. ChatGPT, 14 April Version 4, Open AI, 14 April, chat.openai.com/chat [8] LegalShield, Business Success Requires Sound Legal Counsel, 2023, https://www.legalshield.com/business-plan/coverage-pricing-pro/ [9] Association of Corporate Counsel, Guide to ACC Value Challenge Process Improvement, 2016 https://www.acc.com/sites/default/files/2019-04/ProcessImprovement-6-16.pdf [10] Kimberlee Leonard, How Much Does A Website Cost? (2023 Guide), Mar. 6, 2023 https://www.forbes.com/advisor/business/software/how-much-does-a-website-cost/ [11] Microsoft, Easily connect with people in Microsoft Teams Free, 2023, https://www.microsoft.com/en-us/microsoft-teams/free [12] Apple, Buy MacBook Pro, 2023, https://www.apple.com/shop/buy-mac/macbook-pro [13] Baremetrics, How to create a marketing budget for your startup, 2023, https://baremetrics.com/academy/how-to-create-a-marketing-budget-for-your-startup [14] Sky Ariella, 26 Incredible Nonprofit Statistics [2023}: How Many Nonprofits Are in the U.S.?, Mar. 13, 2023, https://www.zippia.com/advice/nonprofit-statistics/ [15] British Business Bank, How to calculate market size, 2022 https://www.startuploans.co.uk/business-guidance/calculate-market-size/
[16] British Business Bank, How to calculate market size, 2022 https://www.startuploans.co.uk/business-guidance/calculate-market-size/
Alaina Benjamin is a recent law graduate from Michigan State University College of Law and is working as an attorney on staff at a large corporation in North Indiana. She holds her undergraduate degree in Business from Calvin University in Grand Rapids, MI. Alaina has a deep passion for innovation, efficiency, and problem solving which is where her emphasis focuses on both personally and professionally. She enjoys looking at complex problems and figuring out new, yet accurate and efficient solutions.
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