The default path for entrepreneurship is usually starting a small business, but did you know that building a startup is a viable alternative? Today on The Legalpreneur Podcast, I highlight the key differences between a small business and a startup, so you can decide which model fits your goals.
Scale is the main distinction between these business models; small businesses remain small while startups are designed for growth.
If your goal is to be self-employed and develop a steady revenue stream, then starting a small business could be the right path for you. Small business owners do not need to cater to investors and are thus free to operate in niche industries that otherwise would not attract funding as a startup.
Building a startup is rooted in relationships because, unlike a small business, you receive funding from venture capitalists and investors who help grow your company. Generally, investors are only interested in billion-dollar industries, so you must fill a void in an already well-developed market. If you do successfully build your startup, attract investors and sell your company, you can expect a much bigger financial payout than you could achieve with a small business.
Whichever entrepreneurial path you take, your potential is only limited by what you believe you can achieve. Before I started The Legalpreneur, I did not know that building a startup was attainable to someone like myself. However, I’ve since learned that the only difference between you and a business owner or a startup CEO is daring to start!
If you want to learn what it takes to build a small business or a startup, listen now!
[1:00] Small businesses stay small and startups are designed for growth
[2:00] The CEO of any startup is in the business of relationships
[4:00] A seed round is typically the first round of funding in your startup
[5:00] Venture capitalists are essentially your boss when they fund your startup
[6:00] Lowering your turn rate by teaching clients the value of your service
[7:00] Investors will not talk to you if your market size is less than a billion
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The Legalpreneur Podcast is advertising/marketing material. It is not legal advice. Please consult with your attorney on these topics. Copyright Legalpreneur Inc 2022
Andrea Sager 00:03
Welcome to the Legalpreneur podcast. I’m your host Andrea Sager founder and CEO of Legalpreneur Inc. As a serial entrepreneur and someone that works exclusively with small business owners legally protecting their business. I’m dedicated to covering common legal issues faced by business owners, providing you with the business knowledge you need to catapult your business’s growth, and showing you just how some of the world’s most elite entrepreneurs have handled these legal and business issues themselves. In true attorney fashion, the information in this episode is not legal advice. This is for informational purposes only. And you should always consult with your attorney before implementing any of the information in the show.
Andrea Sager 00:45
Hello there Happy Friday. I’m really excited about today’s episode because it’s something very relevant to my current life. And that is startups versus small businesses. I’ve had a number of requests to do this episode. So here it is, we’re getting to it. But before we get into it, if you are not yet part of the legal premium membership, what are you waiting for, you get all access to your very own attorney unlimited emails, a phone call, every month document review, you get access to all of our contract templates, you get a discount on the additional services, plus a free trademark search and a free business audit. If you need an LLC, we will file it for you for free as well. So a lot of benefits in the membership. Click the link in the show notes if you’re ready to get started. And I cannot wait to have you in the membership.
Andrea Sager 01:35
Okay, so startups versus small businesses, this is something I enjoy covering because I went from small business in the law firm to startup Legalpreneur. And I’ve had several small businesses. And I want to make sure that you know the difference between a small business and a startup. Now, there’s one main difference. And then there’s like a lot, so like more a lot of nuances. But for the most part, the main differences, a small business is just what it sounds, it’s small, they want to stay small, they don’t plan to grow and scale to be a multibillion dollar company. Whereas a startup, they’re positioning themselves for growth, they want to grow quickly, small business, they just want steady revenue. Typically, it’s just the operator that’s wanting to maintain the revenue coming in for the business, and not basically just not work for anybody else. They want to have their own small business bringing their own money. So if you have a small business, you got to think about, okay, how big do I want to grow? If you don’t want to be in the business of people in the business of relationships, that’s probably not the route you want to go, I have learned that being the CEO of a startup, you honestly, are in the business of relationships, because that’s gonna get you the farthest is cultivating relationships that are going to get you farther than you can go on your own.
Andrea Sager 03:00
So think about how big do you want to grow? And if you’re like, Absolutely, I want to be the next billion dollar CEO, I want to go the startup route, then do it, get get to it. Now, when you have a startup, you don’t have to have investors, you can bootstrap, which means you just grow it on your own. Or you can get investors and there’s no right or wrong answer. It’s just what’s right for you. So when I had the law firm in 2020, is when we decided, Okay, we’re gonna launch this side project. And by this time, we already had the legal premium membership. But we wanted to launch contract templates. And so we launched the contract vault however, I created Legalpreneur LLC, because I knew eventually I wanted Legalpreneur to be the umbrella. And it’s I’ve been very strategic about everything. But the contract vault just happened to be the first product inside of Legalpreneur, the company. Then at the end of 2021, is when I decided to go all in with Legalpreneurs.
Andrea Sager 04:00
So up until then, Legalpreneur was a side project to the law firm because the law firm was bringing in great money. It was wonderful. It basically the law firm basically paid to create and grow Legalpreneur. Now, the plan was to raise a seed round. So a seed round is basically typically the first round of funding in a startup. And it’s typically when you already have product market fit. You have some revenue coming in already, but not a lot. Now. We decided we were going to raise $2 million for our seed round in at the beginning. So we decided this that in 2021, started trying to raise in 2022. It turned into a friends and family round ended up raising 150,000 And I did have VC commitments, but we just realized okay, we’re not actually there yet to want that kind of boss because basically if you have VCs they are your boss. And we had a lot of kinks to work out. I was speaking at a conference last week and I and we had the deal day. And I was sharing at the conference that I spoke at, basically going from small business to startup.
Andrea Sager 05:14
And I was talking about how you have to track your numbers, because in the small business, and for the law firm, like we were just cranking along, like we weren’t like, we didn’t have the foundation that we have now and Legalpreneur. And I remember some investors, because we had really crazy growth with the membership. And it did really, really well. And we thought we were golden. However, our churn rate was not good. And which is How long are you keeping customers? How often are they dropping off, and the higher the percentage the horse it is, our growth of the membership was like 95%. Year over year, our churn rate was like 80%. And we only knew that because we started tracking and we’re like, oh, shit, like, we have to figure out how to get this churn rate down.
Andrea Sager 06:00
And so getting ready for our deal day with the investors, we were tracking everything again. And now we’re like, we just keep always keep it updated. But I am really proud to say that we’re over the past six months, we’ve been under I think, a 3% churn rate. And that came from a lot of hard work trying to figure out okay, how do we get members to stay on longer? How do we make this better for them? How do we provide them a better service? And how do we get them to see the value to stay longer, because it wasn’t, it wasn’t that we weren’t providing a bad service, it was mainly they just didn’t see the need to stay on. And so we worked really hard to do that. And so we went from 80% to less than 3% in a year. And so I was really proud of that. But I’m just telling you this, because if you want to go from small businesses to start up, you have to know these numbers, you have to start tracking these numbers. Now, another thing, if you want to raise money from investors is you have to make sure the market size is there, investors will not talk to you. If your market size is under a billion, and most of them want to see more than a billion dollar market size, like the legal services industry as a whole $350 billion online legal services $11 billion industry.
Andrea Sager 07:15
So you have to know what type of industry you are in, how big is the market will investors even talk to you? I don’t want to throw too much at you about startups. But I’m kind of just like teaching you as we go along. Because we are we are back to raising again, we’re looking for our lead investor for our seed round, going to raise like two to 3 million. And we have a lot in the works is really exciting. The deal day was great, following up with all those investors, and it’s, this is gonna be a big year, big year. If you have questions like I really do want your feedback, do you all enjoy hearing about the startup stuff? If not, I can only I will only talk about their stuff. But I it would have been helpful for me to hear because I didn’t know I could do this. I remember I was at Chris Harders mastermind and 2021. And basically it was there were I realize Holy shit, like all these people that are raising money.
Andrea Sager 08:12
And you know, these fast growing startups and digital like they’re no different than me like they just did it. They just did it. They’re no different than me. But I didn’t know. And if it wasn’t for Chris harder, literally like throwing it in my face. I wouldn’t be doing it. So that’s why I wanted to bring this to you all here to hopefully show you, hey, you can do this too. And I’ve said it here before, but I’ll say it again, my goals are number one sell Legalpreneur for at least a billion dollars. I would like to do that within seven years. Because ally will be 1011 Thomas will be 1213 and I want to make sure that I’m around a lot more when they’re going to be traveling a lot more for sports getting more active. Definitely there for everything in high school. So that’s my goal is to sell for at least a billion dollars within seven years. And I then want to take that and start my own fund my own VC fund for underrepresented minorities and women so yeah, that’s my goal. And I’d love to have you along for the ride. Anyways, let me know if this is helpful. I would love to hear from you. Reach out on Instagram Tik Tok, wherever you are, shoot me know, and I’ll see you next time. Here at Legalpreneur, we’re
Andrea Sager 09:32
committed to providing a supportive legal community for all business owners. I know how scary the legal stuff can be. If you found this information helpful, I would be so grateful if you could share it with a fellow business owner. And quite frankly, it doesn’t cost anything to rate review or subscribe to the show. Your support helps me reach more listeners which allows me to support more business owners in their entrepreneurial journey. Have any questions or comments about the show? Feel free to drop me a line on Instagram I promise I read all of the messages and comments. And if you want to be a guest on the show or know someone that would make a great guest, simply fill out our application form and a team member will reach out if we think it’s a good fit. I’ll see you in the next episode.