Navigating an evolving regulatory, financial and economic landscape: A roadmap for small businesses

Small businesses are an economic engine for Chicago's suburban communities. Not only are there more than one million small businesses in Illinois, but also the state boasts one of the country's fastest rates of new business formation. That growth must be protected, particularly in uncertain economic times.

From technology startups to professional services firms to local artisans, small businesses create wealth and employment opportunities for countless suburban residents. But not all owners have equitable access to the resources and counsel to navigate challenges, whether legislative, financial, or otherwise.

With that in mind, here are several ways small business owners can protect their businesses in the year ahead.

• Monitor the evolving regulatory landscape.

Federal, state and local policies evolve daily. In Illinois, for example, state legislators recently passed a law requiring paid time off (PTO) for full-time employees beginning Jan. 1, 2024, guaranteeing all Illinois employees up to 40 hours of accrued PTO annually. Additionally, recent changes in state law govern the use of artificial intelligence in the hiring process, requiring employers to submit annual records of demographic data to ensure compliance and eliminate racial bias.

On the federal level, policymakers are considering legislation to regulate America's largest technology companies, but some of the misguided proposals would negatively impact the way small businesses leverage today's most prolific digital tools, such as low-cost digital advertising and global e-commerce platforms, while making it harder for American companies to innovate for the future. It's important that small business owners keep an eye on both current and proposed policies and, when necessary, leverage their voices to defend their interests.

• Focus on business fundamentals.

Business funding is scarce for businesses of all sizes. For many years, venture capital firms were funding ideas as much as proven concepts. Today, VC funding is at a three-year low, the Federal Reserve continues to raise interest rates to ward off a recession, and banks are tightening their belts, especially in the wake of the Silicon Valley Bank failure.

These factors make borrowing harder and more expensive. In this climate, it is important to focus on business fundamentals: maintaining profitability, controlling costs, fueling growth through revenue generation and reinvesting in the business. Managing these factors will make small businesses more self-sustainable and, thus, more attractive to both investors and other capital sources.

• Shore up IP and cyber risks.

Intellectual property and data continue to be important drivers of investment opportunities for small businesses. A single cybersecurity flaw, ransomware attack or data breach can cripple a small business and its prospects, so it's crucial for small businesses to utilize reputable cloud services and back up their data. What's more, business owners must quantify the value of their company's own intellectual property and data and consider trademark, copyright, contractual and other protections, where appropriate.

It's never too early to plan for succession.

As corporate lawyers, we see it all the time: a business owner falls ill or suddenly is not able to work, and family members must scramble to sell the business. This situation can be avoided with a little advanced planning.

Single owners of profitable businesses should consider their own exit plans well before they actually plan to exit.

Do you want to sell? Do you want to onboard family members? Is there a third-party entity that could absorb your business while you transition to retirement? Answering these questions and planning accordingly is a simple way to protect the value of your business.

Above all, business owners must have a trusted legal adviser and long-term partner who understands their motivations and business goals and can help anticipate opportunities and overcome challenges. Investing in a legal adviser with experience counseling entities of all sizes and across multiple industries will save you time and money down the line while positioning your business to win, regardless of what economic, legislative or financial challenges it faces.

• Jessica Fairchild is a corporate attorney in Lake Forest whose legal practice focuses on supporting owners and entrepreneurs and their businesses, from startups to Fortune 500 enterprises.