Trent partnered with a company we’ll call Starter Partners. The partnership took the form of Starter Partners writing a seven-figure check to Trent for 15 percent ownership of his company. Additionally, Trent took what was essentially a put option—he can sell additional shares of his company to Starter Partners at an agreed-upon valuation.

Trent remains the decision maker and is in charge of his profit and loss statement. Starter Partners receives 15 percent of the company’s profits, so they audited the P&L to verify that expenses were directly attributable to operating costs. The result wasn’t just trust but efficiency.

Trent was a good stock picker and a great salesperson but not a best-in-class manager. Trent’s office manager handled the bookkeeping duties, but there were no CFO-like responsibilities or expectations from the office manager or any other employee. Starter Partners took over bookkeeping and tightened up Trent’s expenses by eliminating redundant software licenses, canceling underused (or forgotten) subscriptions, negotiating more favorable vendor contracts, providing previously purchased research, and freeing up the office manager so that they no longer had to absorb the cost of a virtual assistant to handle e-mail and travel management. Trent “gave up” 15 percent of his profit in the partnership, but these actions by Starter Partners created a win-win by adding four additional percentage points to Trent’s corporate profit margin.

Starter Partners is now working with Trent to recapture another five percentage points of profit margin by allowing Trent’s company to rely on its centralized trading and investment selection platform and compliance system. That additional five percentage points of increased margin comes from two sources: Starter Partners’ centralized system frees Trent’s advisors from placing trades, allowing for increased business development, and when Trent’s chief compliance officer plans to retire this year, Trent will transition that work to Starter Partners instead of replacing her.

Less direct but still adding to Trent’s profitability was his newfound exposure to industry best practices for workflows and automation, cutting-edge continuing education to elevate client advice, and access to a broader line of services that attracted clients not previously in Trent’s addressable market.

Trent sold 15 percent of his company’s profit margin, but the buyers built back more than half of that. Later this year, Trent will sell the remaining 85 percent of his shares to Starter Partners at a higher value than he would have if he still owned 100 percent of his shares but didn’t use minority capital as a growth accelerator.

What problem can your company solve through an equity partner?

Extra capital allows small businesses to pursue opportunities previously out of reach due to financial constraints. When investors purchase a stake in a company, they provide funds that the business can use to invest in growth initiatives. Those ambitions include expanding the company’s physical footprint by opening new locations or facilities, hiring additional staff to increase production or improve customer service, or developing new products and services to meet the market’s evolving needs.

Investors like Starter Partners, who purchase equity in small businesses, often bring valuable expertise and industry knowledge to the table. Many investors are successful business leaders or industry experts who deeply understand the market and can provide guidance and advice to help the company navigate challenges and capitalize on opportunities. They may also have connections within the industry that can open new doors for business, such as access to new distribution channels or introductions to potential customers.

Selling a minority stake can also help small business owners manage risk by sharing it with investors. Starting and growing a business is perilous, and many small business owners put a significant portion of their family wealth on the line to finance their ventures. By monetizing equity, owners can reduce their personal financial exposure and spread the risk among a larger group of stakeholders. The owners’ increased investment portfolio and access to corporate cash can provide peace of mind and allow owners to focus on running and growing the business without worrying about the potential for outsized financial risks.

Despite the advantages, small business owners should assess the negotiated implications of selling equity before deciding. Owners should also consider potential investors and their alignment with the company’s values, goals and culture. Ideal investors will share the owner’s vision for the business and be committed to supporting its long-term success. They should also have a track record of successful investments and a reputation for working collaboratively with business owners to drive growth and create value.

With the right approach, accepting minority capital can be a growth catalyst for small businesses looking to succeed in today’s competitive marketplace.