10 Top Legal Tips to Consider for Growing Your Business

July 10th 2024

Growing a business can involve navigating a challenging legal landscape in order to maximise opportunities. Here are 10 top tips to keep in mind when scaling up your business:

1. Structuring

A crucial factor is planning the appropriate vehicle for the growth. A common approach is to organically grow a company over time by getting more clients, increasing sales, developing new products, and taking on more employees. Another option may be to acquire other companies, or enter into joint ventures with other businesses. Alternatively, franchising may be another approach where you licence your brand to others. You may also want to consider distribution or reselling arrangements in order to extend the reach of your business.

2. Shareholders

As your company grows it may be sensible to put into place or update a shareholder agreement, which sets out the responsibilities and decision-making rights and obligations of the equity stake holders, as well as deals with any exits, unexpected events and dispute resolution procedures. The shareholders agreement, which might also incorporate an updated business plan, can then be used to provide the framework for future growth.

3. Finance and Taxation

Many businesses need capital to expand. You may want to consider borrowing from a commercial lender, and there may also be other avenues for raising capital such as issuing new shares to investors. If you go down the road of looking for investors, then you will want to think about what percentage of your company you are prepared to sell them, and keep in mind that you may need to have future funding rounds by similar methods. You may also want to look at the Enterprise Investment scheme and see how this could be potentially be used to raise capital. 

4. Employees

As your business grows, you are likely to be hiring more employees. For key employees, it may be sensible to put incentives in place in order to retain those employees during the period of growth. There are a number of incentive schemes that you could consider, including profit share schemes and bonus schemes, as well as share options schemes that are tax advantageous such as an EMI (Employee Management Incentive scheme).

5. Trading Terms

As you expand, you will enter into various contracts with suppliers, customers, and partners. It’s important to have legally sound contractual documentation that clearly set out the the terms and conditions of business.

As part of your contract documentation, it is strongly recommended that you not only have formal terms and conditions for supplies and purchases, but also rigorous internal procedures so your employees in turn ensure such terms and conditions are agreed by customers and suppliers.

In the case of complex and/or large supply or purchase arrangements, it may be wise to have tailor made contract documentation prepared rather than rely on any generic terms and conditions. 

6. Intellectual Property 

Protecting your intellectual property is vital for maintaining a competitive edge. This includes registering trademarks, patents, and copyrights. Proper IP protection can prevent competitors from using your business’s unique assets and can add significant value to your business. The licensing of your intellectual property will also be a key aspect of any franchise arrangements should your business opt to go down that route.

7. Property

As you expand you will want to consider whether you need to buy or lease new property, and consider whether your existing property arrangements will work with your projected plans for the whole business in mind. If you are going to lease, you should consider whether the lease contains a break right to enable you to leave the premises early if the proposed expansion does not go entirely to plan.

8. Cashflow 

Cashflow is king! Managing your cashflow can become increasingly critical and challenging as you scale up your business. You may for example want to consider whether you require whole or partial payment from customers up front, and you will want to make you have rigorous debt chasing and collection procedures in place. You may also want to ensure you have a suitable overdraft facility with your bank to manage any short term bumps in the road with cashflow. The directors of the company should also be aware that the banks may require personal guarantees from individual directors for such overdraft facilities as well as any loans made by the banks to the company.

9. Data Protection

As your business grows, the chances are that it will be processing more data and so businesses will need to give particular attention to adhering to data protection laws to safeguard the personal information of their customers and employees. The General Data Protection Regulation (GDPR) sets out strict rules for businesses that collect, process, and store personal data. It is essential to have a comprehensive data privacy policy in place that outlines how personal data is collected, used, and protected. Businesses must also obtain explicit consent from individuals before processing their personal data and must take appropriate measures to ensure data security.

10. Risk and Insurance 

The range of risks and liabilities is likely to correspondingly increase as your business grows. These could range from contractual disputes and employee claims to product liability and litigation. Implementing risk management strategies, such as obtaining insurance coverage, creating internal policies and procedures, can help mitigate potential risks and reduce exposure.

You will want to consider whether your existing insurance policies are sufficient and whether new policies need to be taken out in order to provide the peace of mind to as well as to demonstrate to your suppliers, customers and employees your growing business has suitable backing. 

At SE-Solicitors, we can help your business thrive. Whether you wish to build legal foundations or accelerate your business growth, we have the technical expertise to navigate all your legal complexities. To discuss how we can help your business, contact me, James Macdonald here or call me directly on 01295 204138.