Five top tips for scaling businesses

Scaling a business is tough work and there is no “one size fits all” guide to success. However, our experts work with a large number of scaling businesses and there are a few common themes which often arise in our conversations. We have condensed these into five “top tips” below. 

Whether you are considering an investment offer, an acquisition or a commercial opportunity, following these tips should help to ensure you can take advantage of opportunities when they arise.

As your business grows and evolves, so should your legal documentation

It can often be tempting to stick to the initial contracts or advice received when first starting out. However, legal advice and documentation is at its most useful in context, so if your business has grown or changed direction, don’t be afraid to invest in where you want to get to and seek legal advice that supports that vision rather than obstructs it. Remember, the law isn’t there to act as a barrier to growth or success in business; it’s there to protect businesses, customers and the industry.

This can apply to anything from commercial contracts (e.g. are these payment terms still relevant, are we now in a better bargaining position, etc), employment agreements (e.g. are salaries still in line with market, are we now able to offer more incentives to employees, etc) to shareholder/investment agreements (what is the company prohibited from doing without formal shareholder/investor consent, is our approach to board meetings still relevant, etc).

Organisation is key

Ensure that you keep written records, particularly of any agreements with customers, suppliers or others, rather than relying on verbal agreements or short email exchanges.

Keep your documents and data in good order – preferably in an organised (ideally indexed) data room or other file-sharing system. This will facilitate prompt sharing with any investors, acquirers or others who may need to review documentation, and will provide easy referencing when required.

It is difficult to overstate the usefulness of this. In particular, due diligence and disclosure processes in corporate transactions can often take up large amounts of management time in searching for and organisation documentation – having everything well organised in advance can lead to significant time savings. Speaking of which:

Set reasonable timescales

We all know that business sometimes needs to move quickly. However, in recent times you may have felt that some things have moved more slowly?

In periods of uncertainty, due diligence by funders and potential acquirers can often be more involved. Decision-making is likely to take longer, and processing times are more stretched out – for example, many businesses have experienced extended timeframes for tax clearance and other similar confirmations from HMRC and other government entities.

It is not uncommon for businesses to underestimate the time it takes to negotiate a deal. Taking an investment round as an example, even with the best efforts of all parties and a fair wind we have seen transactions which hoped to complete in 2-3 weeks stretch out to 2-3 months. Being reasonable (or even cautious) with timescales is therefore highly important, particularly in the current market, and planning cashflow and objectives carefully is key.

Protect your intellectual property

In the early days of scaling a business (when still in “start-up mode”) there can of course be cost hurdles to fully protecting Intellectual Property (IP) and often the most effective early form of protection can simply be to keep IP as confidential as possible. However, whether your business has potential patents, trademarks, design rights or other forms of IP, as the business begins to scale you should expect to spend more on IP protection.

One issue which can arise quite commonly for scaling businesses touches on ownership of IP. It is not unusual to use consultants or other external parties when first creating business IP, but what you may not know is that without written engagement terms in place which clearly assign the IP over to your business, ownership will often sit with the consultant / external party. This can lead to complications when an investor or acquirer is reviewing your IP portfolio, not to mention potentially adding risk to your customer relationships.

Consult advisors in good time

It is never too early to form a relationship with legal, accountancy and other professional advisors. Take time to find the advisors who are right for you, and who have plenty of experience working with scaling businesses to help you plan for the future.

Experienced advisors will be very familiar with the cost and time pressures faced by scaling a business, and many will offer as much friendly and informal support as they are able before formally incurring cost.

Forming these relationships at an early stage can help to smooth your growth journey in future, as your advisors will already be at least partly aware of your business and its needs.  

Scott is a Senior Associate at Ashfords. He is recommended by Legal 500 in recognition of his work in our Venture Capital, Technology and Corporate teams.