Growth is the goal for most companies, large or small. However, unexpected expansion can be challenging for those lacking the systems, processes and strategies to support the intense pressures associated with an uplift in operations. Below Total Business hears from Duncan James, head of corporate in the East Midlands at law firm Shakespeare Martineau, on the intricacies of rapid business growth.
As a business grows it becomes necessary to focus on flexibility across many parts of the company. Leaders should develop a solid strategy sooner rather than that includes plans for the operational, financial and HR needs that come hand-in-hand with scaling up quickly.
Ensuring businesses have the right contracts in place can help to protect the company’s ethos, culture, focus and direction. It is not uncommon for shareholders to have differing views of how to take a company forward and this makes protecting its future even more important.
Ensuring that a shareholder agreement is signed by all relevant parties, will help to protect value, protect the business and fellow shareholders by keeping objectives at the forefront of all decision making. For family businesses, a constitution should be formed. This document defines the roles and responsibilities of individual family members and sets out a clear path.
A family constitution does not have to be lengthy. Three simple documents can help to keep communication open and clear – a tax plan, including wills and succession planning, a shareholder agreement and a business plan. In doing so, should anything unexpected happen to the company or a majority shareholder, it is clear to the entire family who should take responsibility, and which direction the business should remain headed in.
Another area that can significantly add or detract from business value is intellectual property (IP) protection. Disagreements over IP can be a source of conflict among owners and understanding where the value of the business comes from is crucial. The perceived ‘value’ isn’t always held by the owner – it could fall to consultants, a partner or even with part-time staff that have a particularly strong relationship with a key client. Protecting your IP rights -regardless of whether an invention, trademark or design is concerned – is one way to ensure that the business maintains control even when dealing with an ever-increasing workforce.
The loss of IP can have far-reaching consequences, no less than directly impacting the bottom line, and tightening protections of an IP portfolio should come well before business growth plans are implemented.
For many, feeling isolated can have serious repercussions on leadership. It is unlikely that a business owner is facing a problem that no other entrepreneur has experienced too. While there are more informal networking opportunities for owners to meet like-minded people, who can share similar experiences and solutions, non-executive directors (NEDs) can also be a more formal source of help. NEDs can offer industry insights and advice, while often bringing a particular specialism to the table, such as legal or accountancy advice. Assessing which areas a business or leader needs support with is the first step in finding a NED that can help champion that need.
With the continual bunfight over attracting and retaining the best talent, tying in key employees, particularly those who are tipped to take on the business, with shares or options can help to secure the future of the company. This can be done by providing a right to a shareholding at a future point in time. In doing so, an owner can attract the star, bind them into the business and protect existing wealth in the process. Not only this, but if carried out in the right way, can prove tax efficient too.
If a business is looking to implement a rapid growth strategy – whether an M&A, entering a new market or winning a sizeable contract – it is worth considering a document spring clean at regular intervals to ensure that the business remains attractive and hasn’t entered into any agreements that have the potential to undermine its value. Maintaining value through the right people, processes and policies will leave owners to focus on one task – growth.