30 November 2016
From start-ups to succession planning: business tips and advice
In the third article in our Things To Do Before You're 50 series, our corporate and commercial team and employment team focus on the business world. Whether you're a start-up or runaway success, it's important to make sure you have all the legal issues in order at every stage.
Starting a new business
Statistics from Companies House show that 2015 had the highest number of new incorporations on record - more than 608,000 new businesses were registered, an increase of over 26,000 from the 2014 figure, which was also a record.
In the area covered by South Bucks District Council, 1,072 new businesses were set up during the year - that’s nearly 16 start-up ventures per 1,000 people - demonstrating there are plenty of entrepreneurs out there who are ready to invest for the future.
According to statistics, the average age of an entrepreneur in the UK is 47 (46 for men and 48 for women) - which means as the big 50 approaches, it’s the perfect time to take a more entrepreneurial approach.
“Starting a business when you have age and experience on your side makes sense,” says Simon. “In your 20s and 30s you will probably be focused on your career and your personal life, building a family life, buying a house and all the responsibilities that come with it.
“By the time you are in your 40s, you have the knowledge and experience that enables you to spot a gap in your chosen market, you will know your potential customers and will no doubt have built up a good reputation and networks too.
“You’re also likely to have more financial security, which may attract others to invest, and you still have the energy and passion to pour into making your ideas a reality.”
Depending on your business plan, securing funding for a start-up may be a necessary first step. A partnership with a good law firm can help you through those early stages, ensuring you engage successfully with future financial backers and shareholders and have all the necessary agreements in place.
Rule number one
Staying on top of all the latest rules and regulations is essential. That’s everything from employment, health and safety, and discrimination law; to supply chain relationships, property leases and commercial contracts - to name just a few.
Taking advice from a multi-disciplinary firm of qualified lawyers whose expertise encompasses both corporate and commercial law, as well as other areas such as employment, litigation and property, will help ensure you don’t fall at the first hurdle.
If you have spotted a gap in the market and have a great idea, then don’t run the risk of losing your commercial advantage. Making sure you retain your IP (intellectual property) is critical as, by sharing your ideas with other parties, you may find there are some who are willing to use your hard work for their own benefit.
Simon says: “Protecting your IP can be expensive, which means some smaller companies or individuals can decide not to put any protections in place; failure to do so can lead to problems later as ownership of IP can be difficult to prove. However, there are various options available which can be effective.”
He recommends making sure IP ownership is set out in employees’ contracts, asking clients and potential investors to sign Non-Disclosure Agreements and ensuring all contractors have contracts confirming transfer of ownership to the business.
If you’re coming up to 50, the chances are when you started working the Internet didn’t even exist in the shape we know it today. Technological advances have come on in leaps and bounds and one which many businesses use is cloud-based storage.
While it is more cost and space efficient than having your own servers, there can be risks, especially with security, so speak to the experts before signing on the dotted line.
Going into business with family and friends
Starting a new business completely on your own can be a daunting prospect, which is why people often opt to go into partnership with family or friends.
While there are many plus points, it can also be difficult to keep matters on a business-like keel, especially when it comes to issues such as income versus investment and the amount of time the company needs.
“Before you start working together, it’s important to set some ground rules,” says Vicky. “If you’re setting up a business with a former colleague, then you will know how well you work together, but if it’s closer to home - for example with a sibling or a close friend - the lines can become much more blurred.
“Make sure you are prepared to have frank discussions and be honest about your plans, such as your exit timetable or what happens if the investment isn’t successful. Equally there may be other factors, such as a falling out or a divorce, so you need to think very carefully.
“Remember that if it does go wrong, then it’s not just the business you have to worry about, but your longer term relationship with those individuals.”
From mergers and acquisitions to joint venture arrangements, it’s likely that at some stage of the business lifecycle there will be an opportunity to pool assets and exploit new markets. While this can herald a great new beginning, if the cracks begin to show then having an expert on hand to manage (and hopefully resolve) any dispute is essential.
Everyone likes to think they can trust their employees, but the number of Employment Tribunals is testament to the things that can go wrong. Jo says: “A typical dispute may involve an employee leaving one company and setting up on their own, taking their most lucrative clients with them.
“An employment lawyer can advise on how to add an effective restrictive covenant into their contract to make sure that doesn’t happen and also advise on other issues, such as discrimination, equality and, of course, employment contracts themselves.”
As well as following employment law, organisations should also have policies in place to aid employees’ understanding of the various rules. For example, since new Shared Parental Leave (SPL) was introduced in April 2015, companies have been encouraged to have their own SPL policy, setting out the necessary timeframes and notification requirements, and to share this with employees, who are expected to adhere to it too.
Other topics likely to be covered by in-house policies include employee use of social media and the internet, bullying in the workplace, training and development, and staff behaviour at company events - notably the Christmas party!
A good sounding board
No matter how old we are, having an independent sounding board to discuss future plans and ideas is always a smart move. The B P Collins team works in partnership with its clients, helping companies to take a longer term strategic view of business needs and identify potential risks, as well as dealing with immediate requirements.
Succession and exit planning
Looking at an exit plan when you are only just starting a business may sound like a step too far, but if you consider the most popular age to start a business is 40-50, then it starts to make sense.
Thinking about the future is especially important if you have partners and fellow investors. If an attractive offer was received, would you take it? Do you want to hand it down to the next generation within the family or have you identified someone else to take over? Would you sell to your nearest competitor?
Considering these options is important right from the start as, when the time comes, an attractive offer can create unexpected divisions between business founders and stakeholders, including management and investors.
Although we don’t like to think about our demise, it is important to plan for the possibility that you, as the business owner, could become incapacitated or die, unexpectedly. All business owners should ensure they have made a power of attorney and a will, identifying what should happen to the business and their shares, if the worst happens. They also need to make sure someone knows where these documents are.
“Becoming an entrepreneur and starting your own business means being able to cope with many different challenges,” concluded Simon.
“Partnering with a lawyer you trust who understands your business and will be with you every step of the way can be an invaluable support. Someone who will help you consider the challenges, minimise the risks and share the successes.
“We appreciate that when you are starting out in business your focus will be on the immediate job in hand, but experience shows that it is much more cost and time effective to invest in good advice early on, rather than try to resolve legal problems once something has gone wrong.
“Surely that has to be the best business decision you’ll ever make.”