Scaling up a business marks the transition from the start up phase to a growth-focused enterprise. Growing a business focuses on increasing its revenue and market share in a way that achieves greater profitability. Fredrica Reid, Corporate & Commercial solicitor, shares her top tips for business expansion.
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Have a clear strategy
A clear strategic plan is fundamental for any business scaling up. Outline clear objectives (often this is for the owners to sell or exit in some other way that realises the value of their business), identify target markets and establish measurable goals. The strategy should include financial projections, marketing strategies, and operational improvements. It is also important to review and adjust the strategy in order to adapt to changing market conditions and business needs.
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Secure appropriate funding
A key concern for businesses when looking to scale up is ensuring that they can secure the funding they needs to support their strategy. Owners need to evaluate the funding options to determine the best fit for their needs. Each funding source will have its own set of requirements and implications for the business. Irrespective of the financing chosen, a business must ensure it has regular cashflow forecasting to help anticipate any potential shortfalls and ensure that it has the funds available to keep operations running smoothly during the expansion period.
Equity financing
Equity financing is a method of raising capital for a company by selling shares of the company to investors. Investors will receive a proportion of the future profits and a return on any future sale and can include family and friends, angel investors, venture capitalists or private equity firms.
Debt financing
Debt financing involves borrowing funds that must be repaid with interest. It comes in various forms, including business loans, lines of credit, invoice financing (lending that lets you borrow cash against your unpaid invoices) and peer to peer lending. Unlike equity financing, debt financing does not dilute the business ownership, however it requires regular repayments, which can strain cash flow if not managed properly.
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Scale up by acquisition
More rapid scale up can be achieved by acquiring another business in the same sector to increase market share. Alternatively, acquisitions in a different or complimentary sector can strengthen a business by expanding into an alternative market. Proper legal and tax advice on the structure of any acquisition should be sought and proper due diligence carried out.
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Get your house in order
Ensure any agreements between partners or shareholders are robust, that key contracts with manufacturers, suppliers and customers are in place and that any valuable intellectual property (logo, brand name etc) is registered and protected where possible. Check that any necessary consents and insurance policies are in place and that title to any property of the business is in order or that any necessary leases or licences are properly documented.
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Embrace technology
As a business expands and attracts a larger customer base, its technology infrastructure will need to be able to keep up. Scaling up will involve expanding and optimising IT infrastructure and systems to support increasing business demands. CRM, automation and cloud tools can be used to boost productivity.
By focusing on these top tips, a business can navigate the complexities of scaling up and position itself for sustainable growth. DTM Legal’s expert team can advise and assist with legal matters during scale up and all stages of the business life cycle.
