2020 has been difficult for everyone, to say the least. Yet, several businesses and entrepreneurs have come out victorious by displaying a blend of grit and adaptability, leading them to success.
Through this article, we touch upon raising capital, bookkeeping in the UK and leveraging legal assistance.
1. Businesses should show as much traction as possible when raising capital
At the early stages, company capital typically entails the founder’s savings. Sometimes even additional investments from their family and friends. These funds are to cover the initial costs and to get the business off the ground. Once launched, the next step is to attract more external capital to help fuel the subsequent growth stages. Besides, a company needs to show its ability to deliver on the promised product or service.
There are companies like Outfund which supports businesses with six months of trading operations and at least £10000 per month in online revenues through the initial funding for investing in marketing, inventory or agency fees.
2. Companies should get their documents to attract potential investors
Irrespective of the capital raising mechanism, as an entrepreneur, you should protect your business. One should have the foresight to gauge what a potential investor or lender is looking for, and only then will your business proposition appeal to them.
The following are the things that, you as a business owner, should take into account:
First, make sure that your brand is protected such that it creates restraint of commerce for other people or businesses to prey on your profits. Protecting your Intellectual Property or IP will augment the attractiveness and appeal of your brand to potential investors and prospects as well.
‘Your reputation and goodwill are actually valuable assets in and of themselves and have a real financial value to you.’ – Frankie Mundy
Secondly, ensure that the company records are updated, and record-keeping, disclosure, and filing mandates are adhered to. Not doing so will cost you not only financially but also serve a poor impression on potential investors.
Thirdly, check if your company’s bylaws have legal protection in your employee contracts with key staff members. It should address the following questions:
- Do the bylaws prevent employees from poaching clients or other staff after quitting?
- Do the bylaws prevent them from becoming competitors?
- Do they protect confidential information about your business activities?
More so, a business should consider whether it is compliant with UK GDPR. People are beginning to pay attention to how companies handle and deal with data, suggests Frankie. Incorrect dealing and handling can be hugely damaging to your reputation and image.
Additionally, ensure that you have proper written contracts or terms and conditions for stakeholders, customers and suppliers. Well-drafted documents will demonstrate your business conduct and operations but also protect your operations in case things go wrong.
Keep in mind that you cover these aspects before approaching potential investors. They may demand details regarding your business operations. Keeping the required information handy will help save time eventually.
Nonetheless, putting together all this information might be a time-consuming endeavour. But, not being organised will leave a negative impression for sure, says Mundy.
3. Have proper accounting processes to gauge how much funding your business is eligible for
Good bookkeeping and accounting basics contribute a great deal to fundraising. The reason is that any loan provider or investor will want to look at your company’s financials. Think of this one as a hygiene or extrinsic factor (Herzberg Two-Factor theory).
Furthermore, clear and crisp bookkeeping and accounting will help understand the quantity and rate (or price) at which you can raise capital and forecast your business financials. It is not uncommon for entrepreneurs and companies to approach investors with a company valuation, only to realise later that it is invalid due to an erroneous calculation in revenue. Don’t let this be a bad influence on the funding capacity of a company.
Going further down the road, organised and streamlined procedures enable you to understand your financial standing in the long run.
4. Diversity and flexibility to adapt to pitfalls is a must
The ongoing pandemic makes it apparent that one cannot prepare for every possible issue. Nonetheless, you should be ready for everything you can think of.
In today’s day, it is also crucial to have processes to help you adapt quickly and seize valuable opportunities. For instance, if you have sufficient capital to support your inventory upfront, it massively impacts your profitability.
Making the most of new marketplaces such as platforms, populations, products, and geographies is another way for staying flexible and leveraging upon opportunities. One must never depend on just a single marketplace or channel to fuel sales, even if it garners enormous organic traffic.
The saying that all your eggs shouldn’t be in one basket was written for this situation. Diversification is the key.
You can test the waters for opportunities through niche marketplaces, including Fruugo and OnBuy. Also, experiment with other aspects of your business as well.
For instance, when marketing, you should test new options and avoid relying solely on Facebook or Google. Doing so will add a protective layer to your business in case something happens or prices shoot northwards.
The same applies when dealing with customers too. If you have a good reputation and goodwill, try new sales models or programs such as pre-selling your products. Trying and testing such unique routes is always worth it. It’ll be great if it works, and if it does not, at least you know for the next time.
5. Track your numbers to know how to grow
If you are into your first trading year and looking for growth, there are two things you should note. Most importantly, track the products to know if they are profitable. Doing so will help pinpoint where and in which direction your next business investment should be.
As a business owner, you should ensure that good bookkeeping and account practices are set in stone. Unless a good distribution of the costs of goods sold or COGS or attribution towards your ad spends is in place, you will not be able to decide what products are profitable and where you should invest moving on from here.
Plus, the faster you grow, the higher are the chances of running into liquidity issues. Hence, it is vital to have in place a process for cash flow forecasts.
Cash Flow and liquidity are the biggest causes of bankruptcy. Just keep a keen eye on the numbers, and you will smoothly sail through uncertainties.
6. Sort out the legal aspects
Another thing that business runners need to think about is risk management. In this light, consider separating your personal and business or company assets, especially during the early stages of your business. Getting your legal aspects sorted will, ultimately, help you protect your long-term business interests.
Next, keep in place some protective measures for unforeseeable events. Saving for a rainy day can be done by putting robust terms and conditions. These terms shall have clauses for protecting your brand from predatory behaviours such as copying or rights infringement.
Thirdly, a vital part of a business is to think about company staff as they are a considerable investment and among your company’s important assets. The pandemic has seen quite some shake-ups as companies had to invent new work policies. Hence, understanding your staff members’ is absolutely indispensable now.
Also, proper contracts must be in place for staff employment along with HR practices that deal fairly and consistently. Employment law claims are the least of the costs and concerns to hit your business activities. There is way more to taking care of your staff than ironclad documents.
It’s important to be flexible. If your business has always done things a particular way, it does not necessarily mean the same process shall follow suit in the future. For instance, the pandemic has taught us that allowing your staff to work from home or through flexible working schemes is more cost-efficient than hauling all of them into physical workplaces.
7. Set up your company and do the due diligence before expansion
When contemplating expanding into new countries or territories, you should have a comprehensive setup in the new region that you plan to focus on. One should not jump the gun and try to do a land grab, expanding into every possible territory.
Before formally entering into the region, make sure you are comfortable in the original country of operation with a sufficient financial backing of cash reserves. More so, you should have tested the waters or done market research and due diligence before trying this new venture.
Also, you need to know the rules and regulations of the prospective market you plan to enter. Ensure that you understand how the foreign regulations work. Additionally, all charges have to be adhered to as well. The reason is that the way a particular aspect works in England may starkly differ from other places. Not keeping this in mind can hamper growth and profitability in the future.
Traditionally, expansion is among the most expensive endeavours. But with e-commerce, things may seem a lot easier than before. Nonetheless, this should not be taken for granted as it can backfire if you do not think carefully through every step of the course.
Getting some local legal advice will not hurt you much; in fact, it is a plus point, says Mundy. After Brexit, just because the UK law has been complied with, it does not mean you are necessarily compliant in other regions as well.
Fulfil your business expansion with trusted sidekicks
The above tips address the seven essential learnings that small business owners should follow to get through these unpredictable and unprecedented times.
Osome is glad to support small and medium-sized firms in their growth even throughout these tough times. Business growth always comes with the necessary but unwanted paperwork in bookkeeping and accounting for companies in the UK. If you need to take the bricks out of the bag and lighten the load, reach out to us!
