7 Tips To Grow Your Business in Uncertain Times
2020 has been a tough and uncertain year for businesses across the UK and beyond. Still, many companies and entrepreneurs have shown amazing success, grit, and adaptability.
In this webinar, we discussed how registered businesses can scale and grow nowadays through raising capital, setting up bookkeeping, and leveraging legal assistance. Lessons learnt during COVID, and how these companies Outfund, Sparqa Legal, and East river can help entrepreneurs drive business growth further.
The webinar was hosted by East river’s Partnership Lead Gul Singh and Sophie McGrahan, involving:
- Rob Wilson, Portfolio Manager at Outfund
- Frankie Mundy, Senior Legal Editor at Sparqa Legal
- Alexey Potemkin, Managing Director at East river UK
You can watch the webinar for some exclusive discount codes for you to enjoy, or read on for a summary.
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1. Show as Much Traction as Possible to Raise Capital2. Get Your Documents in Order to Make Your Business Attractive for Potential Investors
3. Establish Accounting Processes to Know How Much Funding You Are Eligible For
4. Diversify and Be Flexible to Adapt to Pitfalls Quicker
5. Keep Track of Your Numbers to Know How To Grow
6. Get Your Legal Stuff Sorted Early On
7. Set up Your Company Properly and Do Due Diligence Prior to Expansion
Show as Much Traction as Possible To Raise Capital
Typically, an early-stage company’s capital consists of the founder’s savings and sometimes additional investments from their friends and family, says Rob Wilson of Outfund. This money is usually used to cover the initial costs and get the business off the ground. Then, it looks for ways to attract external capital to fuel the next stages of its growth.
At that very early stage it is traditionally difficult to raise finance, whether it be through debt or through equity investors, and lenders as well. We're always going to want to see as much traction as possible, proof that there is something in this business, that there is a product market fit, and that you have sufficient margins.
Besides, a business needs to show it’s able to ultimately deliver the promised product or service. Rob explained how his company works with businesses looking for funding. They’re able to support businesses who have at least 6 months of trading history and are generating at least £10,000 per month in online revenues, he says. If a company shows that, their fund can provide initial funding to invest in marketing inventory or agency fees.
Put Your Documents in Order To Make Your Business Attractive for Potential Investors
Regardless of how you plan to raise capital, you should protect your business legally, advises Frankie Mundy. You should anticipate what an investor or lender will be looking for, and make your businesses as attractive as possible to them. Here are the things business owners should take into account:
Firstly, think of whether you have protected your brand to stop other people from profiting from it. Protecting your Intellectual Property will increase your brand's attractiveness to potential investors as well.
Your reputation and goodwill are actually valuable assets in and of themselves, and have a real financial value to you.
Secondly, make sure your company records are up to date and basic record keeping and disclosure and filing obligations are met. Otherwise, you don’t just risk fines: messy records will make a poor impression on potential investors.
Thirdly, check if your company has legal protection in your employment contracts with key staff. Do they prevent your key employees from poaching your clients or other staff after they quit? Do they prevent them from becoming your competitors? Do they protect your confidential information?
Further, a business should consider if it’s compliant with UK GDPR as people are really starting to pay attention to how businesses are handling data, notes Frankie. It can be hugely damaging to your reputation if you handle personal data wrong.
In addition, you should take care of having proper written contracts or terms and conditions in place with stakeholders, customers, and suppliers.
“Not only do well drafted documents help you to demonstrate to potential investors that you are conducting your business properly, but they also help to protect your business if things go wrong”
One of the most crucial things is to cover these points prior to contacting potential investors. They may want to have detailed information on how your business operates, and putting this information together is very time-consuming. “It can make a really bad impression if you're not organized”, said Mundy.
Establish Accounting Processes To Know How Much Funding You Are Eligible For
Good bookkeeping and accounting basics can also contribute to successful fundraising, says Alexey Potemkin. First of all, any loan provider or investor will be looking at your company's financials. “It’s a hygiene factor for you”, shares Alexey.
Moreover, clear and concise bookkeeping and accounting help you understand how much and at what price you can raise capital and forecast your business financials. It’s not infrequent for businesses to come to investors with a certain company valuation in mind and later realize it’s invalid because they’ve calculated their revenue incorrectly. This, in turn, impacts how much money a company can raise.
One of the things that we advice any company to do, even if you're just starting, is to put proper processes and procedures in place around the finances and the bookkeeping.
Down the line, good procedures allow you to understand if you’re successful and what your financial standing is.
Diversify and Be Flexible To Adapt to Pitfalls Quicker
The pandemic made it apparent that you can’t prepare for every possible issue, says Rob Wilson, but you should have a plan for what to do if you come across one.
“It is really important that you put certain processes in place to ensure that you can adapt quickly and seize opportunities,” says Wilson.
For instance, if you have enough capital to purchase your inventory up front, doing so can make a massive impact on your profitability.
Another way to stay flexible and take advantage of opportunities is to make the most of new marketplaces.
“You should never rely on just one marketplace or one channel to drive your sales, even if you get a lot of organic traffic from it, so make sure that you diversify”, believes Rob. Test other opportunities or niche marketplaces like Fruugo and OnBuy.
You can experiment with other parts of your business as well. In marketing, you should test new options and avoid relying on a sole channel like Facebook or Google. It will protect your business from getting impacted in case something happens or prices go up.
The same applies to how you work with your customers. For instance, if you have a good reputation, you can try new sales models like offering to pre-sell your products. “It’s always worth trying these things out. If it works - great, if not - at least you know, next time”.
Keep Track of Your Numbers To Know How To Grow
If you’re in the first year of trading and are looking for growth, there are two things you should take note of, says Alexey. Most importantly, you should keep track of exactly what products that you’re selling are profitable: it will help you pinpoint which part of your business you should invest in.
“Make sure that you are putting good bookkeeping and accounting practices in place”, he shares. “So unless you've done a good distribution of cost of goods sold, the good attribution of your ad spend, you'll not be able to say what products are profitable and where you should be putting more money”.
Besides, the faster you grow, the higher the chance of liquidity problems. Therefore it’s vital to make sure you’re doing cash flow forecasts. “The cash flow and liquidity problems are one single biggest cause for businesses going bankrupt”, explains Alexey. Keeping an eye on the figures will help you a lot in the times of uncertainty.
Get Your Legal Stuff Sorted Early On
Another thing business owners should think about is thinking of and managing their risks. “It's a really good idea to get your legal sorted, and ultimately, that will help you to protect your business in the long term and help it thrive”, believes Mundy. One of the things to consider is separating your personal assets from those of your company - especially if you're at an early stage of your business.
Next, you should give a thought to protecting yourself in case something unforeseeable happens. It can be done by putting robust terms and conditions in place: they contain clauses that essentially protect your brand, especially from copying or infringement of your rights.
An important part of a business to think about is the company staff: they are a huge investment and one of the most important assets. There have been a lot of shake ups during the pandemic, and we had to invent new work policies, so now you need to understand what your staff members’ rights are.
“It's really a good time to try and consolidate things and make sure your staff are employed under proper contracts, that you've got proper HR policies in place to make sure you're dealing with the staff consistently and fairly”, she says. “It can be detrimental to you if you don't treat yourself in the correct way, not least because you can face employment law claims”.
In addition, Mundy stresses the importance of being flexible. If a business has been always doing things in a certain way, it doesn’t necessarily mean it has to keep doing them this way in the future. For example, letting your employees work from home or adopting a flexible scheme may be more cost-efficient than hauling all of them back in.
Set up Your Company Properly and Do Due Diligence Prior to Expansion
If a business aims to expand into new countries, it’s important to make sure that you are properly set up in the country that you're originally focused on, says Rob. “I wouldn't jump the gun and try to do a land grab and expand into every territory possible”, he shares.
Prior to expansion, make sure that you're at a comfortable position in your original country of operation and have sufficient cash reserves. In addition, you should have tested the water or done your market research before you try this new venture.
Besides, you need to know the rules and practices established in the market you want to enter. Be sure you understand how foreign regulations work, notes Alexey, and that you’re taking care of all possible charges and fees. The things that work in a certain manner in England may work differently elsewhere, which may affect the growth and profitability of your business.
“Expansion used to be one of the most expensive business projects. With e-commerce it may seem easier now but it can backfire if you don’t think through every step of the process”, says Potemkin.
It won’t hurt to get local legal advice, recommends Mundy. “After Brexit, just because you’re complying with UK law it doesn’t necessarily mean you’re going to be compliant beyond the UK”.
Grow Your Business With Trusted Sidekicks
These are the 7 tips from East river, Sparqa Legal and Outfund for all small business owners to get through an unpredictable and unprecedented time.
East river was glad to participate in this webinar with other like-minded businesses supporting small and medium-sized businesses. Growing your business always comes with the necessary but unwanted paperwork in bookkeeping and accounting. If you need to offload these tasks, reach out to us!
