We recently invited Joanna Oakey, Director of Aspect Legal to a webinar on the topic, ‘The Legal Challenges of a Growing Business’
Here’s what she said -
Why is growth the most vulnerable stage?
Growth is the most vulnerable phase for a business and many people think that the most vulnerable phase of a business is in startup, but that is a vulnerable phase generally in relation to working out whether or not the business has legs. The vulnerability in growth comes from the fact that you have something that you don't want to lose and that has value that you need to ensure that you're protecting. It is so devastating when we see businesses in growth suffer issues that either take their eye off the ball or entirely blow them up.
So, what are the characteristics that we see of growing businesses?
Quite often, they have a lack of structure and appropriate legal foundations. This is often because when the businesses start up and they are in the startup phase, the legal documents have come into place often from being borrowed or stolen. When you are in this period of growth and you are building yourself and your business up to withstand periods of growth, and the bigger entity that you are growing it into, it's in a completely different situation when you set it up and put those documents in place in the beginning.
The other characteristic of growth is that fires start appearing in the business that leach time, attention and money. So at best, this can cause ongoing disputes and issues that start off as little niggles but then can grow into big niggles that take you off-course of growth and can create an unsaleable business.
We see a lot of those unsaleable businesses when the business owners have gotten weary of all of the issues that have happened in their business as part of growth and they just want to offload it. But that is the worst time to try and offload your business because it is almost unsalable at that point, and you will get a very low sale value. But at worst, it can destroy the whole business.