Are you an SME navigating the intricate journey of business growth and development in the UK?

In the vibrant landscape of UK entrepreneurship, businesses emerge, evolve, and sometimes end their journeys through various stages of growth and development. We call this the business lifecycle and generally there are four phases as shown below. Understanding the legal dimensions of each phase is crucial for safeguarding your company's interests.

This case study follows the lifecycle of a hypothetical company, showcasing the typical phases it will go through from starts up to exit.

Phase 1: Setting up your business

The journey begins with the creation of "SJ TechSmart Ltd," a startup founded by two entrepreneurs, Sarah and James. The company objective is to develop innovative software for small businesses. They register their company as a limited company with Companies House, put some initial funding into the company through personal savings and a small business loan, and the company is created.

SJ TechSmart realise that in order to create a presence in their market they need a website, and with that  they also need to think about contracts. They work with a commercial solicitor and have the following documents drafted for the company:

• Website terms and conditions
• Website acceptable use policy
• Website privacy policy
• Website cookie policy
• Terms and conditions for their customers
• Supplier contract

Phase 2: Scaling your business

As SJ TechSmart gains traction, Sarah and James focus on product development, market validation, and growing their customer base. Sarah and James take on and move into their first commercial office space, using a commercial property solicitor to deal with their commercial lease. They hire a small team of developers and sales professionals, establish some professional partnerships, and really focus  on their unique business model.

The company experiences rapid growth and needs to ensure that the company structure keeps pace with their growth in business. Sarah and James have an employment law solicitor create the following contracts for them:

• Contracts of employment (junior and senior)
• Consultancy agreement
• Employee handbook
• Development of policies and procedures

Their lawyer works with them on the development of the company policies and procedures, and provides guidance on managing staff.

Phase 3: Problem solving

As SJ TechSmart matures and reaches a steady state, it shifts its focus towards ensuring the business is efficient. They want it to be a great place to work for its staff, to improve on profitability, and to sustain their competitive advantage.

During this phase Sarah and James have an issue with an employee performing poorly and seek advice from their employment law solicitor to assist them in navigating the situation. They also find that they’re having issues with non-payment of invoices from some of their customers. This means they need help from a commercial solicitor who can assist with their debt recovery procedure. Unfortunately, one of the debts remained unpaid and so the company instructed their solicitor to take legal action to recover the money due to the company. As a result of the situation, Sarah and James  had their commercial solicitor review their terms and conditions. This allowed them to make some updates to reflect the development of the company since it was formed and to tighten up their credit control process.

 Phase 4: Planning a business exit

After years of growth and success, Sarah and James start thinking about their retirement and consider what might be their exit strategy. They received acquisition offers from larger tech companies interested in their innovative technology and customer base. After careful consideration, they decide to sell SJ TechSmart to a multinational corporation that promises to support its continued growth and expansion. The acquisition deal is negotiated using a corporate law specialist, and SJ TechSmart becomes part of a larger entity, marking the end of its independent journey. Following this Sarah and James enter into a contract to continuing working as consultants to the company for a 12-month period. This smooths the transition and provides a good handover to ensure the future of the business is secured. Sarah and James are both presented with consultancy contracts, which they instruct their solicitor to advise them on to make sure they aren’t agreeing to anything too onerous.

The lifecycle of SJ TechSmart Ltd gives an example of a typical business, from humble beginnings as a startup to a successful exit through acquisition. Along the way, the company navigated through various phases of growth, overcoming challenges, and seizing opportunities, taking legal advice at every step to ensure the business was protected as far as possible.

To discuss any aspect of the business lifecycle contact Sarah Naylor at sarah.naylor@switalskis.com or call 01302 320621