Your business is off to a great start. You’re happy with your structure, sales are booming, and employees are working hard and happy at their jobs. You keep reading about scaling up. Now you are wondering if it’s time for you to do so, and what that entails from a business and management perspective as well as from a legal one.
What is Scaling?
Scaling refers to growing the business or revenues without significant increases in costs or disruption to your current business. Scaling generally includes:
- Taking on more work
- Automating operations
- Focusing on your core business and outsourcing where necessary — and at the same time resisting the temptation to expand into a new area just because everyone else is
- Hiring, retaining, and developing top talent
But you shouldn’t scale just for the sake of scaling. It should be demand driven. If demand for your product or service is high and expected to stay that way or increase in the foreseeable future, then it’s probably time to start scaling up. Another sign that it’s time to scale is having to regularly turn down new business or clients because you don’t have the resources to meet their needs.
As you scale your business, you’ll also need to consider or reconsider a number of legal issues. Proactively addressing these can provide a solid legal backbone for your business as you scale:
- Customer and supplier contracts – as you begin increasing business and meeting more demand, it’s important to ensure that both your customer and supplier contracts reflect the specifics of your business. If you’ve been using a standard contract you got off the Internet or one you borrowed from a friend, now is the time to draw up solid contracts reflecting your operations, risks, and relationships.
- Data and intellectual property protection – your business processes and the way you automate your operations are as much a part of your business’s intellectual property as a patent or copyright. As you scale up, it’s important to protect this information as well as customer lists, marketing strategies, and other proprietary data through privacy policies and nondisclosure agreements.
- Partner agreements – if you will be subcontracting, taking on new distributors, or entering other partnering arrangements, make sure these agreements are bound by written contracts. It’s important to protect your interests and limit your liabilities. You will want to identify any potential issues, from disputes to distribution delays, and address them in your agreements so you are protected should something detrimental to your business or you occur.
- Regulatory compliance – as your business grows, it may become subject to certain local, state, or federal regulations based on its increased revenue and/or its number of employees. If you open operations in a different state or country, you will need to ensure you comply with all those laws as well. For example, some reporting requirements of the Occupational Safety and Health Act don’t apply until companies have 10 employees. Likewise, employers are only required to offer paid leave under the Family and Medical Leave Act once they have 50 employees.
- Human resource considerations – a key to successfully scaling up operations is hiring and retaining talented employees. It’s important to set employee policies and procedures, and to have an employee handbook that spells these out, including but not limited to expectations, benefits, paid time off, compliance with employment and discrimination laws, and discipline and grievance processes.
Your InPrime Legal Team
Let our team help you with setting up your business, writing contracts, establishing HR procedures, and protecting your intellectual property. Measure your legal risk today by using our Business Legal Risk Assessment. In less than 5 minutes, you will discover areas where our experienced attorneys can help to mitigate your business and personal legal risks and assist you as your company grows. Contact InPrime Legal online today or call us at 770-282-8967.
Disclaimer: This blog should not be used as a substitute for competent legal advice from one of our licensed attorneys.