As an entrepreneur, you’re a risk taker on a fast-paced journey. There are many things you will need to address along the way to give your start-up the best chance of success – including compliance and good corporate housekeeping.
Setting strong legal foundations in the early days will ultimately underpin the value you are working so hard to build, so here are the main areas to consider:
Nail down the essential housekeeping.
At the very least, you need to have a robust corporate record keeping system set up from day one. As and when you seek investment or come to exit, you will need the paperwork to underpin the value in your business.
You will also have company registers, filings, deadlines and governance requirements that need to be dealt with in a systematic way. Founders need to take responsibility for this from day one – if admin is not your strong point, then hire someone to do it.
Gaps in records will cost way more to fix than to get right the first time, as will gaps in compliance or basic housekeeping like insurance cover.
Avoid the elephant traps.
There are some things that are super hard to fix if you get them wrong in the early stages so take professional advice to make sure you avoid mistakes.
Classic examples include:
- Unintentionally conferring onerous equity terms on investors, advisors, commercial counterparties or staff
- Giving away or not securing valuable intellectual property rights
- Entering into highly unfavourable initial customer contracts at a time you will be desperate to make your first sales
- Missing filings/ tax compliance or basic requirements in relation to data/ GDPR
- Not foreseeing founder fall-outs
These may seem like very obvious situations to avoid but they do happen – and have a habit of surfacing at the worst possible time.
Don’t clog up your commercial vision.
All too often we see founders spending huge amounts of time on fundraising and investor reporting, compliance and legal issues. This is sometimes unavoidable, but it represents a huge cost which is needed to develop the business.
Consider whether it is worth hiring someone who can take the lead on these matters, such as a finance director or another seasoned and organised exec. There will be a cost but you need to weigh that up with the barriers that doing it all yourself will bring. Getting together a team that plays to the respective strengths of its members is a fundamental priority.
You may well be bootstrapping at first. However, there has never been a better time to raise funding. With that in mind, run through some cost benefit analysis and allocate your scarce resources accordingly. In particular, allocate the right amount for getting quality advice, hiring to cover management resourcing needs, and investing in systems and partnerships that can provide a corporate memory from the early days.