Introduction 

Netsheria International LLP team was recently involved in a panel discussion by Agema Analysts at iHUb in Nairobi dubbed “Key Aspects to Consider when Scaling Up Your Business”. The event primarily encompassed startups and small and medium enterprises who were provided with advisory on strategic local expertise and analysis capability to critical investment and risk areas for successful, safe and compliant running of their businesses. 

Scaling up your business

For most entrepreneurs, getting their business off the ground may have been challenging but scaling up tends to bring a whole new set of issues. The reality is that scaling up a business requires a different skill set to the ones employed when getting it off the ground in the first place where there is need to manage both growth and risk.  

As such, it calls for meticulous planning by entrepreneurs toward where they want to see their business to ensure it has sufficient resources in place to service the needs of clients and customers whilst ensuring these resources are managed properly. 

Aspects to consider when scaling up your business

1. Does your startup have the right setup? 

Essentially, this refers to the initial stages of conjuring your business towards operations. This entails evaluating the business idea, making of a business plan, securing funding, making sure the business adheres to legal requirements, establishing a location whether physical or online, developing a business plan and building a customer base. Once the essential details are confirmed and necessary documentations prepared, entrepreneurs should undertake registration of their business to ensure they can legally start operations. 

2. Tax considerations when starting your business 

Many people have an interest in starting a business of their own but do not investigate tax considerations. This can be the case if they do not understand the taxation effects of starting a business. As such, they need to consider: how starting their business affects their tax obligations, how to prepare their business for taxes and cost implications, how and what taxes are payable per their business model whether a company, partnership or sole proprietorship, tax exemptions, separation of business and personal taxes, who can help them in the process and penalties for failure to adhere to tax obligations. 

3. Are your startup Intellectual Property rights protected? 

Startups depend on their IP to confer a competitive advantage and to act as a container to hold the goodwill they create in the market. Basically, one should consult with an IP lawyer or an expert to determine which category applies to their startup and how to register or enforce their IP rights. This will help them develop an IP strategy that allows them to make informed decisions. Startups can formulate their IP strategy by identifying the different types of intellectual property and how they can best be used while incurring minimal legal expenses. 

4. Does your startup meet minimum corporate governance and corporate compliance standards? 

The lack of a corporate governance framework or adoption of basic governance practices often impact startups and SMEs who are at the cradle stage due to lack of knowledge of the concept of corporate governance. Non-compliance usually leads to reduced chances of funding either via equity or debt. Corporate governance entails balancing the interest of the stake holders in the business including shareholders, management, customers, suppliers, financiers, government and the community. This should also include the business’ ethical obligations to consider the society they operate in toward a wider range of stakeholders. Thus, stakeholder interests are at the core of corporate governance.  

5. Considerations while onboarding investors or partners to your startup 

Onboarding a new investor or partner can help grow and transform businesses. To make the best of this opportunity, it is important to consider investor or partner expectations in the relationship, alignment of interests, duration of the investment or partnership, roles and responsibilities adopted, strategies to retain investors or partners and exit plans and considerations to be made.   

6. Key elements of investment agreements/SAFE note- Raising Capital 

A Simple Agreement for Future Equity (SAFE) note entails an investment contract commonly used by startups to raise capital from early-stage investors. It enables startups secure funding while offering investors the right to convert their investment into equity in the future. Some of the FAQs on SAFE notes worthy of consideration by startups entail: Whether startups can negotiate terms of a SAFE note agreement with investors, suitability of SAFE notes for particular startups, whether SAFE can be converted into equity before a subsequent funding round and risks associated with utilizing SAFE notes for fundraising. 

Conclusions

In the ever-evolving world of technology, businesses have not been left behind. In scaling up their businesses, entrepreneurs are encouraged to adopt technology in the growth of their business and embrace use of new features and software to simplify running of the business while aiming to maximize on profits.  

By considering the above aspects, startups and SMEs are able to shift from starting up to scaling up their business. 

To learn more about how Netsheria can help you grow your business, visit our website or contact us today.