2025 is a new year and a new opportunity to build something great.
Over the next year or two, many experts forecast that interest rates will start to fall, and money will become cheaper. It usually follows then, that corporates and investors (like VCs and PEs) will start to deploy funds – which will involve investments in, and acquisitions of, early stage businesses. If an investor or buyer comes knocking, will you be ready? Below are five key areas that should you focus on to help you lay the foundations for building a great business in 2025, ready for success.
IP: Secure your valuable information assets
It is important to secure your IP and information. It can also add value to your business which can attract investors. In later stages, business owners can generate revenue by allowing others to use their IP, through licensing or franchising.
Securing IP can be done through trademarks, domain names, copyrights, patents, designs. This protects your business identity, such as your brand name, logo, or tagline. Also, a registered trademark legally asserts your nationwide ownership over these business identifiers (also giving exclusive rights).
We recommend setting out IP ownership in employment and contractor agreements. We’ve seen scenarios where deals have fallen-over because key contractors did not have contracts that clarify IP ownership. It’s vital to have clear employment and contractor agreements that detail IP ownership.
It is also worth considering establishing an IP Holding Company. Having an IP Holding Company allows the IP assets to be separate from the operational business, providing an extra layer of protection if the operational entity suffers a liability event.
Employment: Secure your key talent
When starting a business, choosing the right people will be a huge determiner of success. Engaging employees who have the right skills and drive to implement the ‘vision’ will be vital in scaling your business.
Startups are usually bootstrapped or funded by family and friends. Given this, a common issue for startups is under-resourcing, which can make enticing talent difficult. Startups often can’t pay competitive salaries. This means the need to attract and retain talent in other ways through incentives like Employee Share Schemes and Employee Share Option Plans. Share schemes allow employees to own a stake, giving them a personal interest in success. ESS and ESOPs are mutually beneficial – they allow you to attract and hold on to talent, and align the employee’s interests with the interests of the business (as the better the business does, the more their stake is worth).
Employees come and go. Planning for this, however, is important. Restraints, such as non-compete, non-solicitation, and confidentiality clauses in an employment contract, are essential tools for protecting your startup. These safeguards are intended to prevent outgoing employees or partners from using sensitive information, trade secrets, or client relationships to compete against your business.
Shareholder Agreements: Have clear rules for the business
If your business has more than one owner, we recommend a Shareholders Agreement. It will record the rules around governance, decision-making and exit scenarios.
An example of this could be a 10% shareholder blocking a potential sale of 100% of the business. If the company does not have a shareholders Agreement – then the majority sellers are at the mercy of the minority holders. This can be avoided using a “drag-along” process typically included in a Shareholders Agreement – where the majority shareholders can ‘drag’ the minority shareholders into a sale.
Authorisations and licences: Cleared to operate legally
To ensure smooth operations and legal compliance, it’s critical to identify and obtain the required licences and authorisations for your specific business type and industry.
Potential investors or acquirers will want to ensure that your business is properly authorised to operate. For example, say a business has incidental operations involving Financial Services – but is not licenced (it does not have an ‘AFSL’). This could complicate a sale – at minimum, there would robust negotiations around the warranties for the sale agreement. Some potential buyers may walk-away from a deal if they perceive too much operational / legal risk.
Keep things simple: Investors and acquirers don’t like complexity
When setting up your business, the best structure is a simple one. Overcomplicating your setup will not always achieve greater protection. In most cases, investors will reject overcomplicated structures in favour of simple ones, which can mean that in order to secure investment you will have to unwind your complicated structure – and this can cost time and money.
Keeping your corporate structure simple is a smart move. It saves money on setup costs, reduces complexity and paperwork, and overall makes your business easier to manage – and understand. A straightforward setup lets you focus on growing your business instead of dealing with complicated legal or administrative issues.
Unwinding a complicated business structure once you are already operational can cause major headaches. Restructuring often involves significant legal and administrative effort, which can be time-consuming and expensive. Tax issues are also a common consideration, as restructuring may trigger unexpected tax liabilities such as capital gains. Spending time and money on restructuring is also disruptive to your business, especially if you’re trying to scale, raise capital, or get ready to sell.
By focusing on these five key areas – securing IP, attracting and retaining talent, implementing a shareholders’ agreement, obtaining necessary authorisations, and maintaining a simple business structure – you can position your business for growth and success in 2025 and beyond. These proactive measures will not only enhance your operational efficiency but also make your business more appealing to potential investors and acquirers, ultimately paving the way for a prosperous future.
Written by Adam Henderson, Corporate Partner, Hicksons Lawyers
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Are you ready to capitalize on the coming wave of funding and acquisition opportunities? Here are five critical areas to focus on Expert, Investors Dynamic Business
