Bishop Fleming has over 400 tech clients and specialises in the scale-up phase, helping businesses to grow, expand and realise their business goals. As your business progresses from start-up to scale-up, we can help your business face change.
Whether your biggest challenge is funding the expansion of your business, talent acquisition and retention, or scaling your business to meet the needs of an international market, our team has the industry insight to ensure your business is best equipped for future growth.
What is the Scale Up stage?
Every business will reach a point when they want to expand. Be that through hiring new staff, increased marketing, purchasing a new premise or through acquisition. For many businesses the first stage of the scale up process is generating finance to put their plans into action.
In broad terms businesses can raise finance through debt or through equity financing. Debt financing is financing in the form of loans be that from the bank, another business, or any other external investors. The main advantage of debt financing is that it is a cheaper form of financing as it is less risky for the investor than equity finance. The downside of debt financing is that it will increase the financial stress on the business. This additionally financial stress is because of the interest payments that the lender requires to be paid each month.
Equity financing on the other hand involves issuing shares in your company to an investor. This will entitle the shareholder to dividends in the business, however whether a dividend is issue is discretionary.
The main cause of failure during scale up is not that the growth strategy was poor, but that cashflow was not properly managed. During scale up significant amount of cash are spent to achieve future growth which often means there are not reserves of cash to pay workers and suppliers which means that if debtors are kept under control, then cash can run dry, and the business will fall.
Frequently Asked Questions
Are assets protected?
Any assets held in the trading company are at risk in the event of anyone suing the company. As you scale up, you can insert a holding company on top of your trading company, which is a more sophisticated group structure, and allows you to hold your assets in a separate company to the trade. Any challenge to the trading company would not risk the assets.
How can we build the value of the business?
"Building value" will be determined by your definition of value. Building value to be a market leader may require different things compared with building value for an exit strategy.
Maximising the monetary value of the business will require maximising the valuation of the business. One common method of valuing businesses is by using EBITDA (earnings before interest, tax, depreciation, and amortisation). Therefore, maximising value will be maximising sales and maximising profit margins.
How can the business attract Venture Capital and Private equity funding?
There are a number of set criteria that venture capital and private equity funders require, dependant on sector. Our Corporate Finance team are specialists in this field and can discuss your needs further. Consistent requirements across all sectors generally include the presence of a strong management team, proven track records and evidence of future growth.
How can the business attract and retain the best talent?
People are a business’s biggest asset, yet they can also be a business’s biggest challenge. There are a number of ways that you can attract and retain talent, by offering competitive packages, share options, benefits to your employees, and maximising value from your spend. Bishop Fleming have a specialist employer solutions team who can help to design and implement bespoke solutions that meet your individual challenges and goals.
What do we need to know about expanding internationally?
There are a number of considerations when expanding internationally. Customs, VAT, shipping costs, import tariffs and local taxes are just a few of the initial considerations.
It is key to ensure the business is structured efficiently (i.e. should you open a separate entity overseas, or just have a branch of your UK business?). In order to do this, we advise engaging with reputable advisors in your region who can assist with setting up the structure of the overseas business. We are part of the Kreston network which gives us access to over 170 partner firms from 120 countries around the world.
Together with our Kreston partners we can ensure you are supported from a UK and an international perspective.
What do we need to consider when looking to acquire a business?
The first consideration is your motivation for acquisition. Depending on your motive, our Corporate Finance team can help you to identify target companies that meet those needs, and help you to understand what the valuation of that business is.
Once you have targeted and understand the costs of the business, the next consideration is how you will fund that business. Will you be raising finance in order to acquire, or are you using existing assets?
You must then due your Due Diligence on the acquisition.