Tax and Legal: Build the business you would want to buy
Professions in the law and accountancy require prolonged training and formal qualifications, and therefore, typically generate large invoices. So, for founders bootstrapping a start-up, any opportunity to avoid engaging the service of either is potential ‘hustle’, and one more month of burn in the calendar…
While undeniable that not hiring a lawyer or accountant can save a business money, the London Chapter of the Startup Leadership Program (SLP) learnt that, ultimately, this will decrease a company’s value in the long run. Subject matter experts from Metric Accountants and Shoesmiths took time on Monday to explain where founders should focus their resources when meeting essential UK tax and legal responsibilities.
Across the session, all guest experts urged founders to view tax and legal requirements through a lens of value creation: “Build the business you would want to buy.” Items and tasks that might not seem crucial now can make life extremely complicated during a company’s most crucial moments – such as a financing round or liquidation event.
On tax, founders heard how late filing of accounts are often used as a red flag during a typical VC’s due diligence. While on company formation, a convoluted cap table or company structure often had the potential to scupper a deal. And, with intellectual property, attention to detail in commercial agreements can make the difference between short lived success and long-term growth.
Clearly our guests from the tax and legal professions had a vested interest in demonstrating the worth of their services; however, judging by the number of notes taken during the session by SLP founders, it was clear that everyone saw the value of getting the basics done right.
Accountancy and legal services exist because UK tax and law are complex. Inside of 2 hours, our expert speakers, unsurprisingly, exceeded the collective knowledge of the room. This demonstrated that no founder has enough time to master either of these subjects in addition to building their business.
At the end of the evening, the choice seemed clear: either blag your way through both minefields and hope your company survives with all its legal limbs intact; or engage on a selective basis in crucial areas expanding as your business grows. As to what those crucial areas are, you’ll have to apply to SLP 2021 and attend next year’s session to find out…