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What CEOs Forget to Do During the Scaling Stage

Updated: Mar 8, 2021

I'm betting you haven't heard this one before.



You’ve probably read plenty of blog posts about the different stages of business. Each one admonishing you to evaluate which stage of business you are in and what is required to succeed at that stage.


And this is another one. Well, kinda. I’m adding this one to the fray because with all the talk about systems, hiring decisions, evergreen products, and mindset shifting, I haven’t heard anyone talk about this yet:


How does your relationship with legal change as you move through the different stages? At which stages does one move from DIY to hiring a lawyer, from hiring a lawyer to hiring a law firm, from hiring a law firm to having their own in-house legal counsel?


Too many business owners have upgraded literally everything else in their business, yet still approach legal the same way they did when they first started. This isn’t all their fault - the legal world is famously a black box that hides the ball on what it does and why.


But since you’re reading this blog, let’s shed a little light.


Business Stages


There is no real consensus on what to call the various stages of business. For our purposes, I’m going to use four: (1) Startup, (2) Growth, (3) Scale, and (4) Exit/Decline/Renew. In the Startup Stage, DIY is your best friend because you don’t have the funding to do anything else. The exceptions are if you’re in an industry that people want to invest in (tech), if you have a profession that banks are willing to loan to (doctors), or if you’re independently wealthy. Your #1 concern during Startup is actually making money.


During the Growth Stage, something magical happens. Revenue is now increasing quarter by quarter and month by month. This is super exciting, especially if this is your first business, because you are making real money with no salary, no W2, and no boss. However, you’ve also never had this many clients/customers before. So now you need to manage it. At first, you’re just in reaction mode. Over time, you learn to proactively plan. This is when you realize you can’t do it all so you start to hire people.


At some point, you wake up one day and realize that you are successful… but exhausted. Welcome to the Scaling Stage. By this point, you’ve got a good team around you. Things run relatively smoothly and the revenue continues to go up. However, you’re also beginning to see that you are a bottleneck. Until now, you have had a high-touch approach and kept a hand on everything going on in your business. But you’re facing the reality that you simply can’t be everywhere at once and what’s more - you don’t want to. You got into entrepreneurship to have a level of freedom, and this is not it. So you decide to scale. Scaling is about taking yourself out of the way of your business so that it can grow beyond you. This involves effectively duplicating yourself and empowering the business to run without you.


It would be great if that was it - evergreen money forever with your business running on autopilot. But there is a stage after Scaling, and I’m calling it Exit/Decline/Renew. At this point, one option is to “cash in” by selling the business to someone else. But for those of us who want to stay in the game, there are only two options: Decline or Renew.


Notice there is no option to simply Maintain. This is because your business will always be affected by four things: your personal life, society, world events, and financial markets. Because of these four things, you will not be able to run your business five years from now (or maybe even 12 months from now) the same way you are running it today. You will get married or have children. Your parents will age and need to come live with you. Changing circumstances will lead to an interstate or even an international move. If nothing else, you will get older and what you want out of life will change. Aside from personal changes, societal thinking will change (what is socially acceptable, what people expect from brands), there will be world events (natural disasters, public health crisis), and lastly, financial markets will shift and the economy will expand and contract.


As a result, there is no option to simply Maintain. The only way to stay in business is to Renew. And if you stay for the long-haul, periods of metamorphosis are par for the course.


Soooo…. Legal?


Oh right, this is a legal blog. With that background under our belt, let’s talk about your relationship with legal.


The bottom-line here is that growing a business requires gradually move from DIY to Done For You. Most people struggle with this; they hold on to a DIY mentality too long and the business suffers (not to mention their own piece of mind).


When you first started your business, you probably started with DIY legal. You downloaded some contract templates from a website, Googled how to start an LLC, used Legal Zoom for some odds and ends, and called it a day.


The problem is that now you're way past startup, but you never took the time to set your business on a firm legal foundation. As a result, you’re running a six figure business using outdated contract templates that might not even be enforceable in your state. You’ve built a strong brand, but never registered your trademark, which means a cease and desist letter is almost certainly in your future. You’ve developed this amazing product, but never bothered to register the copyright. So there’s nothing to stop someone else from lifting it, putting their name on it, and re-selling it themselves.


It's the equivalent of having your beautiful forever home sitting on a crumbling foundation.


Stages of Legal Support


So what are the stages of legal support?


Once you graduate from DIY, your first foray into legal support will probably be hiring an individual lawyer. Individual lawyers can handle things like trademarks, copyright, contracts, lawsuits, legal strategy, employee issues, executive compensation, data privacy, stock options, advertising regulations, and a multitude of other business law subjects.


Depending on which industry you are in, you may never need to move beyond your trusty neighborhood lawyer or small law firm. However, if you are in a highly-regulated industry, you may eventually need to hire a large, multinational firm. I came from a BigLaw firm, so I may be biased. But in my personal opinion, no one does government regulation better than BigLaw. So if you’re in an industry where you need to keep the SEC, FDA, FTC, DOJ, or any other three-letter-agency happy and you are big enough to be on the government’s radar, you might need to think about bringing in the big guns. Nothing ruins a good time like a government investigation.


Beyond that, you may eventually reach a point where you need weekly access to a lawyer. You simply have an ongoing need for someone to be reviewing your contracts, drafting new ones, monitoring new laws, registering your trademarks and copyrights, negotiating your deals, researching new projects you want to take on, etc. At that point, you’ll probably want to hire a lawyer full-time. This person is called a General Counsel or In-House Counsel. As time goes on, you may hire more lawyers until you have a full blown, in-house legal department.


Takeaways


So there you have it. Now that you know what the landscape looks like, where are you in that picture? Are you in a Growth or Scaling Stage, yet never upgraded the legal support you had in the Startup Stage? Is your intellectual property unprotected and are your contracts outdated?


If that is you, don’t fret. The good news is, it’s never too late to begin.





Thanks for reading the Bevel Law Blog! While this information is hopefully helpful to you, nothing in this blog is intended to be legal advice. Always consult a lawyer before making any legal decisions based on topics in this blog.

Ready to start legally protecting your business as you scale? Book a call today at bevellaw.com/book.


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