Once a business has moved beyond idea stage and begins to generate traction, the focus naturally shifts to growth. Revenue increases, teams expand, and new opportunities emerge.
However, this is also the stage where underlying structural weaknesses begin to surface.
Growth, in itself, does not create stability. In many cases, it amplifies inefficiencies, exposes gaps in governance, and places strain on arrangements that were never designed to scale. At this stage, structure becomes critical not as a formality, but as a framework that enables sustainable growth.
The Shift from Founder Led to Business Led
In the early stages, businesses are often driven by a small group of founders making quick, instinctive decisions. As the business grows, this model becomes harder to maintain.
Key questions begin to arise:
- Who makes decisions, and how are they made?
- How are profits distributed or reinvested?
- What happens when new investors or stakeholders are introduced?
- How are disputes resolved?
Without clear answers, growth can lead to friction rather than progress.
Shareholding and Control: Aligning Interests Early
One of the most important areas to address at this stage is the relationship between shareholders.
In many businesses, shareholdings are initially divided based on early contribution, rather than long-term roles or expectations. As the business evolves, this can lead to misalignment.
Issues commonly arise where:
- Founders contribute differently over time
- New investors require influence or protection
- Key individuals are not properly incentivised
- There is no clear mechanism for exit or transfer of shares
A well-drafted shareholders’ agreement can address these issues by setting out:
- Decision-making thresholds
- Reserved matters
- Dividend policy
- Exit provisions
- Protection for minority shareholders
Aligning these arrangements early reduces the risk of conflict later.
Funding Growth: Understanding the Options
Growth requires capital, but the way that capital is introduced has long-term consequences.
Businesses typically consider a combination of:
- Equity investment (issuing shares)
- Debt funding (loans or lending facilities)
- Convertible instruments (bridging the gap between debt and equity)
Each option affects:
- Ownership and control
- Cash flow and repayment obligations
- Risk exposure
- Future funding rounds
It is not simply a question of securing funding it is about structuring funding in a way that supports the long-term strategy of the business.
A major consideration post receipt of funding which is often overlooked is that there may well be covenants in place that prevent further funding being obtained or even worse restrictions placed on thresholds of operational cashflow that needs to be factored into day-to-day decisions.
Governance: Creating Clarity as Complexity Increases
As businesses grow, informal decision making becomes increasingly difficult.
Governance structures provide clarity around:
- Roles and responsibilities of directors
- Board decision-making processes
- Delegation of authority
- Reporting and accountability
Directors must also be aware of their statutory duties under the Companies Act 2006, particularly as decisions begin to carry greater financial and operational consequence.
Good governance does not slow a business down it allows it to move forward with confidence.
Protecting Value: Intellectual Property and Key Assets
As the business develops, its value is often driven by:
- Intellectual property
- Brand
- Customer relationships
- Data
If these assets are not properly owned and protected, value can be diluted or lost.
Common issues include:
- IP owned personally by founders rather than the company
- Lack of clear assignment agreements
- Weak contractual protection with employees or contractors
Ensuring that key assets are correctly structured and protected is essential, particularly in the context of future investment or exit.
Tax and Long-Term Planning
Growth also brings increased scrutiny on tax efficiency. At this stage, businesses should consider:
- How profits are extracted (salary vs dividends)
- The tax implications of share structures
- Incentivisation schemes (e.g. EMI options)
- Long-term planning for founders and key stakeholders
Tax and legal structuring should be aligned, rather than considered in isolation.
Johnson & Boon Insight
The most common issue we see at this stage is not a lack of growth; it is growth without structure.
Businesses move quickly, opportunities are taken, and decisions are made in real time. However, without a clear framework:
- ownership becomes unclear
- control becomes contested
- and risk becomes difficult to manage
Taking time to review and refine structure at this stage creates flexibility and protects future options. If your business is growing, it is worth asking whether your current structure is designed to support that growth.
A well-structured business does not just scale it scales with control, clarity, and confidence.
