Business Health Check
Business is about maximising opportunities and controlling risk.
While entrepreneurs often focus on opportunities and mature businesses focus on controlling risk, the two issues are inseparable.
Whether informally or formally, all business owners have a strategy to get the most out of their business and avoid risks. We recommend all business owners take the time to set out that strategy in writing and review it regularly.
This article expands of our video on “business health checks” where we explain how we can assist business owners get more out of their businesses. Below are some tips on the kind of legal risks that should be considered as part of an overall business strategy.
Terms and conditions
The relationship with customers is perhaps the key opportunity and key risk of any business. The process of finding and assessing appropriate customers as well as the terms and conditions of supply are critical.
Businesses should carefully consider who they are selling to, if they will be paid on time and if the margin is appropriate. The terms and conditions of supply should always be in writing and include terms regarding price, payment, default, warranties, cancellation, limitation of liability, recovery costs and legal compliance.
However your business is structured, (company, trust, partnership etc), you should have an agreement in place that regulates the relationship between the owners. For example, a company with multiple shareholders should have a written shareholder agreement which includes clauses relating to how decisions are made, how profits are distributed, how a shareholder may be replaced, how shares should be valued and how any deadlock may be resolved.
Having a written agreement gives the owners alignment and clarity around their role, obligations and entitlements and make it easier to raise capital. In the event of a dispute, the agreement will also provide a roadmap to resolution.
A key risk of any business is its relationship with its people. The recent media coverage shows the serious consequences of breaking the Fair Work Act 2009 (Cth). But even beyond pay and entitlements, owners should consider how important information such as customer or product information are protected. Similarly, the employment contract should prevent employees from taking customers with them when they leave the business.
Often the most valuable asset of a business is its brand. However, many businesses have not registered that brand via a trademark. Registering a business name with ASIC does not stop your competitors from using the same or a similar name. A registered trademark does.
Taurus Legal Management are specialists in business risk assessments. Please do not hesitate to contact any member of the Taurus Legal Management team on (03) 9481 2000 or firstname.lastname@example.org.