September 7, 2020
Jack Ma, founder of Alibaba, is a truly inspirational entrepreneur. His story is one of succeeding against the odds, which he attributes to persistence and smart business strategy. He speaks of the importance of learning vicariously through other people’s mistakes. It is a strategic blunder to assume you’ll get it right first time, so rather take the time to learn what not to do from others who have already gone through the pain of making their own mistakes.
Let’s contextualise this with an example of setting up an e-commerce business. Nowadays it’s easy right? Yes and no. The advent of Paypal has removed many trust barriers and the availability of drop-shipping means that logistics are no longer an issue. However, there are still numerous business and legal considerations that should not be ignored.
To support the start-up ecosystem, Stephen Thompson, Darwin Gray, and Alexander Leigh, Development Bank of Wales, share their top tips for things to be mindful of when establishing your e-commerce business:
Your business description is exhaustive and covers all potential categories that you might wish to operate in
Your logo and slogan also need to be adequately covered
You also need to decide which territories you wish to operate in
Lastly, on the day of filing, it is imperative that you run full searches on existing trademarks. There’s no point in going to the trouble of registering a great new brand if someone is already using it!
Getting any of this wrong could mean a costly and exhausting legal battle, or even that you need to rebrand which could set you back £100k, not to mention the hassle. This may seem obvious but you would be surprised how many times eager entrepreneurs do not do the basics.
Yes, you could adapt these from your competitor’s website or just grab something that you find online. However, without the benefit of your own legal advice, you will have little or no fallback if policies that you have copied from elsewhere do not provide you with the legal protection that you thought that they would.
Paying for a lawyer to generate these policies may seem like a nuisance at the beginning, however, when legal issues crop-up down the line, your future self will be thankful that you took the trouble to put in place a robust set of documents.
If you’re seeking external capital, this is certainly something that investors will insist upon. Make sure your employee contracts are properly drafted so that all IP is immediately assigned to the company, otherwise you could end up in a tricky situation legally. Also, where you have used consultants to help you with logos, website content and the like, make sure that they have transferred the IP rights to you that they create on your behalf. The last thing that you want to find when you are trying to get an investment deal over the line is that you don’t own your business IP.
Make sure you are following the letter of the law at all times. You could spend a large amount of time and money dealing with a claim by a disgruntled consumer or alternatively answering to the local trading standards office if you are not following the rules.
If you plan on holding customer (or any) personal data, you should make sure you are up-to-date with the GDPR. Fines for getting it wrong can be the greater of 2% of your worldwide annual turnover or €10 million. With a relatively modest investment in a privacy policy and other appropriate steps, you can ensure that you are compliant with the law.
Setting up an online e-commence business is exciting and potentially very rewarding. However, it is essential that you work your way through the basic steps in doing so, taking appropriate legal and other professional advice along the way.
Contributors:
Stephen Thompson, Managing Partner, Darwin Gray
Alexander Leigh, Investment Executive, Development Bank of Wales
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