Beware of Partnerships!

Are you in a business partnership?

It might seem strange to think you need a partnership agreement when you’re in business with an old friend or husband/wife/civil partner/personal partner. But things can go wrong and I’ve seen it happen a lot in the many years I’ve been an accountant (and even before!).

Here are some possible scenarios:

It could be your partner dies and you suddenly find his/her share has been been passed to a relative or personal partner you don’t know/like. What do you do if they try to prevent you making decisions to move the business forward or dislike what you’re doing?
It could be your partner has a long-term illness and can’t work in the business. As a partner they are still entitled to their share of the profit whether they do any work or not. Do you work twice as hard or get help and diminish the profit, including your share?

It could be your partner decides to retire and wants their share out of the business. Do you have to sell all the business assets in order to give them their money? What happens to the business you’ve spent years working on?

It could be your partner and you can’t agree what direction to take the business in. I have seen businesses paralysed for years through indecision and because there was no guidance to resolve disputes.

It could be your partner takes out a loan on behalf of the partnership and then runs off to the Cayman Islands. As you don’t have a partnership agreement the law states ‘you are jointly and severally liable’. Which means, if the lender doesn’t get paid you’re personally liable for the loan.

All of the above scenarios are very real and could easily happen. But if you have a partnership agreement in place then you will have a legal document to help resolve many of these issues.

It’s not a difficult process to put in place. Talk to your solicitor (and make sure they are used to commercial, not domestic, law) and ask them to set up an agreement for you. Then get your accountant to have a look over it in case there’s something missing.

Your accountant should be nagging you to get one in place anyway!

What stops your Business from growing?

In our recent Business survey nearly 50% of you said you found growing your business a real challenge. But what is it that’s stopping you from growing? Sales or increasing your turnover is a real issue and my last four blogs have covered that issue.

What about cashflow? 26.2% of you mentioned this and 9.8% mentioned it was a struggle getting paid. So let’s assume that cashflow is not just linked to lack of sales but to other issues we all face, like:

• Having to wait 30, 60, 90 days or longer before you get paid and sometimes not getting paid at all
• Too much money spent on running your business and not knowing how to cut that expenditure
• Lack of funding from the bank and not being able to get help when you most need it

What if you could do things differently which means you get paid faster? Would that help your cashflow? I want to share some stories of business owners doing things a different way and getting great results.

If you’re not in the sort of business where you get paid straight away for your product or service you might find you have to wait months before you get paid. Your bloody customers just don’t understand that you’ve had to pay out for materials or rent or wages. Well don’t be too quick to blame your customer. After all who set up the terms and conditions? Who said you had to offer 30, 60, 90 days credit?

You might think it’s the norm within your industry but you know what your customer might not have that same ‘norm’ within their brain. One hynotherapist I know would take bookings for a course of hypnotherapy sessions and her ‘norm’ was 50% upfront, the rest payable in equal instalments at each subsequent session. When she changed one sentence she got a lot more money more quickly. Instead of asking for the 50% deposit, she said ‘how much do you want to pay today?’ Most of her clients paid the full amount!

I would suggest to her going one step further – change the terms and conditions to 100% upfront. She then has the flexibility to offer payment terms, if necessary, while most of her clients paid in advance. Do you set up conditions that mean you don’t get paid as quickly as you could?

A graphic designer, when she set up her business, gave her clients 30 days to pay once the work was complete. However the major frustration she had was that many times the client stalled the work while she had to wait for their feedback before she could complete it. So not only did the work drag on for longer but she couldn’t get paid until it was all done. I suggested she put in a plan to get paid in instalments over the period of time she expects the work to take.

She asked for a deposit of 50% and then agreed instalments and dates with the client before the work went ahead. She got paid much faster and clients were less likely to stall the work as they were paying for it whether it was finished or not. By changing her conditions she didn’t lose a single client, she got paid faster and her workflow was smoothed out.

So don't hide behind the excuse that in your industry it's just the way it is. There are lots of Business Owners doing something that little bit different from the 'norm' and as a result making more profit, getting paid faster, and getting more freedom.

More sales for less effort

If you think of what you do as solving a problems for your customer, what other problems could you be solving for them? And what sort of impact could that have on your sales? You surely know by now that I’ll want to talk you through some figures! Let’s have a look, and I’ll use the same figures as my last blog. Your sale is £50 and your customers buy on average 4 times a year (but you’ve now increased this to 5!). However let’s just stick with 4 times just now. If there was something extra that your customers could buy at that point, and it might be an extra £5, that’s £20 per customer. You’ve got 500 customers so that an extra £10,000 in sales. That’s the equivalent of another 50 new customers.

Now I know it’s easy to come out with figures and I don’t really expect all your customers will buy more every time. But can you see how this is worth considering?

It could be that you offer different levels of service to different customers and that’s how you can increase the average spend. There is evidence to suggest that 10% of customers will always buy the most expensive option. If you don’t offer them alternatives you could be leaving a lot of money on the table. Or they may even go elsewhere for that premium service or product.

We’re all familiar with the upsell, for example:

MacDonalds – ‘Do you want fries with it?’

Restaurants – ‘Would you like a drink while you’re looking at the menu?’ ‘Would you like a dessert/coffee?’

Airport parking – ‘Do you want us to park your car for you?’

Hairdressers – ‘Would you like a treatment to keep your colour longer?’

There’s a whole load of others and I’m suggesting if you’re not doing it in your business then you are not solving all of your customers’ problems. Some of your customers are really short of time and would appreciate something to help with that. Some of your customers trust you and are happy to buy more things from you. Some of your customers like to have the best quality. So why not help them?

To be frank if you don’t help them they may think you just don’t care enough and go to your competitor anyway. And you don’t need to provide it all yourself. There may be a like minded business owner you can join up with and recommend (for commission or not) to your customers. They in turn may well return the compliment.

By thinking in a slightly different manner you might not need so many extra leads or new customers. It’ll cost you less to use your existing customer base, you can do it in less time and you can strengthen you customer relationships at the same time.

More Secrets to Increasing Sales

So how do you get existing customers to buy from you more often? I don’t know your specific circumstance so I’ve got to be pretty general here to try and cover as many bases as possible. But if you look at the maths (I’m pretty keen on this!) it could make a real difference to the sales and profits of your business.

Say you have a product/service you sell for £50 to your customers on average 4 times a year. What happens if you can get them to buy once more from you? That’s £50 more from each customer and you only need 4 of your already happy customers to buy once more from you to replace a new customer. If you have 500 customers then  that’s £25,000 in extra sales right there. Can you see why this could be really powerful?

So how can you go about this?

If you’re in retail and you sell to consumers there’s lot of things you can do and I’m sure you’re already doing some of them. For example if you have a seasonal sale and offer extra discounts to your loyal customers. This could be enough to encourage them to come back to you for some extra bits and pieces they wouldn’t normally have bought.And might just give you the opportunity to sell something else to them while they're there.

A general one we can all use is send a newsletter to keep them informed of what’s new (or the new lines you have) and how you can solve a particular problem they might be facing. You may be able to give them some tips that will generate some thoughts about how else they can use you.

You might even be in the type of business where you can give them a call when you know they may be running out of a particular product. Or you know they have a challenging situation you could help them with. This can be used by personal services too eg hairdressers, dentists, beauticians, gyms/trainers ('hello, haven’t seen you in a while').

None of this is rocket science it’s really just looking at ways we can help customers, because after all we’re here to solve their problems in some way or another.

Next time I want to look at increasing customer spend and how you can increase your sales by solving more of their problems (and perhaps ones they didn’t even know they had!)

Increasing sales using your price

In my last blog I spoke about increasing sales and all the elements that make this up. One of them is pricing and for most of us pricing is difficult. Do you use the following method to price? – more expensive than the cheapest competitor and less expensive than the dearest competitor.

Is that the way to do it? I don’t think so…. we rarely make buying decisions based just on price. If that's the case we wouldn’t buy pre-packaged lettuce (300% more expensive that washing it yourself!), we wouldn’t buy Coca Cola (Pepsi was the preferred option in taste tests!), we wouldn’t buy new cars (we all know 2^nd hand cars offer better value for money!).

So if you don’t buy on price why do you assume your customers buy only on price? I’m afraid it’s all in our mind, so we really need to expand our thinking on this one. After all if you put your prices up by 10% how much more profit would you have in your business? If your sales are £100,000 then that’s another £10,000 in profit. Now you may lose some customers but how many would you need to lose before you made no extra profit?

You would still be less busy for the same profit. What changes could that allow you to make in your business? What other opportunities could you take?

I’m not suggesting you just put your prices up, there are lots of different ways of doing this successfully and this blog is just too short to go into them. I do have free webinar you can listen to that takes you through how to do this. To register go to pricing webinar

Next blog I’ll reveal how getting your existing customers to do one thing could solve your sales problems for ever.

The Secrets to Selling More

We recently carried out a survey and got some real insights into how people are coping with the current business climate. Many thanks if you’re one of the business owners who've completed it.

What you told us is that business growth is a challenge and over 79% of you were looking for more customers. Getting new customers is one key piece of the puzzle that makes up your sales - but it might not be the most important piece.

The way to think about your sales or turnover is to break it down to its different elements. These are:
- Customers
- Price
- How often your customers buy from you
- How much they buy at one time
- Defection rate ( ie how many of your customers return time after time?)

If you’re always chasing new customers then you might just be pissing off your loyal customer base. Have you ever been annoyed by the great deals new customers get from, say, your telephone provider? Or bank? Or insurance company?  You might just be doing the same thing to your valuable customers because you don’t give them enough attention and you don’t do enough to develop customer loyalty.

Why do your customers leave?
The reason they leave and go to your competitor is down to the perception they have of how you treat them. And - that is you don’t care enough about them - 68% of the time that’s why your customers leave.

So just maybe you’re looking at the wrong thing! Do you have a loyalty scheme or offer them something that new customers don’t get? Do you thank them for being customers? Do you even like them? I hope you do and let them know.

It may be costing you a lot of money if you’re losing customers – and you might not even know you’re losing them. Do you measure this?

If you kept 95% of the customers you have and turn some of them into raving fans how much easier would it be to attract more sales?

What ideas could you come up with that would keep your customers loyal and help them spread the word to their friends, family and contacts? Take some time out and come out with some ideas. Let your imagination run riot!

Next blog I'll take you through how to price your product or service and how this can make a huge impact on your profit- in no time at all.

How to do everything and still have time left

In  a small business you wear lots of hats and if you're like me when you started your business you try to do everything yourself. 

One day you wake up frazzled and poor and wonder what exactly are you doing? It's called overloaditis. OK I just made that up, but we don't want to spend more money than we need to, right? And it's just not sensible spending money on getting someone else to do something we're no good at and that takes us 4 times as long, right?

As the Americans would say - let's do the Maths! You're doing your own bookkeeping, you hate numbers so you procrastinate for an hour (or two) before you sit down and do it. If you're hourly rate is £50 an hour that's already cost you £50 and you haven't done anything yet!! Then multiply that rate by 4 when you do something as it takes you much longer. So what are we up to for that month? Well let's be generous and say it takes you 6 hours, that's £300 plus £50. How much would it cost for a bookkeeper? Even if they charge the same hourly rate as you it would cost you £75.

You've also lost opportunities - how much could you have sold in that time? Or what else could only  you do for your business that would reap rewards?

And don't even get me started on if you answer your own phone. Instead of being interrupted midway through something and answering with a snarl. You could get someone really pleasant to answer and take a message. Freeing you up to do what you're great at.

Don't get sucked into false economies! Do yourself a favour and only do what only you can do....