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!

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.