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FINDING THE PERFECT PARTNER
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Choosing a partner is a serious decision. You need compatibility, trust
and shared goals. But Bridget Carter isn't talking about marriage.
you have decided to go into business with your best frierkl,your wife or maybe even your father. But despite all the good in tentions,a business with a loved one can go horribly wrong. So before diving into something that could last a lifetime, you need to think carefully about the consequences.
The person Choose someone who shares your values. You might love them, but are they hardworking? Do they want to take the business in the same direction? Do they have integrity?
If the answer to these questions isn't yes, then the decision needs to be no. If you're not sure, don't do it. It is better to hurt their feelings now rather than destroy the relationship forever. People who do not say no become the subject of horror stories.
The magistrates' courts hear them week after week, where a once much-loved friend and business partner has embezzled money, cheated their relative, partner or former friend or cut corners by shirking their duties, leading to a potential criminal case.
Given all this, if you do trust your chosen partner you should also consider your compatibility.They might be talented and have your full admiration and respect, but you need to make sure that you will be able to get on. For instance, two stubborn personalities don't always bide well when it comes to making a good team.
Getting out Right from the start you need to have a strategy for ending the business. Get some independent help. Ben Woolf, associate solicitor at Barker Gotelee, explains to his clients that this is really like an insurance policy.
say to them:'! hope when we have done all of this drafting we can put this in the drawer and forget about it'."
Professor Robin Jarvis, head of small business at the ACCA, says that in the classic entrepreneurial business people go in knowing when they are going to get out.
It could be that one person wants to get into a business as a 10-year project where the other person sees it as a life-long venture.
According to a research report by the ACCA on Accountancy Practice and the Provision of Ownership Succession Advice, most people put succession to the back of their minds until a change in circumstances acts as a trigger, suddenly making them want to be out of their business within two or three years.This usually occurs when people are in their 50s.
The politics Getting into business with a family member or wife or bringing them into the business at a later stage can create major political problems within the company. If this person does not have the skills or experience, not only will it make other staff members unhappy, but the business could suffer.
Jarvis says he knows of these cases. "There are the classic succession problems and awkward situations in families," he says."Some say that brothers are favoured in a family of four.rlhe brother can turn up from wherever and he is suddenly favoured.
"Discrimination against women is a common problem within families," he says — but there are others.
Woolf says he knows of a situation where a father in his 50s left his haulage business to his 21-year-old son. But after the father transferred all of the shares over to him the son turned around and fired the father. He then frittered away the business's proceeds.
In another example he knows of a son who set up a business and was running it alongside the business owned by his parents. When he lost his 0-licence, his parents ended up doing much of the work lor him. But as a result, the parents' business suffered.
The money
It might be easier to get a loan when there are two people, hut this is because the banks like having two people logo after to collect debts, according to Woolf."If the partner has no money, the bank can go after you.The banks will want personal guarantees from the directors."
'Mink also about the finances with respect to divorce. If your partner gets divorced, half of everything he or she owns in the business can go to their spouse. "In cases of divorce,what would normally happen is that one partner would buy out the other."
This can he problematic with succession. You can get a legal agreement called Articles of Association, which says the business is allowed to be passed on only to certain people. "But the courts hate that,"Woolf says."They will usually make the family member who has split from their relationship pay out a lot of money."
Woolf adds that you also need to decide what structure you are going to run your business through—whether it is a partnership or a limited company.
Banks and finance companies are more used to dealing with limited companies than partnerships. he says.
The workload
Put in writing who does what and decide how hard you will work.
If a partner says they will manage the finances of a transport firm while the other manages the transport desk, you need to make sure they have the talent to do the job.
Small business adviser Paul Tomkinson, who runs M&I,says many couples fall down by giving up a good job to do the bookkeeping. Or else they do it badly in their 'spare' time.
"There is nothing lobe gained by having your personal partner take on an adm in role if they are unable or unwilling to do it," he says. "If all partners can't add value to the business then contract out the work you can't do to someone who can."
You need to seriously consider whether this person is going to be prepared to make awkward calls such as chasing up late payments. Or that they are going to respond quickly to immediate requests to fax PODs to ensure payments are made on time.
Tomkinson says combined personal/ business relationships tend to be either very good or very had. You must be able to separate the two. Otherwise the issues on one side will spill over onto the other.
-In business your relationship will be tested to the limits. If you have respect for and confidence in each other's abilities you have a chance. But remember this is a business." w