Together we’re stronger. How collaborating with other business owners could save your business.
At any time of financial crisis, the first thing to do is take stock, assess your business model and to plan your survival strategy.
This article focuses on a particular area of growth – partnerships. We look at how forging relationships with the right partners can cut your costs, boost your market presence, increase sales, and so boost your profitability.
So what do you know about partnerships, how they work and the benefits they can bring? This article will explain all.
The health check
But before embarking down this road it’s vital you give your business a thorough ‘health check’, to establish a starting point for you going forward.
Specialist help is a must here: your accountant or advisor will bring a ‘fresh pair of eyes’ to your business, and they’ll help you spot the tell-tale signs of financial difficulty. These include:
- Lack of cash in the bank account.
- An increase in borrowing or use of bank overdraft.
- A slowdown in sales and/or rising stock levels.
- Late payment of suppliers’ invoices.
- Receiving an increasing number of final demands from suppliers.
- VAT and PAYE arrears.
- Late payment of staff or staff put on reduced hours.
- High turnover of staff.
- Cuts to directors’ pay and/or bonuses
If any of these apply to your business then you should seek professional advice from a business recovery expert, who can provide suitable turnaround solutions.
It’s vitally important that you act decisively. Delay at this stage could prove fatal to the business. However, if you establish that it has solid foundations and is viable going forward, then it might be a good time to look at forming strategic partnerships with companies or individuals who can provide the expertise – or the finance – you might be lacking.
At this point it is worthwhile looking at your use of technology, and how you use the internet to market your company and sell your products and services. The simple question is this: could you re-focus your business to exploit the advantages online can bring?
If the answer is yes, then partnering with a company with experience in your sector could pay dividends.
Lloyd Jones, Senior Client Relationship Manager at PR/marketing agency Get Seen Now, explains: “You should be focusing on your online presence by creating a better mobile experience, improving your sites, and consider setting your business up on some more social media channels, if relevant.
“Social media engagement has grown by about two-thirds since the pandemic began, with platforms such as TikTok experiencing particularly high growth, so if there’s a platform you’re not using that can strategically build your profile, it’s always worth exploring.”
Partnering: the pros
The benefits of going into partnership(s) can be many-fold and long lasting.
Pooling resources or sharing services.
By partnering with a business that operates in the same sector you can negotiate a contract to share the centralised services of an IT, marketing, PR, human resources, legal services or accountancy professional. This will give you access to the back-office operations that you might not usually have the budget for.
You might have great products or services, but might be weak when it comes to, say, marketing and promotion. Creating a contra-arrangement with a marketing or promotions agency that knows their sector could generate more sales, while also raising your company’s profile. This mutually beneficial exchange of products or services is a way to gain much-needed skills without extra cost.
A good partner will bring knowledge and experience you may be lacking, adding complementary skills to help you grow your business. Not only that, they will free up your time and resources, allowing you to focus on your core business.
An injection of enthusiasm.
There are other advantages that will be more personal. Working with a new partner or partners can stimulate enthusiasm and creativity, breathing fresh life into your company. If you’re a sole trader it can relieve the stress that inevitably comes with working solo, especially when the new partner brings expertise to areas where you might have struggled. You could be more motivated to tackle the things you are good at, secure in the knowledge that someone else is handling the ‘other stuff’.
All of this should help you re-focus and move forward, as the refreshed, more agile business shakes of the shackles that were holding it back.
Partnering: the cons
There are, of course, disadvantages that you should be aware of.
Loss of control.
Depending on the nature of the agreement between the respective partners, you may lose autonomy over certain areas you ‘cede’ to your partner.
But remember, you partner with an individual or another firm because you need the requisite expertise, so you have to be prepared for the partner to use this expertise in the way they think best.
Relationships can – and do – go wrong. Don’t discount your emotions in weighing the advantages and the disadvantages of a partnership. Out the outset, look for a partner who shares your vision, has similar values, a similar outlook and similar goals. This can go a long way towards preventing problems further down the line.
Multi-partnering, where four or five (or more) companies band together, can bring significant cost savings as the group will have increased ‘buying power’, and so be able to negotiate deals in a range of areas. These typically include payroll services, insurance, legal services, HR, information technology…and so on.
Similarly, the cost of fundamentals such as staff training, data protection and compliance, database management – there are many others – can be split between the partner companies.
Another version of multi-partnering is to form a board of like-minded business owners in different sectors. While your businesses remain separate, these are people who can support and advise on another, and give a fresh perspective on how to tackle your business’ challenges.
It may be that a more formal, legal partnership arrangement is suitable, meaning you and your fellow directors have to give up equity to secure the services of the new partner.
While this may be an unattractive proposition to many, there are considerable advantages to be had.
An injection of cash into the organisation.
A new partner might be prepared to invest in the business or may help attract potential investors and raise capital to grow the business. The right person could, by reputation, experience or even contacts, improve your ability to borrow money.
If your business needs an injection of cash then it will be worth your while to talk to a business rescue expert who can guide you through the process of how to identify a suitable partner and ensuring any realignment of the company is the best interests of all the parties concerned.
A different view.
A new partnership can introduce a fresh pair of eyes, to spot previously overlooked weakness or new opportunities. This is especially the case where the new partner has a different area of expertise than the directors in situ.
They may bring a new perspective on areas of major importance, such as markets sold in to, product range, pricing policy, suppliers used, staff roles and use of the internet to drive the business. And they may also suggest smaller changes to ‘fine tune’ the business to operate more effectively and profitably.
There are, of course, disadvantages to be considered before any contracts are signed. We have already touched on them earlier in this article.
- Loss of equity or shares.
- Loss of control. If you are a sole trader, or run a micro-business, then you will have had total control of the company and its operations. Signing a partnership deal changes this, and it’s easy to underestimate the emotional impact this might have.
- The money! What happens if you think your new partner is not ‘pulling their weight’? This could lead to disputes over payments or bonuses that could de-rail the arrangement. With this in mind, it’s vital that a ‘Deed of Partnership’ is put in place, to ensure that all parties are aware of what procedures will be in place if there is disagreement and what will happen if the partnership is dissolved. More about that below.
Member organisations can provide considerable help both financially and with expert advice. Let’s explain by way of an example.
The ICPA, founded almost 20 years ago and now well-established, was set up by five accountants based in Essex. The aim was to provide help and advice to accountants (who became members) who had nowhere else to turn.
The organisation now has almost 1,150 member practices, which pay a monthly subscription based on their size. In return members benefit from discounted PI insurance, as the organisation ‘bulk buys’ the insurance for every member practice.
Other benefits include telephone helplines, CPD and training, discounts on software, newsletters and other communiqués, cut-price access to technical publications…and many more.
It may be that you operate in a sector that have similar member organisations or trade bodies that can offer you similar financial and knowledge benefits.
Setting your goals
Once you have weighed up the pros and cons of setting up partnership arrangements, you need to sit down with your trusted advisor(s) to set some goals, and devise a strategy on how to achieve these goals.
Define exactly what you want from the partnership.
Is it a cash injection? Is it to acquire greater expertise/experience in the marketplace? Is it complementary skills, or filling a skills gap? Or someone to share the burden of running the business with?
This is a crucial point, as the answer will determine who you or your advisors approaches to partner with. Don’t approach someone who could improve your access to capital when what you really need is someone to sort out the company website.
When you have established this ‘ultimate’ goal, then draw up a list of potential partners. This will mean a good deal of research but it is an area where your accountant will be able to help. Perhaps you (or they) know of someone, personally or by reputation.
Establish what you yourself bring to the table.
In effect, when you approach a firm or individual to partner with you are ‘selling’ yourself. Why should they partner you? How do they know your company is built on solid foundations, and that they would not be risking their time, capital or reputation by working with you? It’s up to you to reassure them that, together, you have a bright future.
Draw up a document profiling your company.
Included its history, products and services, market presence and plans for future growth. Think of it as a ‘corporate CV’. This is your sales document – something to impress potential future partners, to make them want to partner you.
Approaching a prospective partner
Once you’ve identified a potential partner then it’s time to approach them – possibly through your accountant or business advisor.
If they show an interest then suggest a formal meeting, perhaps at your accountant’s office. If after negotiations both parties are happy to proceed, you may want to involve business specialists to help prepare a ‘Deed of Partnership’.
This is a document drawn up by the new partners that should contain:
- The names of the firms involved.
- Name and details of all partners.
- Date of partnership starting.
- Duration of partnership (if applicable).
- Capital contributed by each partner.
- Profit/loss sharing ratio.
- Salary/bonuses/dividends payable to partners (if any).
- The procedure if disputes arise between partners.
- Procedure for disbanding the partnership.
Once this is signed and sealed, you’re ready to go!
Successful partnership working
So what makes a successful partnership? The North of England Social Partnership Forum is a partnership of healthcare professionals and agencies. It identifies the following as factors necessary to make a partnership work:
- Having mutual respect.
- Actively listening to each other.
- Working from shared values.
- Being honest.
- Being solution-focused.
- Acknowledging each other’s views.
- Open communication and information sharing.
It said: “If we fail to actively listen to each other, acknowledge each other’s views, share information openly and honestly it is highly unlikely that we will have mutual respect.
“At the heart of partnership working is trust, building and maintaining trusts requires us to practice each of the behaviours above consistently overtime.”
Partnership arrangements can help increase a business’ potential, making it more adaptable, agile and fit-for-purpose in today’s challenging business environment.
It can bring new skills to a company, re-invigorating and re-energising those involved, motivating them for the challenges that lie ahead.
A professional advisor can help you jump the hurdles that you face, giving you the right advice at the right time. And ensuring you get the right partners to move your business forward to a more profitable, more secure future.
If you need help solving your business’ challenges, we can bring the practical experience and know-how to help you evolve and adapt to thrive in the future.