Some business partnerships are just meant to be and last for many years, even after the namesakes have long left the business. Think M&S, founded in 1884 by Michael Marks and Thomas Spencer. But not all business founders have as much enduring success.

In a previous article I covered the issue of how lonely being an entrepreneur can be. Linked to this issue which many sadly have had to deal with, is the ending (usually prematurely) of a business partnership.

Parting company with a business partner or partners can be traumatic, acrimonious and can get very messy, just like any relationship end.

Whether one partner gets cold feet, wants to take a different path in their career, doesn’t match the energy and vision of the other or if there’s a fall out. Whatever the reason for the breakdown, you need to stay focused on keeping the business going and filling any gaps their departure might leave.

The truth is, if success is slower than you hoped, you often start to see the darker side of your business partners. Stress levels rise, tempers fray and other people – maybe a spouse or family members might start interfering in the background about where the business should be.

Other common situations that can break a business partnership – the sleeping partner who wants to withdraw their investment,  the partner who thinks they can do what you do but better, even though you have agreed the division of roles, issues over competence, a person who makes questionable decisions without fully consulting or abuses the company credit card – the list is endless.

First thing to decide is depending on where you are on your entrepreneurial journey is if there is a business to continue if the other person leaves. It may be worth walking away and setting up a new business which gives you 100% control. Many entrepreneurs have set up their own business as they want to be self-employed and therefore teaming up with someone else just doesn’t work for them in the longer term.

If the departing partner brought to the business has a certain skill set, consider how that gap can be filled and how much that will cost the business in the short medium and longer-term. Again, you need to be realistic and consider if there is a business without them.

If you want to and can carry on without them, then it is hoped you will have a shareholder agreement which can be referred to. In this you will have already agreed exit terms already and this can be implemented swiftly and effectively to allow their departure.

A first question I always ask when talking to a founder in this situation is ‘have you spoken to the other person?’ You need to be able to reach a position quickly where both of you are happy with the outcome. Working with solicitors will help you to reach an acceptable agreement but it is essential to value the business right so that you are not paying them too much for their share and this can be critical for future business success.

Whatever stage of the business life cycle you are in, it’s important to maintain a strong cash flow position and you might have to review and adjust budgets and financial forecasts during this period.

It can be more difficult where you want to remove a shareholder or business partner, but they don’t want to go. Again, the starting point here is to refer to the shareholder agreement. It may take time to negotiate terms with them and it is likely to be more expensive to remove them in this way.

Where the sale of the business has been agreed to the remaining founding partner then a set of completion accounts might be needed. There is typically a 6/12-month contingency period during this process where final adjustments are made. Sometimes an audit might be needed to help with this process to provide credibility to the numbers used to establish a fair and accurate price is paid.

The more advisors who are involved, the more complicated the process can get so where you can work with advisors who are used to working together, then you will probably achieve a faster outcome.

Before and after the deal has been concluded, both the person exiting the business and the remaining founder in the business should review their own tax position and wealth planning for the future.

Business founders fall out regularly, some make up and for others it is the end. Make sure you have the right support at every step of your business journey.

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How strong is your business partnership?

There are so many different levels on which trust can make or break your business success that maybe it is something you should give more thought to.

Who do you trust and how do you build trust in your team are fundamental questions for any business owner to start with and review regularly, but also more broadly trust needs to be considered in the context of the industry sector you work in, trust in the products or services you deliver, trust in the government to support UK business. When you think about it, trust is central to everything.

The result of the general election may over time help to instil greater trust on many levels that are beyond your control as a business owner and so if you haven’t thought about it already, what can you personally do now to create greater trust to help your business grow?

Infrastructure

Start with having the infrastructure in place to minimise issues around trust in your business. If you are a business which handles cash, have safeguards in place so as your business grows, you will have more control and there will be fewer opportunities for theft or mistakes.

Can you ever trust your team 100%? This is often a real issue for entrepreneurs, especially when having to scale up fast and employing people for the first time or outsourcing aspects of their production or service offering to third parties.

Having the building blocks – the processes, the governance, the external advisors and support that allow you to grow will help to build trust. Use the knowledge and experience of your professional advisors from the beginning and at different stages of your business growth journey to help you to maintain and build trust every step of the way.

Culture

Having the right structure in place builds trust and helps to then shape the culture of the business. Where employees can work efficiently and effectively and are well rewarded for their efforts creates a more trusting and success focused internal culture. Put simply you deliver on your side of the bargain to your team, and they will deliver what your business needs to succeed. What is built on the inside of the business is also projected externally to customers and clients.

Relieve the burden

It is often underestimated how much hard work is needed for building and maintaining success and we know being an entrepreneur is often a lonely business. You need someone around you who can help to relieve the burden – a ‘right-hand’ person who you trust to enable you to think about the next big challenge. People who can act in this role are quite frankly gold dust to your business success and they will play a key role. Whether this is a family member, an employee or an advisor, think about who is critical to your success and do they trust you?

Be more trustworthy

You can’t succeed in anything unless people trust you, so keep your promises to others and yourself, no matter how small. If you can be trusted on the small stuff you can be trusted on the larger things.

Also only commit to what you can deliver. Many entrepreneurs have hastily promised and then had to back track. You won’t be the first or last person to do this and it is something which happens regularly, so avoid it.

The modern-day equivalent of “My word is my bond” from Shakespeare’s The Merchant of Venice is now your personal brand. Only promise what you can deliver and in the age of social media, make sure what you project professionally is matched personally.

Finally, if you can’t keep to a commitment or fulfil a promise, be honest and explain why. In business there are always so many factors that can impact on a business’s ability to deliver, but to maintain trust and keep clients and customers coming back to you even if you mess up means they must trust you.

Read more:
How important is trust to you as an entrepreneur?

The latest series of BBC’s The Apprentice concluded recently with gym owner Rachel Woolford receiving a £250,000 investment from Lord Sugar and a professional collaboration which should help to accelerate her business and open many new doors for the young entrepreneur.

Most entrepreneurs can only dream of finding their own Lord Sugar, metaphorically a Knight in shining armour to help them to grow their business. Private Equity investment opportunities has somewhat slowed down for some business sectors, although we are still seeing a lot of interest in biotech and tech related sectors and start-up businesses. This year there is likely to be a change in government and combined with the continued fallout from the cost-of-living crisis this is all having an effect on small businesses who need investment now to take them to the next level.

I think some entrepreneurs are stalling making the next step because they are waiting for success to come to them. Unless you are Rachel Woolford then most business owners need to change that mindset. Business ‘damsels in distress’ need to take ownership of the situation they are in right now. And if they don’t have it already, they need to put a robust and realistic plan in place to help drive their business towards success and find the most suitable funding to help them achieve it.

Businesses need cash to grow – whether that comes from existing sales or a lump sum investment. When to seek investors and finding ones who are suitable, or knowing how and when to seek borrowing and the options available are key issues for many entrepreneurs currently. Business owners can’t just put their business on hold while they wait for the perfect time, perfect investor, lowest interest rate etc, they need to go and find what works for them rather than wait. There is rarely a perfect time when everything aligns.

The medium term forecast for interest rates is that they are likely to fall and inflation has dropped. We are certainly seeing more lender appetite and much of the risk has already been priced into borrowing costs. This is where opportunities can begin for you.

With these signs that the economy has stabilised and it is finally heading in the right direction then it’s important to be ready for that moment when you decide to approach an investor or institution for funding to put you on a growth trajectory.

It has been said many times, but its importance remains, if you have a good, well documented business track record and a clear business plan then in my view it’s important to strike while there is demand in the market for your goods or services. If you are waiting for borrowing to be significantly cheaper or are waiting for your Lord Sugar to knock at the door then in that time period a lot can change, competition can grow and the market can move onto the next big thing.

I tell my clients that uncertainty and risk will always remain but if you really know your market, sector and your customers or clients then the risk is already calculated. You have done much of the homework.

If you haven’t approached business borrowing before then paying particular attention to the contract and terms and conditions is key. Borrowing can be taken for a longer period to help reduce monthly costs but with a break clause to allow you to redeem it early or make additional payments. Be aware of any personal guarantees you are being asked to make.

For some entrepreneurs crowd funding or peer-to-peer lending is also worth considering. This often works better for smaller investments where there is less risk and it is usually faster to turn around with flexible terms.

If you are still unsure if now is a good time then with the help of a trusted advisor (aka your Knight in shining armour), they can review where you are and the options open to you, moving your business onto the next level might happen sooner than you think.

Read more:
Do you need a Knight in shining armour in business?

Who and what data you trust in business is important and increasingly audits are being used to provide confirmation of the facts – whether to shareholders, potential investors or banks.

An audit is a statutory requirement for many businesses and is often performed on a voluntary basis by firms who do not otherwise have a legal requirement to have one undertaken.

The purpose of a statutory audit to form an independent opinion on the financial statements of the audited entity on whether the financial statements show a true and fair view and have been properly prepared in accordance with accounting standards.

There has been some speculation that audit thresholds may increase which in my opinion will be a shame as many smaller firms do (and could) benefit from them. Audits have more value than being just a tick box exercise and that’s an important message.

Currently you don’t need an audit if your business meets two of these three criteria:

• Turnover of up to £10.2m
• Net assets of £5.1m
• 50 or fewer employees

You do need an audit regardless of the above if your business operates in a regulated area where audits are mandatory, such as insurance or banking or if your shareholders (with at least 10% of a holding in the business) make a request for an audit. There are also specific rules for groups and subsidiary companies.

So, for businesses outside of these criteria, why bother with an audit?

The key point is that an audit provides reassurance and a credibility to your numbers. Management accounts whilst telling a certain story are not verified, and if in the future you will be looking for investors, to sell your business or to obtain significant bank lending then an audit can play a crucial role.

It may also highlight areas where your business might be missing out, such on lucrative tax reliefs as well as other tax benefits, or where your systems and processes could benefit from tightening up.

Who do you pick to carry out an audit?

Auditors need to be independent, and they are there to verify a set of financial statements which set out the performance of the business and give assurance that the numbers and the narrative are materially correct.

Like anything you pay for what you get, and the real value from an audit which many firms miss is to instruct a well-rounded firm who will look at your business holistically, may spot opportunities and who should tell you what tax reliefs you might be missing out on. They will also provide a management letter which gives advice on operational efficiencies – what is or isn’t being done well. Investors find this letter a useful document as it summarises for them what might be needed, what policies and procedures especially, to help steer a business onto a more productive and profitable path. It also provides confirmation that the right processes and procedures are in place for that business as it can benchmark against similar firms.

Just a couple of examples of audit success that I have seen recently is firstly where a business had not claimed tens of thousands of pounds in R&D credits as they hadn’t thought they qualified and significant tax rebates were subsequently claimed for them.

Also, where a group of businesses had not been structured for optimal tax efficiencies and a simple reorganisation produced significant tax savings for them. I could go on as there are so many other examples I have seen over the years, and the key point is that auditors who are professional, well-rounded businesspeople are able to spot opportunities that businesses can benefit from.

Of course, auditors are there to look for other things which may hide behind the numbers and with the risk of business fraud being at an all-time high, knowing you have the robust systems in place to identify risk and prevent it as well as cash and payment controls could mean the difference between success or failure.

Audit could be your eyes and ears on the ground where it is impossible to have oversight of all your operations so I would urge business owners to think about how it could help them on their business journey, rather than think of it as something burdensome that needs to be done once key thresholds are met.

Read more:
Providing credibility to your numbers

Being an entrepreneur and working on your first business can be lonely, especially in the early years, so how do you stay focused and on track to achieving your goal of success?

In my experience what most people don’t realise when they give up their job to work on their business full time is that they are losing a network around them. While you might have a spouse or partner cheering you on from the side-lines or working with you, loneliness is one of the biggest issues many entrepreneurs face because the time they need to dedicate to the business leaves little time for other people.

It’s also tempting to start comparing yourself with others, especially those on social media platforms – something which should be avoided. Every business and every business owner’s journey are different.

Where to start

Having the right team of advisors around you at the beginning is an investment in your business and it’s important for many reasons. They will have already been on the journey with different businesses and they understand exactly what you are going to need at the different stages in the life cycle. Setting up a business in the right way can help avoid serious issues further down the line.

First thing to get right is to structure the business in the most effective way so that tax savings can be optimised such as R&D credits in the early years and in the longer-term capital gains tax allowances when exiting the business.

The business needs to be compliant, and it needs to build systems and processes which can be scaled up and brought in-house over time. Day-to-day accounts, payroll and cashflow forecasts can be done virtually, making use of AI accounting software to save time, office space and money especially at the beginning, when you have little time and as the business grows with more suppliers and staff to pay.

Whilst succession planning might seem premature at this early stage it is important to build a business that isn’t overly reliant on one individual which in the longer term, will make it more attractive to investors and ultimately to buyers.

Cashflow

We all know cashflow is king, but you need to have plans in place to get your business to the stage where it is generating sufficient income to expand or to hit milestones for the next round of funding.

Money isn’t cheap anymore and it’s more challenging and expensive to borrow money. We have also seen a slowing down in private equity investment for several reasons but be mindful that this caution may continue as a general election here in the UK gets closer.

Some entrepreneurs just aren’t as business minded as they need to be. They haven’t thought through all the aspects of running a business and discipline is needed to keep a control on costs along with the systems and processes to manage it. In my experience, some entrepreneurs find some of the details of running a business a bit boring – they like coming up with the big idea, but the key to success often lies in paying attention to the detail.

Future proofing

And this is the key point really – none of us really know what is around the corner. You may know your own strengths but it’s important to recognise your weaknesses and collaborate with like-minded advisors who you can bounce ideas off. Good advisors will be there to help smooth out the bumps in the road on your business journey. The key is finding someone who you like and can build a good relationship with and who is interested in your business success.

I’m always interested to meet new entrepreneurs, especially those who can explain their business succinctly as I know they have already done a lot of the hard work to understand there is a gap in the market and what their business can deliver to fill it. Whilst I can’t run the business for them, I can be there to fill in the gaps and to identify the blind spots that will inevitably come up.

Read more:
The lonely road to success