Considering joining forces with another to grow your business? Aidan Fortune speaks to retailers in business partnerships about why this was the right route for them.
As the saying goes, two heads are better than one. After all, where would Batman be without Robin, or Ant without Dec? So if you are feeling over-stretched, or want to split the load to give you time to develop certain areas of the business and let someone else manage others, then maybe you should consider working in partnership with another retailer.
John Perrett and John Ward run 14 Spar stores together on the Isle of Wight. “We felt that with two of us running the business we could grow it properly without running ourselves into the ground,” says John W. “I’ve seen so many sole operators afraid to take holidays because they feel there’s nobody to run the store in their absence, but with two people we can have a better work/life balance.”
Rob Downes of the Forum of Private Business says that entering into a business partnership can offer significant benefits. “A partnership consists of two or more people sharing control, responsibility and finances, thus reducing the overall input one individual has into the business,” he says. “This can be a distinct advantage over a sole trader. Although this would mean that the profits and liability would be shared, a partner or partners would be able to inject fresh capital, as well as skill and ideas, into a business, enabling you to use this for further expansion and development.”
Janine Watts and Dawn Hall have been running the Wealden Stores in Cuckfield, West Sussex, together for 13 years. “We were friends before getting into business together and it made financial sense to do so,” explains Janine.
She believes that partnerships provide an opportunity to discuss every decision in the store, and can’t see the arrangement ending any time soon. “We can have a conversation about the big decisions and sometimes one of us will spot something the other has missed,” she says. “I think we’ll be working like this for the foreseeable future.”
Of course, not all partnerships last for ever, but parting doesn’t have to be acrimonious. After several years running Spar Connah’s Quay, Flintshire, with her father Roy, Jenny Wynne-Jones decided it was time to go it alone and took on nearby Spar Holywell. She looks back on her time as a partner fondly and claims it helped her professionally. “Dad’s been in retail for more than 30 years and there’s not many who know more about the industry than him,” she says.
“His reputation really helped. If I was some stranger who just went knocking on the bank’s door wanting to set up a shop, I don’t think I would have had a hope of getting finance. That’s also true of Spar - they wouldn’t hand over a shop to just anyone, so the years of working with him really helped build up my reputation.”
When Jenny started running her own store, she found the financial side tricky initially as it wasn’t something she was used to dealing with. “I had never done any invoices or billing, so that was all new. I had done rotas, but not wages. I just had to dig in and do it. It’s interesting to see how you can get stuck in a rut with a skills gap if one person manages that side of the business. If I entered into another partnership, I would make sure all parties had a hand in all parts of it. You’ll always edge towards what you’re good at, but it’s important to develop new skills.”
Janine and Dawn split their responsibilities, with Dawn managing the post office and Janine the store, but they both know how to manage each others’ roles. “At first, we both did all the work to get to grips with both sides of the business, but after a couple of years it split naturally,” says Janine. “We both know enough about each other’s jobs that we can do them if needed.”
John P and John W agree that it’s best to share the work between partners. “We split everything up quite evenly,” says John W. “We’re constantly growing so one of us will look after the existing business while the other will explore expansion opportunities.
“Even when we have a site in mind, we’ll split up the work,” he adds. “John P will do the groundwork on the expansion, including the legal and financial side, and when that’s sorted I’ll take over the shopfitting, staffing and ranging.”
Downes says that retailers should enter into a partnership with their eyes wide open. “The consequences of setting up the wrong form of partnership with a colleague or friend can be disastrous,” he says. “When starting up it is critical that you know your strengths and weaknesses - and those of your potential partner, or partners. It is important not to be dazzled by someone’s wealth, or tripped up by a well-meaning friendship.”
John W agrees: “We both play to our strengths and interests. It helps that there’s a large age gap between us as we can come at situations from different perspectives. Quite often, a retailer will fall into the trap of stocking according to their own demographic, so if you have two or more demographics leading the business, you can get a much more rounded view.”
He advises prospective partners to ensure they have the same vision for the business, and that it’s sustainable. “There are two sets of families relying on a partnership business so it needs to be twice as viable, and all partners need to be fully invested in it,” he says. “We haven’t had any drawbacks - there’s a trust factor between us and we’re also able to talk things through to reach a middle ground.”
Janine recommends that anyone considering a partnership should make sure that legal contracts have been agreed upon beforehand. “It’s something we did before starting and it means that we’re legally covered should anything happen,” she says. “We’ve never had any fallings out over the 13 years, but it can happen and it’s best that if one partner decides to leave the business, it can be done as painlessly as possible.”
Downes agrees. “Once you have decided on the type of partnership that is best for your business it is recommended you lay down the ground rules,” he says. “Entrepreneurs must make it crystal clear what’s expected of each partner from the outset. It is all too easy for people to drift into an ordinary partnership as one can be formed without any formal documentation.
“While there is no legal requirement for the partners to have a written agreement, you may live to regret not having put one in place. It can prevent unpleasant, unwanted and unnecessary disputes over profit share, debt liabilities, how much each partner invests, seniority in the business, decision-making and rules on closing the firm.”
Jenny and her father didn’t have any legal arrangement set up when they were partners. “We operated on a verbal agreement, but there should be a legal contract drawn up, even if it’s family,” she warns. “It was fine with us, but I’ve seen the other side of it as well, with family members falling out.”
Downes urges those considering the move to first ask themselves some questions. “What experience and expertise do they have? Can they drive the business forward? What level of trust do you have in them? What do they add to the business? All these considerations, and the commercial risk involved, are crucial when deciding whether to form an ordinary, a limited liability or a limited partnership.”
Although she is now a sole operator, Jenny’s positive experience in a partnership means that she wouldn’t rule it out in the future. “I might get into a partnership again,” she says. “I like that I don’t have to answer to anyone and have complete control of the business, but what I don’t like is being the person who gets the phone calls late at night. It would be nice to be able to share the load.”•
Losing a partner unexpectedly
Sadly, some partnerships are broken up before their time and it’s important to be aware of what would happen were one to end unexpectedly. Lesley Brown ran Frankmarsh Stores in Barnstaple, Devon, with her husband Bill, but when he passed away last year, she was faced with massive legal knots to untangle.
“We were both named as owners of the store because the previous owners, also a husband and wife team, had only put the man’s name on the business and when he passed away it caused his widow a huge amount of trouble,” explains Lesley. “However, despite this there was still a lot to do after Bill passed away.”
One of the main problems was that suppliers no longer recognised the contracts that Lesley and Bill had signed jointly. At a time when she really needed support from her suppliers, Lesley was forced to spend time on paperwork, re-signing many contracts to ensure that she maintained services. “I’ve been talking to suppliers, especially PayPoint, about setting up a department to deal with this situation,” says Lesley. “It is horrible having to explain the situation over the phone again and again.”
Lesley recommends that business partners speak to every firm they are registered with as partners to find out the best course of action. “Sit down with suppliers and ask them what happens if a partnership is suddenly dissolved. It doesn’t have to be because of death sometimes it can happen quickly for financial or personal reasons,” she says. “Also speak to your bank as your account would be affected, and ask what contingencies are available. And, of course, get legal contracts drawn up before anything else.”
• An Ordinary Partnership
The partners carry on the business and each partner has unlimited liability for any debts and liabilities incurred by them in connection with the business. All profits are shared equally, or as otherwise agreed.
• Limited Liability Partnership (LLP)
Involves a separate legal entity owned and controlled by the partners or ‘members’. The key difference from an ordinary partnership is that it is the LLP that carries on the business, as opposed to the members. This means that it is the LLP that has direct responsibility for debts and liabilities. The liability of the members, in the absence of anything else, is limited to the amount they invest. Members share the profits equally or as otherwise agreed.
• Limited Partnership
Involves a ‘general partner’ who has sole responsibility for the conduct of the business, and ‘limited partners’ who invest funds. Usually, it is the general partner who carries on the business and incurs the debts and liabilities. Profits are shared on an agreed basis.
Source: Forum of Private Business