Bobby Kerr’s Clever Business Tips

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This week Bobby offers his expert advice on two very different topics including the trials and tribulations of setting up a business with friends, as well as advice on selling up after thirty years in business.
 
Business Partners or Friends – Where to Draw the Line

First up this week was a query from Simon, a small business owner who set up a 50/50 owned consultancy business with their best friend. The business is performing extremely well and has grown 25% in the past year as well as looking very positive for the year ahead with a number of things in the pipeline.
While the business is performing well, the relationship with their friend is beginning to strain and there are a number of increasing disagreements between them on how to run the business. There is no shareholder agreement in place between the two owners but his friend has asked that one be put in place. Simon is reluctant to commit and has thoughts of going out on his own. As a result he is afraid of how his friend and business partner will take this as he does not want to damage their friendship, as well as potentially walking away from something great.
 
Bobby’s Advice
Shareholder agreements are very important, particularly for 50/50 owned business, like everything, business comes down to the “human” element and how you manage relationships affectively. This is a tricky one as they are obviously good friends – despite the disagreements they might have on running the business.

In saying this, the business sounds like it is in an extremely healthy position, with growth of 25% last year and looking positive for the year ahead. Bobby’s advice is to firstly sort out the business issues, and create a solid structure, to protect themselves more than anything else. Their working relationship seems to have run its course, however his may very well come back if they put the effort in and make their business as the number one priority. There is obviously an underlying friendship and loyalty which should last.
Setting up a Shareholder agreement is advised, and can be quite simple. Simon and his business partner need to include three main elements:
  1. If we fall out, what happens
  2. If somebody wants to buy the business, what happens?
  3. If one party wants to sell the business, what happens?
This simple agreement can be signed and kept on record.
 
Bobby’s final piece of advice to Simon needs to be very calm and collected before rushing into anything for fear of throwing away a great opportunity.
 
 
When is The Right Time to Sell Up?  

Frank got in touch with Bobby this week for advice on selling up his successful printing business after 30 years of operating. Frank is worried that if he puts the business up for sale, this may have a negative impact for his customers and competitors may take advantage. Frank is also concerned about who to choose to take over the business as he has built it from scratch on his own.
 
Bobby’s Advice
Frank obviously seems like a good character, and has likely built the business around his personality. One option is to choose an employee who Frank has worked closely with and knows the business inside out to phase them in over a period of time to take the reins. This can be done over a number of years so that the handover process runs smoothly.

There is also no harm in Frank opening a dialogue with a competitor, not necessarily a direct competitor – perhaps contact competitors in another jurisdiction to gauge interest and take it from there.

Lastly, Frank has the luxury to pick and choose who to approach – whether it’s somebody on the periphery, who knows the business well, may be of interest. Frank needs to be smart about handing over his business, and make sure it doesn’t disrupt his customers and suppliers too much.
 
If you have a business or SME related query you would like answered - you can get in touch with Bobby each week by simply sending a short mail to [email protected]
 

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