Blog posts in Set up a business

How much work satisfaction do you get?

Research published recently suggests the average working adult in the UK is “59% happy in their current job role”. Researchers commissioned by Surbiton High School asked 2,000 employees to rate their level of contentment at work in 11 key areas, “from pay and company perks to relationships with colleagues and management”.

According to the study, workers are generally satisfied with their holiday allowance and relationship with colleagues, giving ratings of seven out of ten for both. Perks received four out of ten, the lowest score, with employees believing they should be entitled to mobile phones, laptops and even private health care.

Respondents were unhappy about their promotion prospects, which were rated just five out of 10. They gave a more encouraging six out of ten each for level of pay, relationship with the boss, work load, working hours, working environment, social life, size of team and hierarchy.

14% claimed they would be happier if they were allowed regular tea breaks, while 34% appreciated being able to manage their own workload. One in three said they liked the feeling of being able to make a difference, while 22% wanted to be able to talk to people every day. An easy commute was also important to 35% of people, while 18% said they would appreciate yearly bonuses.

When it comes to profession, teachers were happiest at work (presumably the poll took place before Education Secretary Michael Gove called for pupils to work longer days and have fewer holidays), with the “satisfaction they gained from working with children far outweighing the negatives”. Secretaries were second happiest group at work, followed in order by engineers, accountants, drivers, shop assistants, caterers, trades people, lawyers and those working in customer care.

Career dissatisfaction continues to be a key reason why people continue to give up their jobs to start their own business, with numbers continuing to rise. According to Enterprise Nation, there was a 10% increase in new businesses in 2012 (484,224) when compared to 2011 (440,600).

10 mistakes all new businesses should avoid

Life as an entrepreneur is always a learning process, and you won’t grow without taking risks. Sometimes, you need to trust your judgement, but there are some mistakes you can avoid altogether. Here are 10 common mistakes you need to avoid.

1 Lack of planning

Don’t neglect to provide a detailed business plan showing your projected outgoings and earnings. You may have a great idea, but this is not a business plan. Investors may be intrigued by your ideas, but they will want cold, hard evidence of their viability.

2 Badly targeted marketing

Make sure you’re specific when advertising. Know what your unique selling proposition is and target a specific market rather than trying to be all things to everyone. There are hundreds of, say, interior decorators, but if you have a speciality in, perhaps, decorative paint effects, use it as a USP.

3 Wasted marketing spend

Don’t have hundreds of business cards and brochures printed. They go out of date very quickly and can be expensive to produce. If your contact details change, the cards and brochures need to be amended.

4 Poor recruitment

Be careful whom you hire. It may seem like a good idea to get friends or family involved in the early days, but if they don’t have the qualities you really need, it will impede your progress. Identify the mix of skills you need and look for people who can provide long-term value to the business.

5 Net losses

Avoid expensive websites and domain names. You could even try building your own business website using one of the popular DIY solutions, you might even know someone with more knowledge who could help you put together your own website. Don’t clutter up your website with information customers don’t really need to know about. Instead, tell them how you can solve their problems or provide them with things they need or want.

6 Inadequate research

Don’t neglect planning and research. These are vital in ensuring the viability of your business idea, and a frequent cause of failure is not spending enough time finding out whether there is genuine demand for what you sell. Your pricing must be competitive and capable of providing a viable return.

7 Unrealistic assumptions

Try not to set your sights too high, because inaccurate forecasting of market size is a common mistake for start-ups. You will need reliable cashflow and income projections to avoid expensive mistakes such as over-staffing, purchase of unnecessary equipment and lavish business premises.

8 Overtrading and overpromising

Beware of the dangers of over-trading, which happens when you take on more orders than you can comfortably fulfil, or that can be supported by working capital and net current assets.

9 Poor stock control

Make sure you have good practices to avoid tying up your capital as a result of poor stock control. Efficiency here means you have the right amount of stock in the right place at the right time – instead of the chaotic opposite.

10 Ignoring the competition

Never take your eyes off the competition. You’ll need to respond to your competitors continually, so you need to remain aware of what they’re up to. To wrongfoot them, you could introduce new products or services. Always try to outperform your competitors. Find ways to be more special that they are.

Have you got any tips to add or any stories to share? We’d love to know what you think…

Liz Madden works for Champion Accountants

What is the key to surviving your first year in business?

This question is particularly close to my heart. When I started my very first business venture at the age of 17 in Communist Hungary – where at that time 'entrepreneurship' was virtually unrecognized – some of the points you will read below were key to my survival. Now, 22 years later, having set up numerous enterprises and working with various entrepreneurs - I often ask the same question to my clients – what is the key to surviving your first year in business?

The points below are the result of my own experiences and those of others. I hope it will be of some value to you. So what is the key to survival?

1 Cashflow – nobody mentioned this when I started out, even nowadays when there is much more awareness of cashflow, people still focus too much on profit. Potentially, this could be a big mistake, especially in your first year of trading.

2 Determination – well, this is something I’ve always had, even as a child. In the first year some people around you will often say: “It will never work”. If your business idea is viable – go for it – and keep going until you succeed!

3 Resilience – I often say to my clients you have to be like a 'bouncy ball' when you are an entrepreneur… There will be ups and downs, but the resilience you have to bounce back will determine your success

4 Support by a coach/mentor – back in early ‘90s I didn’t have a mentor or coach – I do now. This is something I hear very often from my clients: lack of experience and clear goals are where a coach/mentor can help and save you lots of money by encouraging you to make the right decisions and helping you to grow with your business while reaching your own potential.

5 Ability to identify and focus on priorities – an entrepreneur’s life is a very busy one. In your first year of trading you’ll be particularly overwhelmed by opportunities and offers, which are very tempting. At times, you’ll find there aren’t enough hours in the day. That is the time when you need to consider what are the priorities and focus your energy on the most important ones.

6 Sense of humour – probably among the most important things you’ll need to survive your first year in business. There will be lots of happy, funny moments, but also slightly scary and stressful ones. This is when putting things into perspective and having a sense of humour is vital. It’s certainly helped to keep me going for the past 22 years!

Agnes Cserhati, entrepreneur, mentor, CEO and founder of AC PowerCoaching

Championing real-life entrepreneurs

It was depressing to see Business Secretary Vince Cable quoted as saying that the economy was in worse shape than under the previous administration and that a double-dip recession was a distinct possibility.

While the opposition immediately seized upon his comments, it could be argued that this was rather hypocritical as the current debt crisis and poor bank regulation were a direct result of their own policies.

The feeling of most entrepreneurs is that government is essentially powerless to influence the economy at the grass-roots level. Rather than decreasing regulation as they always promise, any intervention on their part, however well meaning, always seems to create even more obstacles to enterprise.

The solution to our economic challenges is clear. Rather than sit on our hands and complain, now is the time for entrepreneurs to get out there and sell our way out of the recession, bringing the rest of the UK's economy along in our wake.

But this will need to be the UK's real-life entrepreneurs, not the get-rich-quick chancers we see in the media, an image actively fostered by offensive and unrepresentative programmes such as Dragons’ Den and The Apprentice.

And while it is always a joy to inspire young people into a path of entrepreneurship, this is a long-term policy rather than the immediate help that the UK's economy needs.

Real-life entrepreneurs first felt the effects of the recession in 2008. Those that have survived followed the best practice that all businesses should follow. This includes the banks, which are always quick to criticise small businesses for their lack of planning.

Successful entrepreneurship involves reducing risk wherever possible by concentrating on the core business of the organisation and, wherever possible, finding the most profitable niche or vertical market. While cost-savings are important, the main focus should be on generating revenue and reducing the length of the sales cycle.

Rather than chasing brand new customers who promise big orders from exotic locations, the place to find immediate revenue is always your existing customers. They may be equally affected by the recession but willing to discuss mutually beneficial outcomes with people they trust.

It is also a myth that there is no money out there. This is the strong message I have received across the spectrum of industry, from private equity and venture capital companies, angel investors and those companies who have managed to grow successfully in the last few years.

You only need to scan the regularly published lists of fast-growth companies to see which industries have thrived in a recession; all of these companies and others like them have money to spend with the right suppliers.

I am also determined to do my bit to help the UK's entrepreneurs. Starting on November 1st in Essex, I will be presenting at twelve branches of the Federation For Small Businesses (FSB), events that are open to everyone.

The FSB recently launched a new initiative “Championing The UK's Real Life Entrepreneurs”, which focuses on the key issues facing its members. These include increasing the routes to finance, improving cash flow, adopting a new approach to regulation, reducing and simplifying business tax, incentivising job creation and opening up export markets.

The FSB's Head of Policy and Public Affairs, Andrew Cave explained to me that the campaign is designed to galvanise the small businesses in the UK to take a forward-looking and positive attitude towards the economy by increasing their revenue and taking on staff, especially the increasing number of unemployed young people.

He argues strongly that the opportunities and skilled, hard-working people are out there; all it needs is a positive attitude.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.

Global Entrepreneurship Week heralded with celebration of future business stars from around the world

In a ceremony that gathered the best of young entrepreneurs of the future from across the world, Youth Business International (YBI) held its Entrepreneur of the Year awards last night in London. It's not often that a business event can have the audience rocking with laughter one minute and sobbing the next, but these awards are truly memorable for their inspiration – the ceremony held a few surprises, a lot of fun and not a few tears.

In a fitting prelude to Global Entrepreneurship Week (GEW), the awards celebrated some of this year’s brightest and best young business talent. Finalists included young people who have started and grown their own businesses from as far afield as Canada, Israel and India, often against hefty odds. The judges are principally YBI, the worldwide network that runs non-profit business-support initiatives for young people across the world, including support programmes in developing countries. With the Prince of Wales as president, the network helped 6,346 young people to start their own business in 2010.

Making tracks

Mrs Deki Wangmo, Woman Entrepreneur of the Year, has overcome centuries-old Himalayan tradition and rather more modern prejudices to create her thriving motor business in Bhutan. At the age of 15, faced with her family’s inability to pay for her education, Bhutanese schoolgirl Deki looked around for a local job, eventually training as a car mechanic.

Despite Himalayan tradition dictating that women stay at home, and startling those who felt car maintenance was not a job for a lady, Deki finished her training with honours in 2007 and left to set up her own tyre retreading business in Thimpu, Bhutan’s capital city. With the help of YBI partners, four years on Deki has established a profitable firm which now employs eight staff, including her husband. “Becoming an entrepreneur was my ultimate choice,” Deki says simply.

Now with three small children to look after, these days Deki also manages to act as an ambassador for local entrepreneurship – which itself is growing as enquiries are increasing from the interested ladies of Bhutan. She's famous now but "It's nice to be appreciated," is all she will admit, modestly.

Now Deki had made it to London, was she going to relax? a spa? manicure maybe? Sadly not – she was flying back to work after a lone day in the bright lights to rescue Mr Wangmo, who was holding the fort – the kids, the business and and their new baby daughter, Little Power – singlehanded. A strong man, I pointed out. "Oh yes,"  she said, beaming with pride: “Such a strong man. But he works for me.”

True value businesses

Winners had to show they had improved economic development in their community sustainably and measurably. And some of the YBI’s future stars have helped save the planet too – Environmental Entrepreneur of the Year Award went to Vaidhyanathan Rajamani, whose water projects firm V Cube saves 50,000 litres of water every day in India. Vaidhyanathan was so keen to be an entrepreneur that when his parents insisted he stay in education he ran away from home.

Selling T-shirts to make ends meet, he battled for years to get anyone to take his inventions seriously. Then YBI, in the form of a local Indian trust, did. Now he employs 37 full-time staff and 342 dealers. No mean feat, as Andrew Devenport, CEO of Youth Business International, points out: “Recent UN figures have highlighted the dire economic situation around the world, with record levels of youth unemployment blighting many countries."

In a moving speech that had assorted tycoons, self-made men and women and even flinty-eyed venture capitalists moist-eyed, Devenport highlighted the growing problem of youth joblessness and the risk of a 'lost generation' that looms ever nearer worldwide. He added: “It’s vital that more young people are encouraged into entrepreneurship to create jobs and drive economic growth.”

The main winner, claiming a prize of including $5,000 US, was Amir Asor, founder of Young Engineers in Israel. He's invented science lego – plastic models that show kids abstract maths and physics concepts in cheery plastic they can build themselves. He now hires 20 people and is training schoolchildren to be engineers through the lego games.

What inspired the Entrepreneur of the Year? Being diagnosed with learning difficulties as a child. As he sprang onto the podium to claim his $5,000 US dollars, the room of grandees exploded with applause and several people finally gave up and burst into tears. But Amir was, typically of his peers, concentrating on his job – quietly thanking his friends and mentors, and, of course, the kids he watches at play.  

Next week GEW sees over 40,000 events take place in over 100 countries worldwide. Ten million of us will take part – among whom will no doubt be the secret stars of future business – and probably some people weeping at how great starting a business really is. Read our daily updates from Day 1 GEW Mon 14 November.

• Follow our round-up of activities from Global Entrepreneurship Week 2011

How to check out potential customers before granting credit

If your business offers credit, you must make sure customers have a good credit history, as this will increase the chances they will pay you on time, every time. You could save yourself a lot of time and worry in the future by researching them at the start of your working relationship.

Ways you can check a new customer’s credit history include:

• Information – Collect the right contact information from the start, including a named person in accounts, where possible.

• Research - Investigate the potential customer; visit their premises; meet their people and get a feel for how they do business. The internet enables you to quickly and easily research what others say about them.

• Contact your potential customer’s other suppliers – Ask them about their experiences – crucially, whether there have been any serious issues regarding payment.

• Bank credit checks – Some banks will carry out business credit checks for you for a small charge.

• Checking software – There are various specialist software tools on the market that enable you to run credit checks on new business clients before entering into a contract with them.

• Use specialist websites – You can check a business’s credit history online by using websites such as UKData.com

If you really want to do business with a new customer but your research makes you less inclined to grant credit, you can request advance payment.

Anita Brook is a chartered accountant and owner of accountancy firm Accounts Assist. She also helps businesses regain control of their cash flow with Debts Assist and helps entrepreneurs launch their own bookkeeping businesses with Brilliant at Bookkeeping.

Advice about naming a business

Choosing a name for your business can be tough, but it can be approached methodically. There are five main types of company name:

• Descriptive (Premier Sandwiches)
• Owner-named (Dave’s Sandwiches)
• Multiple owner-named (Johnson Hobson Wilson Potato Peeler)
• Pointless initials (DS Ltd.)
• Irrelevant but memorable (Orange, as in the mobile phone company)

If you wish to portray a solid but unremarkable image, the descriptive approach may be justified. However, it is worth noting that inventive branding has permeated almost every product category these days, so you should be as brave as you can be.

The second option (ie owner-named) may be relevant if you have a reputation from a past life and it will be helpful for past clients to know that it’s your business. In the case of Dave’s Sandwiches, this is unlikely, but if you are a prominent expert in a specific field, it may be relevant.

Multiple owner-named business names are unwieldy and hard to remember. As a start-up this is unlikely to be an issue, but if you are going into business with several partners consider the pitfalls of choosing a long-winded name just to satisfy the founding partners’ egos. It may not benefit the business, so resist this route if possible because it usually just leads to hoots of derision.

Option four, pointless initials, is also highly undesirable. A quick glance at the phone book reveals thousands of these acronyms. Initials say nothing about you and are unremarkable, so resist using them.

The last option, irrelevant but memorable, can be fun if done well. For example, if you work in a fairly dry sector, the use of a fun, lively name might make your business more memorable. All of this is of course a matter or personal taste, but usually it really is worth dreaming up a distinctive, memorable name for your business.

This extract is taken from Kevin’s recently published book – What You Need to Know About Starting a Business

Kevin Duncan – business adviser, marketing expert and author

Culture as the new marketing

The light bulb went off for me when I read Marketing 3.0 by Kottler. For a brand to be authentic there needs to be full alignment with the culture in the organisation. HR is the new marketing.

Almost as an extension of that is the increasing belief that passion is the ‘X-factor’ in culture. My friend, colleague and business partner Yanky Fachler wrote about the need for “fire in the belly” ten years ago. Since then books such as Mavericks At Work, Poke the Box and The Thank You Economy all agree that passion can and should be the driving force for your business. Their argument is that in a world where everything is commoditised and similar, the only way to differentiate yourself is with your passion.

Since Marketing 3.0, Bookbuzz has covered a wide range of books in the HR and marketing space all touching on that subject. They include:

• Hacking Work – people taking control of their work from the outside in.
• The Talent Masters – Why Smart Leaders Put People Before Numbers – recruit and retain your best people and your business will fly.
• Loose: The Future of Business is Letting Go: How to Break the Rules of Business – the future is not rigid but loose – loose organisations, loose management styles and loose ways of working.
• Toyota Under Fire – invest consistently in culture and you can manage any crisis.
• The great workplace – how to build it and why it matters, investment in staff will give you a six-times higher return on your share value

The Thank You Economy by Gary Vaynerchuk really hit it home for me. He would go as far to say that the next battleground for business after e-commerce and technology will be culture. The book is about extreme customer care (similar to “delivering happiness” and how to use social media. What do you think he thinks is most important for businesses, customers or staff? Giving his obsession with customer care you would suspect he would maintain that the customers are most important. Nope, he is adamant that your focus should be on your staff.

And he takes a leaf out of Why work sucks and how to fix it and applies ROWE (the results only work environment) approach. No rules; treat staff as adults. He talks about the need for a Chief Culture Officer, which is not to be confused with the Chief Curiosity Office that Little Bets and Egonomics would suggest. What else does he say?

• It starts with you and you need to be authentic and set the tone (customers will smell BS a mile away).
• Make sure you know all your staff and spend a lot of time with them (one-to-one management).
• Empower your staff. He suggests giving every employee a personal £200 marketing budget.

As a start-up and as a small business, “culture as the new battle ground” is good news. This is where you can compete with big business. They can’t beat you on culture. If you don’t believe me, I suggest you read Killing Giants.

If it's not core - don't do it

Or, to put it another way, outsource or die! Either way, the message is still the same: starting or running a business is tough, trying to stay focused on what it was you wanted to create, sell, service or make is core.

Everything else is fluff!  Admittedly, important fluff – but fluff none the less.

A couple of years ago I was in Canada starting up a retail gift card company for a major Canadian retailer. The concept was sound, the partners were solid, the customer was signed, awesome!

Then it started to go a bit wonky, then it went really Pete Tong!

One of my biggest suppliers was sliding into administration and I worked with their board, their stakeholders and investors to try and rescue the company because I thought it was important for my company.

Big mistake : I should have moved on and fast. Instead I tried to salvage something that didn’t want to be saved and in doing so sank my own ship. Whole exercise as one of my buddies pointed out at the time was basically a real live fire MBA exercise: I lost some cash (quite a bit), I lost some sleep (also, quite a bit) but I gained valuable experience.

This is what I learned and how I now practise what I preach:

1. If something can be leased, outsourced or serviced by someone else then choose three suppliers, pick one and have a back-up!
2. Do not try to save others if it goes south: it will distract you and potentially destroy you.  Just default to back-up.
3. Start with the end in mind and let this be the blueprint for how you go on.
4. Look at the support services and infrastructure you need around you.  Imagine the business in three years’ time and work back from that.  Pick suppliers and services that can handle your growth:  you may pay a little premium for the elasticity but it will be worth it when the business takes off and you need to ratchet up a couple of gears.
5. Try not to own anything that will depreciate over time.  Outsource your stuff and let others take the depreciation.  Do this for software, hardware, email, CRM, Finance tools etc - all the boring stuff that you need to run the business but crucially is not the business
6. Be lean – most things these days can be purchased on per user, per month, per annum deal from ERP, CRM to storage and security, so do that. Opex is King, Capex is bad!
7. Listen to your head, not your heart (or ego). Focus is everything; support services are just that, support, and the second they don’t work move on!
8. To keep moving forward, stick to the plan with 10 degrees of latitude either side, not 180 degrees.
9. Receive advice with the grace it’s delivered with. None of us knows all the answers.  The really clever person can spot the smartest person in the room and use them!

With so much bad news flying around about austerity, security and economy it’s easy to join in with moaning about things we really can’t change or influence. Ignore this ‘white noise’ and instead focus on your business and move forward with purpose.  There are very few billion dollar contracts from China floating around but there are millions of small business leaders and we can get the economy back off the ground!

Secret diary of a mumpreneur

So, to start off with, a little bit about myself... I’m one half of a dynamic duo that has set up our own little “business-ette”. I can’t call it a “business” because that’s the first rule of being a mumpreneur – we don’t run a business, we have a little hobby on the side that we’re hoping, if all goes well, might one day make us a little bit of money.

But, we do have buyers and sellers, a website and a proper spreadsheet which accounts for money in and money out (if I’m honest it’s mostly money out at the moment). We run monthly good-as-new children’s clothes, toys and equipment sales in our local area and we’ve just had our very first sale (so far, “so mumpreneur”, I know).

Like many mumpreneurs, as well as having two small children, I’ve got a day job, as does my “business” partner, who’s also six months pregnant. What we don’t have is a business plan, marketing strategy, business bank account, much spare time or, in fact, any idea about how to run a proper “business”. Sound familiar?

Over the coming months I hope to be writing about all our wonderful business successes, but in all likelihood I’ll probably be sharing our trials and tribulations, mistakes and dead-ends, not to mention steep learning curve that I guess most fledgling start-ups go through.

Feel free to join me for the ride — in the words of that other dynamic duo, “to the Batmobile…”!

Comment here: http://www.startupdonut.co.uk/forum

Related content:

• Q&A: Antonia Chitty on Mumpreneurship
• Tales of three less-conventional mumpreneurs
• The surprising truth about mumpreneurs

The Big Issue with entrepreneurs

If you are considering starting a business, my first advice is to study some relevant and successful entrepreneurs. If you also have a burning desire to make the world a better place, you should definitely talk to some very particular people: vendors of The Big Issue.

It is a common misconception that The Big Issue is a charity; in fact, it is a social enterprise. The vendors first have to raise the cash to buy the magazine and then persuade people to part with their cash, the classic model for entrepreneurship.

The people behind The Big Issue are highly focused entrepreneurs with a social conscience. John Bird was raised in an orphanage, went to prison and slept rough on the streets. In 1991 he founded the magazine with successful Body Shop entrepreneur Gordon Roddick.

His foil is Nigel Kershaw, a printing expert who first became involved when they were looking at producing the magazine themselves. Then, they worked on various entrepreneurial ideas, such as Big Issue vendors manufacturing fair trade candles for The Body Shop.

Finally, they followed the path often taken by successful entrepreneurs: to have even more fun by investing in other people’s businesses and Big Issue Invest was formed.

Any entrepreneur with an established track record, a fully functioning management team and a genuine market opportunity can potentially grow their company by taking on inward investment.

My own advice is invariably for them to scale back their ambitions and try to grow the company organically from revenue, or do everything they can to retain at least 51% of their company.

If you question this sound counsel, you should spend some quality time with an entrepreneur who came to work one day only to be suddenly, and often correctly, fired by their investors.

If your business would benefit from inward investment, has the potential to make some serious money and also has a genuine social purpose, then you should talk to Kershaw at Big Issue Invest. They have been running a social enterprise loan fund since 2005 and have recently launched a new investment fund.

Their process is no different to any other venture capital firm. Experienced investment professionals will first examine your plan to see if it stands a good chance of making some serious money and therefore provide a healthy return for the investors.

Then, they will check that the enterprise has a demonstrable social purpose; the day-to-day business activities of the company must also make the world a better place. Big Issue Invest will measure and report to their investors on the enterprise’s social impact.

Kershaw is looking for people with the right stuff, or as he nicely defines it, are ‘six-thirty people’. These are business veterans, who spend eight a.m. to seven p.m. making money and then at 7.01 attend a charity event or undertake voluntary work.

Kershaw reckons that at six-thirty these people have the right combination of business and altruistic mindsets, and therefore might make successful social entrepreneurs and investors.

The terms of business from any investment fund always have specific requirements.

In the case of Big Issue Invest, this might include a commitment to interview or train a specific number of Big Issue vendors for future employment.

This makes complete sense to me; when I walk up The Strand I always make a point of avoiding eye contact with the irritating ‘charity muggers’ but always buy a copy of The Big Issue, as I am always interested in meeting aspiring entrepreneurs.

More importantly, the magazine is always a cracking good read and excellent value for money, well worth the £2 investment.

Big Issue Invest can be found at www.bigissueinvest.com.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.

• Read our Q&A on setting up a social enterprise

The benefits and pitfalls of having a business partner

Finding the right partner to help you start up your business more than doubles your chances of success.

Benefits

First there’s resource. Your business will have more financial resources and a wider network of family and friends to help.

Then there are strengths and weaknesses. Very few of us have all of the talents needed to succeed in business. If you think this isn’t you, watch the X Factor for an object lesson in over-confidence in one’s own ability. With two people, you have a greater chance of covering all the things that matter.

Then, there’s morale. It’s hard to start a business, and with two there’s always one to cheer up and urge the other on.

Finally, growth is easier. The biggest first step in growth is usually recruiting your first employee. When there are two of you, the recruit only increases the wage bill by 50 per cent, which is much more manageable.

Challenges

But there can be problems. Let me give you some real life examples. A friend of mine went into business with a partner and after several highly successful years, the relationship became strained to the point where both hated going to work.

My friend offered to buy out the partner, but with the relationship broken, the other party was uncooperative. Feeling desperate, my friend upped the price in an attempt to close the deal. Finally, all was agreed, but he had to put all of his assets on the line and take a loan from the other party. Unfortunately, the long period of wrangling had undermined the business. Unable to meet the loan repayments, my friend ended up losing everything – his job, his house and the business.

In another example, a different friend split from his business partner. The partner, again after much wrangling, took most of the existing business with an agreement to make payments on a percentage of sales. However, the business partner set up a subsidiary; made sales to the subsidiary at a highly discounted rate; then the subsidiary sold the products to the end customer. The result was the ex-partner effectively stole from my friend, although it was probably legal.

Two tips

The problem with partners comes when you fall out. Of course, in the heat of enthusiastic start-up this seems a distant prospect, but it eventually happens in many cases. So I would offer two pieces of advice.

The first is to make sure your potential partner has integrity. If they don’t, were you to split, they will try to defraud you. I parted ways with my business partner. It wasn’t easy and it wasn’t a happy time. But because he had integrity, he didn’t try to “do me down”. In fact, despite the tensions, I still trust him.

A quick way to check if a potential partner has integrity is to ask them about the cleverest things they’ve done in business. If they boast about how they outsmarted (defrauded) other people, you can expect the same treatment if you ever seriously fall-out.

The second recommendation is to draft a “shotgun clause” between you. This allows, at any time, one partner to offer to buy out the other. The recipient of the offer can then choose to either sell or buy at that price, but they don’t have the right to refuse. This is a great way to get to a fair valuation of the business.

Despite the horror stories, partnership is still more than worth the risk. It’s better to have a problem sharing the pie, rather than have no pie, it just pays to take care. After all, you will probably spend more time with this person in the next few years then you will with your personal partner.

Chris Barling is Chairman of ecommerce software supplier SellerDeck