So, on #MicroBizMattersDay, great relationships will be formed and some wonderful innovations, collaborations and business growth will be an outcome from some of today’s activities for many, as well as on the other 364 days of the year.
I was hoping to start today writing about business planning to make 2015 your best year ever, but you know how it is….
As I spent yesterday dealing with the aftermath from a business relationship that ended last year, the universe clearly had other plans for me today! We live and learn, and it’s the learning from that situation that I would like to share today.
If you are thinking of going into new business ventures, contracts and relationships, do so with a degree of due diligence and awareness. Check your facts upfront.
Collaborate, by all means. I love collaboration with the right people. However, ask some key questions before making any agreements, whether suppliers or partners. The decisions that you make involve your money, your business brand and your customers.
Here’s the key things that I advise you to take action on and review before entering into a business relationship.
1. What is the business structure of the company or individual?
It may be Limited by Guarantee or Shares, Sole Trader, CIC – all are regulated differently and different protections exist. You can go to http://wck2.companieshouse.gov.uk/ and type in the name of any Limited Company in the UK to find out its current status, directors and get documents in the public domain for free or for a small fee.
Another helpful site is http://companycheck.co.uk/ which also enables you to check what other companies and ventures individuals have been involved in, and what assets and liabilities exist.
It’s not all that you should make a decision based upon, but it’s a great starting point and can open some interesting conversations with your prospective supplier or partner for you to gauge the individual or company you are considering.
2. Check previous ventures and credit history.
You might want to think twice before going into business with somebody with a history of businesses going down with unpaid charges and debts, where there are issues around strike-off, or where there have been notices for debt action. This can be searched in the UK through The Gazette, which is the official Public Record https://www.thegazette.co.uk/.
On the other hand, many successful people have recovered from a business setback or difficulty but prior issues should raise a flag – question the reasons for the issue, and use your discretion.
It’s a matter of trust, transparency and openness. If you don’t have these essential elements in a business relationship, you won’t get very far.
Real business is about exchange of mutual value for consideration, not one company or individual seeking to make a pure financial gain. Some might disagree, however that’s part of my personal philosophy on business.
3. Ask for evidence of claims made in Advertising or Promotion
Whether finances, customer base or claims made – ask to see the evidence, be it accounts, subscriber lists, customer references.
There is a practice which I see a lot in digital marketing of services, particularly in the coaching industry.
Organisations use the brands of well-known large organisations often without prior consent, to imply endorsement of services.
4. Do NOT be pressured into an Agreement.
Never, ever, ever allow this. Personally, I’m not a big fan of time-limited offers – this is a sales “trick” that is sometimes genuine, but sometimes just designed to get you to part with cash.
There’s little recourse, without going to law, once you have parted with your money, which is an expensive and time-consuming process!
If a time limit relates to an event or programme, it’s plausible – there’s a tangible start date after all – you may even be gifted some early sign-up bonuses.
However, with a product or service, remember this:
A business exists to create value and sell goods and services
to purchasers creating profit in exchange for the value created.
Ask yourself this question. As a Business Owner, would you turn down a request to purchase something that you had in stock after a given date from a willing buyer? There may be some instances, although I have yet to come across them…if you can think of some, do let me know!
4. Social Proof and Associative Reputations
I was taken in. Once, I took the fact that a Director of a company I lost time and money to was introduced to me via my previous employer, and causes that I support helping women in business and gender equality. The individual also appeared to have good standing in the eyes of mutual acquaintances. Combined, I took this as a good basis for trust.
I have a pretty solid network.
I have a strong background in commercial and contract negotiation.
I was taken in.
On appearance, all seemed legitimate. Until invoices started going unpaid. Sometimes a few questions tell you far more than you ever wanted to know.
6. Multiple Launches and Business Names
Ever get the feeling something is…. a little bit familiar? Doing the rounds every year, but new people are brought in, the website is tweaked. Maybe you go to the old site and it even redirects you to a different site? Why might that be?
Business do change names, I even did this myself in 2013. It’s documented and traceable via Companies House.
However, there is a practice known as creating “Phoenix Companies” where failing businesses resurrect under a new legal entity, with a new and separate company registration number, often with the same Directors.
Let’s say you invest money in, or are a customer of Company A.
Company A becomes insolvent, put simply, it cannot pay its debts.
Your action would be against Company A.
Company A stops trading.
Company B is set up, often with the same Directors doing the same thing, often with a lovely new website and business name.
You, my friend, cannot take action against Company B. Your contract is with Company A.
If something seems to be going through re-launch after re-launch, dig a little deeper.
7. Check the Terms and Conditions.
The Key Elements you need to understand:
- Who are you contracting with?
- What do they want from you?
- What are they promising you in return?
Be very careful of agreements with JV / Partners / Services where commission payments are either significantly after the event where you are being asked to generate a sale, or where there are promises of shares that actually don’t exist yet.
Another red flag is affiliate links that don’t work, and promises of infrastructure that are not delivered upon, blamed on “technical delays”.
Think through the “What ifs” and what it would mean for you if the contract was not honoured.
- Loss of any investment made?
- Specific Resource, Costs and Expenses?
- Loss of your time?
- Loss of profit?
- Loss of advancing your own business?
- Would you have the resources to take legal action if necessary?
JVs and Partnerships can be great and work to mutual advantage, however a true JV is a separate legal entity, not an affiliate marketing plan or a referral scheme.
If you are entering into a true JV, it will take time to negotiate if you want it to be effective and you really would be well advised to consult a lawyer.
A business relationship that goes wrong can damage your brand, reputation and affect the viability of your business.
It really is worth Due Diligence upfront.