Going into partnership..Advice?

Freestyle · Apr 25, 2009

Hi all....

This is complicated but i'll try to edit it down to a manageable chunk!

I officially started my own sign and design business back in Jan 09, I was doing this as a sideline along side my full time employment. I found that straight away i had more work than hours in the day and decided to quit my well paid full time job so I could focus on my business. I also took on a part time job to keep a flow of cash to pay the bills and as a buffer incase i got quiet, as my partner stays at home to look after our daughter.

At the moment I do all design work from from home, and I offer a mobile service where i go to my customers to signwrite their vehicles or do their signage on site. All equipment I purchased myself and haven't really paid myself back for. (This is probably just under 2k's worth) i have a healthy customer base of about 10 good, regular clients.

A former colleague has approached me and we have began talks about going into partnership (he has also been in the business for around 10 years) Initially i thought this was a great idea, as his experience and a second head to help develop the business would be great. This is where i would be open to advice...

some friends and family think that i have done too much groundwork to just split everything with someone else. which in some ways i can see their point.. Would it be unreasonable of me to either ask for some form of paymet to buy into the business or offer a split in ownership of say 70/30 for the first year to see how things went? or would that be seen as greedy?

Has anybody else been in this position and what advice could you give?

thanks all!

i234i · Apr 25, 2009

if you started it, built it up and they are just wanting to jump onto it - i'd probably want half of everything you have bought, possibly even a little bit extra as goodwill for part of the business... unless they are willing to put into (in advance!) the same or more of your business.

what about split share worker on commision rather than part of your business?

not sure i'd want to give away what i'd built up, if you can easily get someone else to work for you later if needed or find someone then than give away part of the business just to an old colleague.

Cornish Steve · Apr 25, 2009

Before you go any further, read this thread.

Also, think carefully about what this potential partner can bring and put a value on it. In particular, does the value he can bring equal the value you are bringing to the business? Could you make his percent ownership dependent, in part at least, on how much business he brings in during the first year, the second year, and over five years? What you want to avoid is giving this person a percentage and six months later he loses interest and does nothing.

And put everything in writing!

FireFleur · Apr 25, 2009

What is your business worth right at this moment?

Then split that in two and that is the buy in for 50%.

But, yeah do consider partnerships very carefully, unless you really do compliment each other it can get very messy.

Freestyle · Apr 25, 2009

i see what your saying.. but taking someone on means paying a salary, a commitment I don't want yet. We have discussed that we need to be prepared for little or no salary for the first year, he seems ok with this...

i234i · Apr 25, 2009

I agree with the above, seen so many friends/family end up never speaking after fallouts in this kind..

What difference would it make NOT having him part of the business?
and What difference would it make it he was?

Freestyle · Apr 25, 2009

just seen other two posts, and you both make valid points... i think based on work he brings in is a good idea.

i234i · Apr 25, 2009

approach him on trying out the work split commission, which should be a good drive to make him actually work and could earn him a bit more and be easier for you with no set salary and offer to talk more if it works out well.

you have no tie and can try it out. you benefit, he benefits!

if not, maybe he just wants the glory of owning a business without the hardwork your putting in

Freestyle · Apr 25, 2009

great feedback... I was worring about how he will react when i put these options to him..but i suppose that will give me a good insight into his commitment!

Apr 25, 2009

You really need to know someones character down to the bone before considering a partner.

If you feel uneasy about them in any way.

walk away.

Earl

maxine · Apr 26, 2009

Have a chat with Business link and they can go through various options with you for the company structure

Personally I would steer away from a Partnership as a lot end in tears and it does seem as if you have done all the hard work and there isn't anything of equal value to take on a partner. It might be different if this person was to bring a whole host of new clients or contracts or assets.

Good luck

Pap_sak · Apr 26, 2009

Freestyle said:
Hi all....

This is complicated but i'll try to edit it down to a manageable chunk!

I officially started my own sign and design business back in Jan 09, I was doing this as a sideline along side my full time employment. I found that straight away i had more work than hours in the day and decided to quit my well paid full time job so I could focus on my business. I also took on a part time job to keep a flow of cash to pay the bills and as a buffer incase i got quiet, as my partner stays at home to look after our daughter.

At the moment I do all design work from from home, and I offer a mobile service where i go to my customers to signwrite their vehicles or do their signage on site. All equipment I purchased myself and haven't really paid myself back for. (This is probably just under 2k's worth) i have a healthy customer base of about 10 good, regular clients.

A former colleague has approached me and we have began talks about going into partnership (he has also been in the business for around 10 years) Initially i thought this was a great idea, as his experience and a second head to help develop the business would be great. This is where i would be open to advice...

some friends and family think that i have done too much groundwork to just split everything with someone else. which in some ways i can see their point.. Would it be unreasonable of me to either ask for some form of paymet to buy into the business or offer a split in ownership of say 70/30 for the first year to see how things went? or would that be seen as greedy?

Has anybody else been in this position and what advice could you give?

thanks all!

err, had a long reply but ie decided it wasn't good enough...In firefox and will try remember.

How much are you bringing to the biz over the next 2-3 years and how much will this other person. How much will this persons experince count? Do not value it on now, work it over a few years. Your 10 customers are worth much more than one offs...how much will they bring in? And objectively this persons expertise is probably also worth quite a bit.

Hit that middle ground where you both are happy...otherwise the partnership will go downhill rapidly. You must both be felt as if you have been valued correctly for the partnership to work.

kate1 · Apr 26, 2009

I agree with Maxine, you have to be 100% sure before entering into a partnership

Freestyle · Apr 26, 2009

thanks for all the feedback...really appreciate it! gives me a lot to think about over the next few days

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Going into partnership..Advice?

Freestyle

i234i

Cornish Steve

FireFleur

Freestyle

i234i

Freestyle

i234i

Freestyle

maxine

Pap_sak

kate1

Freestyle

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