Fresh Threads: New employees, partnerships, business plan agonies

  1. Ray Newman

    Ray Newman UKBF Newcomer Administrator

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    Hi UKBFers,

    Welcome to Fresh Threads, our weekly roundup of the best comments and advice from the forums. 

    Here are my top picks from this week:

    1. Investing and becoming a partner in a business

    KTA044, design/printing

    I have been working from home as self-employed graphic designer for the past five years. I often use a local printer to complete my jobs. Recently we have been in talks about joining up together. We often refer work to each other as he doesn't have a design team, and I don't have the facilities to produce prints.

    His limited company has been successfully and profitably running for the past five years or so. I can't afford to set up on my own and he didn't want to employ a graphic designer as he doesn't have enough design work coming in to require one. However, we feel that joining together would be a great move for us both. 

    I want to buy shares in his business and have an active role in running and growing the business,as it has huge potential. I was looking at investing £10k into the company in return for 20% of the shares. This money will go towards growth and development.

    As I would be a shareholder and also be working for the business full time and bringing in my current workload (around £20k p.a.) what would this make me – a director or a partner? What are the legalities around this? Would I just receive 20% in dividends or would I get paid a monthly wage?

    Mike Hayes: This would make you a shareholder and presumably some kind of employee of the business, possibly a company director but that's up for negotiation. Although people throw job titles around I wouldn't consider you to be a partner or director in the business unless you are a company director.

    Any profits remaining in the company can then either be reinvested in the company or distributed as a dividend upon holding a shareholder's meeting.

    From the limited info shared so far, this doesn't seem like a great deal for you. It seems more like your printing buddy is gaining a professional graphic designer at far below market rate.

    Consider what you're giving up, going from being self-employed 100% in control of how you work and who you work with, to an employee and minor shareholder of someone else's company. I'm not saying it's automatically a bad thing but it's not far off being employed in any other small business really, so you need to be comfortable with that. Likewise you're handing over your entire client list to someone else's company, so going back to self-employment in future might not be so easy – consider how long it took you to build up your client list.

    Mark T Jones: At a practical rather than a legal level, you need to ask yourself whether your respective character types will work together in this relationship?

    The founder will most likely view this as his business, and might well view input from you as 'interference'. This isn't an insurmountable problem, but it does need careful consideration.

    Often, the process of drawing up a shareholders' agreement can bring these issues out and address them early on.

    NickGrogan: All wonderful, but no need for a shareholding on either side. Setup contracts with each other, set out what you will both do and how you'll both be rewarded. Faster and easier to setup and better for both. Easier to terminate too. Being a minority shareholder gives no value to you and £10k is not worth the cost/trouble of taking on another shareholder/director.

    2. Defining a role for your first employee

    JakeM, Property

    I’m currently considering whether to take on my first employee and am trying to calculate their roles and responsibilities.

    I’m an architectural designer based on a high street but am considering a general employee rather than someone with an architectural background. 

    At the moment, I can think of the following jobs that I currently undertake but would prefer to offload to focus on the core elements of my business:

    • cleaning external windows in the morning
    • quick vacuum every morning
    • marketing help
    • flyer drops
    • updating social media
    • updating the website
    • being the first point of contact for enquiries – finding out requirements and setting up meetings etc.
    • writing blog posts.

    But what other general roles and responsibilities would be good to add to this list? At present I’m not sure it’s enough for a full time role.

    patientlady: May I say (which might be just me of course) that if I were applying for what seems to be an administration position I would be wary if I was expected to vacuum and clean the windows. My initial thought was that would you be asking me to clean the ladies and gents next, together with making the tea all day.

    fisicx:

    • Cleaning external windows in the morning – get a window-cleaner for this.
    • Quick vacuum every morning – get a cleaner for this.
    • Marketing help – what exactly does this mean?
    • Flyer drops – there a people who can do this for you more cheaply than employing someone
    • Updating social media – why? How does this help the business?
    • Updating the website – update what?
    • Being the first point of contact for enquiries – you can use a virtual assistant for this.
    • Writing blog posts – pay a copywriter to do this.

    The sort of people who have the skills to do all those jobs are very rare and will want paying accordingly. Rethink the benefits of doing all those things. Unless you can pinpoint the monetary value (ie, how much new business it has generated) they may no longer be necessary.

    ecommerce84: You’ll often see cleaners in estate agents or banks after hours or early doors.

    It might be worth asking in any local branches to see who they use. They would certainly take care of the vacuuming and window cleaning for you.

    3. Buying a bar

    noz03, hospitality/catering

    Noz recently moved to Madrid and is planning to open a bar with a friend. He wants some general advice on working in partnership, and arrranging finances:

    “Firstly, in terms of my partnership with my friend, I was thinking if it might be a good idea NOT to be equal partners, as I see disagreements becoming an issue, especially as we both have strong personalities. There would be benefits to either being a minor or major partner, and I would generally be OK with being either, but how would such a partnership work out and what kind of percentages would be a good idea to go with? Once we have that sorted out, how should we plan our finances to cover the running expenses of the bar? We plan to look for relatively successful businesses that are already turning profit in a busy central area, but running the business ‘paycheck to paycheck’ doesn't seem like a smart idea... So how much should we really need on top of the upfront payment? And what is a good way to manage this fund?”

    MrD: Check all figures you are presented with when looking at a business. Believe nothing until you have seen or been able to find proof. The seller, and the seller's agent if they have one, are not working for you, and are not on your side. Their solicitor isn't working for you either.

    And make an agreement with your partner about what happens when things go sour. The forums are littered with businesses that develop problems or go under with no agreement between the parties.

    HFE Signs: We work closely with a lot of bars and hotels, it's a tough business, but in our experience the best performers have something unique i.e. captive market, top chef, regular deals, animals for the kids, special location, top DJ.

    The Byre: Two prerequisites if a partnership is to stand even a remote chance of working long-term:

    1. Not having a partnership at all but dividing the business up into two separate entities that work together.

    2. Both partners must be very easygoing and a joy to work with. I have a partnership with my wife and in over 40 years of being together, we have never had a single serious disagreement. We are just too phlegmatic and affable to bother with such strenuous activity!

    4. The business plan grind

    GannonP, events management

    I’ve had this business idea in my head for the last couple of years and it’s got to the point where I’m actually doing something about it. I’ve researched, I’ve planned an operating structure, I’ve acquired a partner. But for the life of me I can’t get through the business plan.

    Each time I sit at my desk I do manage to chip away at it but not as much as I would like. I also become very distracted as thinking about the business plan causes me to question my model and I go off on a research binge.

    I don’t know if it’s just because I’m new to this or because the business plan is an incredibly laborious task but it’s putting the brakes on the whole project at the moment.

    KyushuTravelAgent: I've written one before and I'm writing one now for a new business. I guess you are working from a template, right? How many pages is the template? A busines plan doesn't have to be a huge monsterous thing.

    MrD: The few plans I've written for other people I've tried to keep below ten pages. One ended up 50 pages for a monster project but only because the boss meddled so much, and added tons of non-core elements to a decent project. 

    Mostly where I have estimated something I have clarified what that guess is based on, such as, say, minimum wage for next seven years based on current rate plus average of past couple of years percentage increase. Employer's pension contribution I've been including for the past decade or so based on reported percentages – before it came in. That sort of thing.

    The Byre: I invested in a business some two-and-a-half years ago and I did not ask for or receive a business plan. What we did was to sit down and talk to the person involved and get a measure of their ability and the viability of the proposed business. So far, things are going very well indeed.

    I shall be starting a new branch of the business and that will cost many, many times what the OP is looking for – but still no business plan. 

    Having spoken to those involved and having a measure of their intelligence and demeanour (I avoid stupid people and anyone who are going to be difficult to get along with – affable is probably the word here!) I look for five things in a business:

    1. Up side. What can we earn? Is this whole thing scale-able?
    2. Down side. What could we lose?
    3. USP. Why would anyone buy from you and not from the other guy?
    4. Plan B. If it all goes pear-shaped, what is your plan for turning this turkey around?
    5. Says who? What hard facts and figures (e.g. existing turnover) can you show me that tells me that this is a real business, and not just a dream?

    If just one of the above five points is missing, I sit on my wallet and de-trouser not one penny. But we cover those points in a series of conversations, not with some magic document or slideshow.

    That's all for this week have a great weekend!

    #0
  2. Furqan721

    Furqan721 UKBF Contributor Full Member

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    Thank You for sharing this stuff!
     
    Posted: May 16, 2018 By: Furqan721 Member since: Feb 26, 2018
    #2
    Chris The Dropshipper likes this.
  3. Salifuj

    Salifuj UKBF Newcomer Free Member

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    After all said and done, not all businesses or websites need to worry about it. Most small businesses will not be affected right?
     
    Posted: May 30, 2018 By: Salifuj Member since: Oct 7, 2016
    #5