New business/buy in/other options

Discussion in 'General Business Forum' started by Wilksy85, Aug 9, 2019.

  1. Wilksy85

    Wilksy85 UKBF Newcomer Free Member

    3 0
    Hi,

    First post and looking for some advice if possible.

    My potential business partner and I are looking to start a joint venture in training. We both have our own small companies; I provide consultancy services and he sells bespoke clothing.

    We are planning to run under his brand name due to the significantly larger social media presence within our target customer base. Financial investment is equal. I provide the specialist knowledge (although he has equal subject knowledge) and the industry connections.

    He understandably wants to keep his clothing element of the company separate from the training element, and I have no interest in it. I am thinking that the easiest option is to set up a new company but trade under the existing name. My partner isn't very keen on this as he sees it as an additional set of fees to pay plus hassle.

    Is there any other options? We are going to meet an accountant, but I wanted to get some early thoughts.

    Thanks in advance
     
    Posted: Aug 9, 2019 By: Wilksy85 Member since: Aug 9, 2019
    #1
  2. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,431 2,109
    So you do the work and bring in your own contacts to the business which i assume has low overheads

    He brings in his contacts and gets half the profit with you doing the work

    Sounds great for him, don't understand what is in it for you, are you desperate for his money input to expand

    Who is going to get the new customers once the old contacts have been used up?

    You dont need a accountant they will know nothing at all about your business, you just need to look whats in it for you and your 100% of your business you have

    Lots of stories on this forum about one person doing all the work but as they are a partner or equal shareholder there is nothing you can do

    Last do his clients actually need your services, selling clothing seems a long way from consultancy

    Think hard
     
    Posted: Aug 9, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #2
  3. Wilksy85

    Wilksy85 UKBF Newcomer Free Member

    3 0
    Hi Chris,

    Thanks for the reply, lots of good thinking points.

    I'm probably not selling my partner well. We are both medically trained and so have the same amount of subject knowledge. I bring the knowledge of running the courses we are doing, plus I have run training departments previously so am comfortable with the "business" element of the industry. Financially we are both investing equally. He has a better social media presence which will help with advertising, whilst I have a better "word of mouth" presence.

    We will both be delivering training, so it will be an equal amount of work.

    I'm stuck though on how to set up due to the earlier mentioned dilemma.
     
    Posted: Aug 9, 2019 By: Wilksy85 Member since: Aug 9, 2019
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    15,048 3,189
    If you set up a separate company for the new business then it will be a lot simpler for your partner to continue his old business if there is a parting of the ways.
     
    Posted: Aug 10, 2019 By: Scalloway Member since: Jun 6, 2010
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

    15,606 1,719
    Separate business with equal control? Future disaster waiting to happen unless you get some sort of agreement in place about when you do disagree.
    Yes it's additional hassle and additional fees. Also less control by him.
    Would not stick new business under either of your existing businesses.
     
    Posted: Aug 10, 2019 By: Mr D Member since: Feb 12, 2017
    #5
  6. Wilksy85

    Wilksy85 UKBF Newcomer Free Member

    3 0
    Morning,

    So are you suggesting the separate business option?

    I know we will disagree (when have business partners always agreed?), so we will have to work out any problems if they arise.
     
    Posted: Aug 10, 2019 By: Wilksy85 Member since: Aug 9, 2019
    #6
  7. Mr D

    Mr D UKBF Legend Free Member

    15,606 1,719
    Yes, separate.

    Work out your procedure for problems now while still talking. The forums have way too many posts by business partners who have equal control, equal say and one won't do something so it does not happen. And no mechanism by the time they stop talking to deal with disagreement.

    What happens when he stops working the business and expects half the profits? What happens when you do?
    What happens if a decision needs to be made by both of you with only one agreeing?
     
    Posted: Aug 10, 2019 By: Mr D Member since: Feb 12, 2017
    #7
  8. Financial-Modeller

    Financial-Modeller UKBF Regular Full Member

    338 91
    @Wilksy85 you mention what your business partner is not keen to do, but haven't mentioned his proposed structure?

    If his reason for not starting a NewCo (which seems the sensible way to proceed) is being responsible for 50% of its costs, it doesn't demonstrate much confidence in his expectation of the earnings of the new venture.
     
    Posted: Aug 10, 2019 By: Financial-Modeller Member since: Jul 3, 2012
    #8
  9. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    10,431 2,109
    A Share Holders agreement drawn up by a solicitor used to commercial contracts is not a option but a necessity, to be honest you would be a absolute idiot not to have one, if your going into business then act the correct way from the start a new company with a shareholders agreement
     
    Posted: Aug 10, 2019 By: Chris Ashdown Member since: Dec 7, 2003
    #9
  10. Noah

    Noah UKBF Ace Free Member

    1,199 298
    I keep seeing this argument, and it makes no sense to me. If you have a credible business plan, especially involving more than 1 person, such fees are going to be trivial compared to the turnover of the projected business and the risks (and hassle!) arising from a half-arsed penny-pinching approach.

    For a proper multiple-employee small company, you might pay £500 - £2k annual accountants fee, depending on how much bookkeeping you do in-house; other co. filing fees and hassle are trivial. If he doesn't think you can afford that, what on earth does he think you CAN afford?
     
    Posted: Aug 13, 2019 By: Noah Member since: Sep 1, 2009
    #10
  11. Noah

    Noah UKBF Ace Free Member

    1,199 298
    That too.
     
    Posted: Aug 13, 2019 By: Noah Member since: Sep 1, 2009
    #11