To consider other partners within a business?

[5leeper]

Hi,
Whilst i run my own business, over the last year i have been looking to going into partnership with a good friend who also has his own business.
The conversations and details have been at great length and in-depth.
Now we are not ground breakers but are experts within our respective fields.
Working together we see potential with combining both trades under one roof and taking steps to grow.

Now, we have two customers who know each other and they are keen to invest.
They can see that investing will propel our start point and offer huge potential.

Percentage stakes mentioned have been at 10% each with myself and partner at 40% each.
So we have the skills and they have the funds.

We know there is a lot of detail to go into and know legal advise will be obtained.
But what experience/advise would you give at the outset.

We will all be having a discussion in the coming weeks and have plenty of questions to ask, but im sure there are some of you, the more business minded people who have some experience of this situation/offer, who would seek answers to other questions.

Its just a toe in the water at this stage but investment sums mentioned are quite large and can make a huge difference.
** I do not get starry-eyed when large sums are offered and quite happy to walk away**

Thank you...

 

[billybob99]

Be prepared for friends that turn into enemies.

 

[5leeper]

Be prepared for friends that turn into enemies.

experience?

 

[Mark T Jones]

Friends and business can mix - the key is in clearly differentiating the 2

detailed discussions are good. Challenge each other’s expectations of what the expect to put in and get out


What are your end-games? Lots of ‘what if scenarios’

turn these into a comprehensive shareholder agreement

 

[Gordon - Commercial Finance]

As Mark says, business and friendship can be a good mix, if done correctly.

Set clear boundaries and expectations from the outset (assume nothing) and have a cast iron shareholder agreement. This is more important when doing business with friends and family, not less as most would assume.

 

[SillyBill]

Can only reiterate what others have said. Work out who the boss is beforehand and have the most difficult conversations upfront. In my first business (and most successful) I insisted I take the majority over someone who had 30 years more experience than me and you can imagine how that conversation went down. And I am sure that ultimatum saved the business many times over when I'd have probably walked if we'd have gone 50:50. Important IMO that is clear who makes the final decision and who is ultimately responsible. Easy to think of these as abstract problems but when stress and money is involved things can boil over easily.

I wouldn't and shouldn't try and put people off as things worked out okay for me with business partners but at this point I'd not go into any new business with anyone else now. You really are entering a marriage of sorts and it takes a lot of work to sustain it. Incidentally I've always liked the people I've been in business with but never would have described any as friends. I always (and so did they it seemed) maintained a professionalism that we were there to do business. The xmas party was just about the only time we'd socialise!

 

[Mr D]

Can only reiterate what others have said. Work out who the boss is beforehand and have the most difficult conversations upfront. In my first business (and most successful) I insisted I take the majority over someone who had 30 years more experience than me and you can imagine how that conversation went down. And I am sure that ultimatum saved the business many times over when I'd have probably walked if we'd have gone 50:50. Important IMO that is clear who makes the final decision and who is ultimately responsible. Easy to think of these as abstract problems but when stress and money is involved things can boil over easily.

I wouldn't and shouldn't try and put people off as things worked out okay for me with business partners but at this point I'd not go into any new business with anyone else now. You really are entering a marriage of sorts and it takes a lot of work to sustain it. Incidentally I've always liked the people I've been in business with but never would have described any as friends. I always (and so did they it seemed) maintained a professionalism that we were there to do business. The xmas party was just about the only time we'd socialise!

Agree that someone has to take charge.

Can even be on particular areas of responsibility. For instance one having final say on finances, admin and staff while the other has final say on stock, on assets, on vehicles.
So long as they keep communicating.


Like any marriage the stresses of life can cause rocky moments and even drive what could have continued as best friends to being unable to stand each other.
Business wrecks friendships way too often. Even breaks up families.

 

[billybob99]

experience?

Business and friendship can be a good mix if done correctly, this mix is rarely done correctly.

You can be chums for 10 years into your business venture before you can't stand each other, or one incident makes everything go t!ts up.

There's a lot of downside than upside.

 

[The Resolver]

Read this

 

[MBE2017]

Read The Resolver link, search the hundreds of threads over the years on partnership and shareholder problems.

Ask all the nasty questions up front, what if you fall out, money problems, a partner decides to leave, who owns IP, what if the others gang up on you and force you out etc etc.

Well done for thinking about it in advance, that puts you ahead of 85% of the forum posters and should help you not necessarily avoid any problems, but solve them easier as they arise.