Tips for Choosing a Business Partner

by WOHe

Did you ever wonder if everyone who owns a shop works 12 hours a
day? Or, if other owners, like you, spend eight hours working on
the shop floor, only to go back into the office at night and do the
books? Or spend a Saturday detailing the next cabinet job?
If this sounds like your life, you may want to consider sharing the
load with someone else a partner. This could be a spouse, a
long-term trusted employee, your shop foreman, a competitor or even
a friend. But, any way you do it, when taking on a business
partner, there are a few basic ground rules you need to follow.

You may find that to run your shop more effectively and
productively, you need more money after all, what shop doesn’t?
Perhaps a partner can bring in some extra capital, so you can go
out and purchase that sliding table saw you’ve had your eye on for
a few years now. Sometimes a new partner can also bring more credit
to the table another house to be able to pledge against a new
building.

A partner can really help with the loneliness of being the boss.
It’s someone else to bounce ideas off of: Should our shop really
take on that $300,000 project? Should we try to be marketing our
cabinetry to those sleazy developers on the other side of
town?
Having someone else around with different expertise can make a big
difference in the way you operate. Perhaps another person is better
at sales or administration than you are after all, many shop owners
are technicians first and foremost. Ask many a shop owner to build
a curved kitchen island, and their eyes will gleam; talk about job
cost spreadsheets and their interest will wane.
Taking on a partner may also increase your spread of customers
especially if you merge with another shop. It may propel you into
different markets that you can easily service with your existing
operation for instance, partnering up with a commercial millworker
could add handsomely to what you do already in your residential
arena.

And, don’t forget that a new partner can introduce you to
different methodologies. You might think your way of dowelling face
frames together is the best way of doing things, but a partner may
show you that pocket screws are faster and easier to deal
with.

The search’
Finding a well-matched partner is as difficult as finding a spouse
perhaps more so. And perhaps you’re a confirmed bachelor anyway.
While you can’t really visit “singles bars,” you can be on the
lookout for a good match.

Take a look at your employees, even if there are only a few of
them. Is there a key player here, someone you can really trust to
run the shop all the time? Do you have a crackerjack installer on
the team? Perhaps some form of partnership or minority ownership in
the shop can help keep that person around and keep that person
highly motivated.

Keep your eyes peeled for competitors, too; there may be another
shop out there that would be a good fit for your operation. The
difficulty is that you often won’t know if it’s a good fit until
you’ve tried things together for a while. Maybe you could try a
joint venture on a job or two before getting into a formal
partnership you do the kitchen, they build the vanities.

Whether you merge, buy or are bought out, you have to try and
imagine yourself one, two and five years from now. What will you be
doing, and how might things be working?

A friend may make a good business partner, too. While you need
to be careful here, the biggest part of a good partnership often
comes down to whether or not you can get along well with the other
person. Your partner may be the best drafter you’ve ever met, but
if you don’t like each other, a long-term relationship probably
won’t work.

Third-party advice can be helpful when you’re trying to figure
out how to deal with a new partnership venture. At first, you may
want to simply run the idea by friends and family. It can be good
to solicit input from trusted employees, though staff people may
get nervous with the idea of change.

A lawyer can give you expensive advice as to the actual set-up
of your arrangement whether it’s a formal corporation, a limited
liability company, a simple partnership. An accountant can give you
a direction on the financial implications of your venture, but
this, too, can be pricey. What you may want to do is figure out by
yourself what you want to do, and then tell the professionals to
spend a minimum of time on it all, but to keep you out of
trouble.

A 50-50 split partnership can work, but many believe a better
way to go is to have a majority owner to avoid deadlock/stalemate
situations. In the event of a dispute, there’s always one party who
can decide on a course of action.

Tread carefully
You may want to have a partner buy in over time, so there’s not a
sudden change for all the parties. It’s a good way of really seeing
how things are working out, especially if you’re doing this with
your foreman, installer or office manager. If in doubt, be
generous; it will pay off in the long run.

Constant communication can be very helpful, too. If you have a
partnership going, you may want to consider holding official
partnership meetings, once a month if possible. These can help
ensure that everyone is kept “in the loop.” Some companies even do
a type of “retreat,” where the partners leave the premises for a
day or more, and spend time strategizing about where to take the
business, what kind of work to focus on, etc.’

On the other hand, beware of spending too much time talking
about the partnership, instead of actually doing the
work.’
You may also want to consider purchasing what’s sometimes called
“key person” insurance to cover you in the event a partner becomes
disabled or dies. Your shop will experience fall-out, and it’s wise
to have some insurance in place.

Remember, too, that while a partnership can be a great way to
snap those “golden handcuffs” onto key people, the reverse can also
occur, and you can end up stuck with a partner whose views
significantly diverge from yours. “Divorce” can be messy and tough
on employees, so choose your business partners carefully.

Next Column: How to Detail and Draw Better

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