# Taking on a partner?



## lentil (Sep 8, 2003)

Are any of you involved in a business partnership or have you been? I am considering taking on a partner and expanding my business from catering/take home meals/lunches to go to more of a cafe/bakery. 

Before I type out the details and explicit questions, I wanted to find out if any of you have experience taking on a partner in an existing business. I'm off to work and will check in later from there. Thanks in advance.


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## cheflayne (Aug 21, 2004)

Taking on a partner in an already existing business can be a very tricky thing. The original owner has to be willing to allow others to make decisions for their "baby". Easier said than done.


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## panini (Jul 28, 2001)

My first response, DON'T DO IT!!!!!!!!!!!!!!!

Lentil,
I do have many thoughts on the subject. My personal experience cost me approx: $ 95,000. So you can see I'm very bias.
I can tell you the most important item in any type of partnership is how to disolve it.
Please use me for questions, I made a few mistakes.
I have also consulted to a great partnership.
Jeff


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## free rider (May 23, 2006)

The trouble with a partnership is the shifting of responsiblity (and/or blame). If you do something with a partner, spell out the responsibilities to the finest detail possible. You don't want to get stuck with problems that might arise because your partner has shifted all the responsibility to you.


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## peachcreek (Sep 21, 2001)

I can't agree with Panini more. Partnerships should only be seen as a last ditch effort. Something else about partnerships- they should only be based on mutual NEED. Not anything else. I, like Panini can tell you horror stories of partnerships gone terribly awry. And like a bad marriage the people involved thought they could make it work only to find both friendships and finances almost destroyed....


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## ted hudgins (Jan 16, 2007)

I have drafted literally over a hundred partnership agreements and not a single one of them addresses all of the situations you will run across because its an ever cahnging landscape. You can try & memorialize most of the management responsibilities, hours required to the job, division of profits, etc., but I guarantee there will be gaps.

If you really want a partner, take on a younger associate and train them to work with you while giving them a new area to develop, such as the storefront you were talking about. You control the $$ and the operations so if it doesn't pan out (bad joke for a bakery, I know...), you can control shutting it down.


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## myron (Jan 18, 2007)

A partnership is a marriage. The courtship goes well, the honeymoon includes incidents worthy of forgiveness then things get serious. If you are dead set on forming a partnership make sure you each consult independent attorneys to form the partnership agreement. If there's an attorney that could possibly represent both of your interests I haven't met him. Attorney's don't work for free but the money you invest up front could save you bug bucks when the honeymoon is over. The other thing partnerships do so very well is destroy friendships. But that's another story.
If your partnership interest is founded upon a need for capital you may want to work out an agreement (using an attorney) that clearly describes who makes the operational and management decisions and at what point the "investor" receives recognition for input. But, if I were your investor, I'd be considering a demand note to protect my investment. Your attorney can explain that level of power.


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## lentil (Sep 8, 2003)

What a lot to think about! I appreciate all your replies and will mull them over with a glass of wine when I get home. 

To answer the mutual need point, there is that. I am at the point where I want the business to expand, but don't have the capital to invest. I'm already working 12 hour days just to keep my head above water, but can't make more money without help. Hiring on more employees means more $$ for workman's comp, state and fed taxes- the whole bit. A partner who feels the same way I do is what I need or I'm thinking the alternative is to close the doors.

My potential partner is a woman my age who is a caterer and professional baker. She's been working independently out of an inn that's been closed for a couple of years with the promise of fulltime employment when the inn reopens. That doesn't seem to be happening. They're stringing her along to have a warm body in the inn so they don't have to be. It's a long story that I won't get into here.

We work well together. I pretty much hate to bake so that's a big plus. I have been wanting to convert part of my space into a cafe, but with the wholesale and meals to go retail as well as a pretty good lunch business, I'm at the end of my energy stores. There's a market in this town for a little cafe that's different from the diners nearby, and I know from talking to my customers that the business will be here. (if you build it, they will come...) We think that the 2 of us could do most of the work with a couple of part timers.

I know it's a risk, but I feel at this point, I have nothing to lose.


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## panini (Jul 28, 2001)

Lentil,
Slow down. Take a deep breath, You sound a little tired and maybe a little overwhelmed.
Reading from the outside- in, you need to be hiring a person, not splitting the profits of your hard work. Your gross sales are enough to qualify for some type of capital. Maybe a small line, 35- 45,000. Get some monies against your CC sales. Heck, put it on a 4% CC.
Get you ducks lined up. 
Possible to mirror your lunch business in the new cafe?
Contract out your friend for desserts and other things. 
I feel a little punch in my gut thinking you may be making a clouded decision .
Feel free to PM. Bounce things around, anytime, really. 2 am ok:lol: 
Jeff


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## lentil (Sep 8, 2003)

Panini,

Thanks for your concern. I really appreciate it. Check for pm's.


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## lentil (Sep 8, 2003)

Panini, you have exceeded your pm space. I can't pm you unless you clear some out.


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## oldschool1982 (Jun 27, 2006)

Lentil,

Part of me wants agree with Pan or to run away from this because of my past in regards to this question. Yet I feel compelled to take a stab at it. 

There are so many trains of thought that it would be easy to get lost so...

Either choose a best friend that you have impecible trust in, a complete stranger or a person you couldn't trust as far as you could throw.

I honestly believe that you have an equal chance with each of them.


It's all chemistry and no matter how the "mix" starts out it always has the possibility of blowing up in your face. As the old sayong goes... "All good things must come to an end". Hopefully you can find a "good thing" to start with. Make it work for as long as you can but don;t be surprised if or when... Based on the price of avocados here today... Just my 26.00lb worth.:roll:


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## lentil (Sep 8, 2003)

to heck with pms. Here's the scoop.

You read me right. I am tired and maybe a little overwhelmed. I've had employees, but what I need is someone who really wants the business to work. Employees want a paycheck and couldn't really care less whether or not the business succeeds. 

I just lost my fulltimer because I had to contract out the baking. This woman was costing me so much money between her stupid mistakes and non-ability to multi-task! I figured out how much I spent on her to fill just one of my wholesale orders and nearly died! She considers herself a pastry chef, but her cookies alone were enough to make you cry. Out of the same batch, she'd have 6 different shapes and sizes while some were undercooked and some were overcooked. And I'm talking about chocolate chip- nothing fancy. When I told her we weren't doing the baking any longer, she gave her notice. I also think she was feeling insecure (as if her skills weren't enough) because she got wind of the partnership thing. enough about her.

Although I am beat, that's not the reason I'm excited about partnering with my friend. I could borrow money to make things easier, but that wouldn't really solve the problem of shouldering the whole thing alone. My husband and son help me when I need them, but neither of them enjoy the business, and frankly, my husband drives me nuts when he works with me. He tries, but he just isn't a food person.:crazy: 

I guess I didn't think things through when I opened the shop. I saw it as something I was good at- at least the cooking and people part- the business part is hard to keep up in addition to the cooking and people thing. I don't even have time to do the paperwork half the time. Advertising goes by the wayside and that's not the only thing.

Anyway thanks for volunteering to talk with me.

portablepantrynh.com is my site if you want to check it out.


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## panini (Jul 28, 2001)

Lentil,
it's a little late. I want to chat. I emptied my PM. I'll PM you in the morning.
Hey, I don't knock anyones decision on anything. How bout we talk about doing it the right way. You are no different from the rest of us. I feel like you once a week! If the partnership is the answer to your frustration, I say go for it. BUT!!! start it right from the inception(no matter how long it takes or how much you need to do this right away) You are experiencing things now from jumping in. Start NOW. 
Shoot, it sounds like you've done the incredible. You started and developed this thing on your own and are seeing some great results. Make sure you give yourself enough credit. Take an hour tomorrow when you get in and just look around. It may look chaotic, but you did it. Something most people cannot do.
Get this thing in writing and formulate a amicable way to disolve the partnership if it need sto be done.
DO NOT THINK ABOUT GIVING UP ANYTHING YOU HAVE ALREADY WORKED SO HARD FOR. YOU GO STAND IN THE MIDDLE OF THE KITCHEN AND LOOK AROUND AT WHAT YOUR BRINGING TO THE TABLE. The partnership can be compensated from the new venture.
I'm sorry if it seems like I'm preaching or being condesending, I'm just trying to protect you from making some of the mistakes I made along the way.
manana
Jeff


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## lentil (Sep 8, 2003)

Thanks, panini. Your post just brought tears to my eyes. I will spend some time today taking inventory- of what's physically in the shop as well as what I've done.


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## frayedknot (Dec 17, 2006)

Lentil, I have read you post from the same angle as Pan in the last post. While I am relatively new to this business I am not new to business. I built several successful businesses during my business career, sold the last one to retire at 42 yo, THEN the now EX wife (read partner) decided SHE wanted it all...she got just what she wanted.. so she thinks. I am much happier now enjoying something that I love to do..it is great to have the passion back.

My advice about creating a sucessful partnership, is to plan for the _what if scenerio_. I have done that in the past and it has seemed to work. Plan for the failures...if you do that you will succeed regardless. Spend time talking about failure with your proposed partner, BEFORE THE MARRIAGE. Sorry that could be a real fact, hopefully not, but none the less it is a real possibility. You both need to keep in contact of that part and the fear of failure. Sometimes it "scares" you into going the extra mile. The failure part may have nothing to do with either one of your efforts, there are many things that cause businesses to fail, outside of the business model.

Also consider this: What is wrong with letting your proposed partner, EARN their part, Figure a way to allow them to "buy in" over time *up to* (NOW HERE IS THE KICKER) *49% OF THE BUSINESS. NEVER NEVER GIVE UP CONTROL. *

You have built, molded, and developed what you have today through countless hours of hard work, I am sure at some point at the expense of your family. *Never give the ultimate control away. *This can be accomplished with incorporating and "voting stock" ...work a formula to allow the partner to earn 15% of the voting stock, each year, each quarter whatever. Maybe you can give your new partner 1/2 of the value of the business but *KEEP CONTROL. *

Also decide who gets what and how much in the event of a sale of the business, or your partner just wants out to persue other interests. What if the partner does not measure up to your expectations, you need to either sell your share or buy her share, all within a specified time frame (called Put and Call options) and she the same with you.

I truly believe one of the great things about our country is the philosophy of working hard, working smart, being fair, and having a sense of pride about what you do...you will ALWAYS make a living. I am sure you are "scared" about this decision, you should be, if you are not...Then maybe you should sell the business to her.

I truly wish you the best of luck and let us know how it works out.


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## lentil (Sep 8, 2003)

Having her buy in? Now that's an interesting concept to which I'll have to give some thought. Right now, I have to go to bed. I'm beat.

I hope you know how much I appreciate the input. I have about a month before anything happens at all, so I'm not feeling too pressured at the moment. I have to meet with the town's planning board to get the okay to change the building's use from a take out to a cafe first. She's also out of state for awhile, but even when she gets back, we don't have to do anything that would be irreversable.


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