Taking on a partner.....thoughts

[JDUpholstery]

So there was a very well thought of upholstery shop in my town that closed down about 4 years ago...after a tornado came through....the building is fine so not sure what the story is why he quit doing it. He has a 4200 square foot shop in which he used to have 6 guys working and kept multiple jobs running at all times...anyhow he stopped by my shop today to let me know he still has all of his equipment and was wondering if I would like to buy any of it

Since I do not have a lot of money, I cant buy any big ticket items, but am interested in some of the stock and smaller machines, staplers, button press, etc.

after a conversation he brings up the idea of working together, while this idea does appeal to me because it is a good chance for me to learn from a more experienced upholsterer, I have some hesitations. Why would he want to work with me, in my shop, when he has a fully stocked shop of his own. the answer he gave was that he got burnt out...

while I do see a lot of possible advantages, I also worry about things like rekindling his passion for it and having him decide he is ready to reopen his shop, then I would lose a lot of business because people around here liked his work and reputation. this could also be a boon for me, more production, more customers (people hearing he is working again) but again, if he is working with me then it will most likely not help my reputation because people will assume he does all the crafting...

Any thoughts on this type of arrangement if it was presented to you?

[Mojo]

I think you asked yourself a very important question..........why would he want to be your partner when he already has a shop and equipment ?

Something here just doesn't seem right. It has beware of ???? signs written all over it.

When I was still a consultant I used to get asked about partnerships and my answer was always the same. Stay clear of them. Typically there is always a winner and loser in a partnership deal and alot of times both end up losing.

I myself would concentrate on growing your own business according to your current health situation and stay clear of partnerships. It is something I have done myself. I have learned how to manage my growth and I know health wise I cannot get any busier or bigger without bringing in extra help which is something I refuse to do.

Chris

[baileyuph]

You have to do the analysis, such as what exactly will the agreement be?

Does that economy (your market area) evaluate out to be strong enough for the two of you to join forces?

Too many questions to this, what is his health, is he solvent, does he own the building he is in?

Pays to know what you are getting into.  You two need a business plan before proceeding with commitment.

One concern I would have is what is the maket in that area?  What can you get for your work and how much work can the locals afford or are willing to pay?

Time to think about all this.

Doyle

[mike802]

Chris is right, stay away from partnerships.  People forget that you can and will be liable for anything your partner does, both professionally and personally.  I was once in a partnership and everything was mostly good, but one of my partners started acting differently, they were on medication that affected their mind, not their fault, but I started getting nervous.  I sat everyone down and explained the benefits of incorporating, thankfully I made a good presentation and all agreed.  We had been incorporated for about a year and a half and the old partner that I was worried about got into personal financial trouble.  Guess who the creditors thought they could come after to collect on that partners bills, you guessed it, me.  It was like divine intervention, it felt so good to say "I am sorry, but this is a corporation."  I was barraged with these kind of calls and I believe I not only saved the business, but my personal assets as well.

If this individual is sincere you could incorporate, he could buy in with the value of his business assets, you would both be employees to the business, you are protected from his personal life and if he wants to walk he can at anytime, you do not have to buy his share if the business cant afford it.  The down side is he could find a buyer for his share that you dont like, I would also recommend that you have a larger share then he does for some added protection if needed.  I went with a C corp for the added protection if affords, many people avoid C corps because they believe you a double taxed on any income, but if you do not pay dividends this is not true.

[sofadoc]

The idea of having a built-in teacher/mentor is an intriguing one.
He says that he got "burnt out" 4 years ago. How has he been putting food on the table since then? I suspect that the only thing burnt, was his credit with his suppliers. Now he's looking for a fresh name to order under. I would suggest that you keep everything in your name. How you split the profits with him is up to you. Any supplies that he brings into the business will remain his until you use them. Pay for them as you go.  Any tools/machinery that he brings with him will be factored into his salary. In other words, he's an employee.....not a partner.

[JDUpholstery]

lots of good points...while I like the idea of having someone skilled helping me, I also lean towards staying  as is...I will be buying some of his stuff though...no doubt! thanks for the points of view, I appreciate it

[byhammerandhand]

Definitely get lawyer(s) involved.  Anticipate and plan for any possible contingency.  Health, financial, family matters, death, boredom, swindling, legal trouble, etc.

One of the best I heard was "name a price"     Two partners in a company that I worked for in college had this.  Any time, one could ask the other, "Name a price."   The other partner had to come up with a money number for half the value of the company.  The asking partner could then say whether he wanted to buy him out at that price or get bought out at that price.   Sort of like having one kid divide the cookie and the other one picking which half he wanted.

My sister nearly went bankrupt because a "friend" borrowed money for a business, he wrote it down as part owner, then proceeded to spend money like crazy.   He is in federal prison now, his accomplice is on parole after serving time, but my sister had to start over financially at age 58.

[kodydog]

Why not just hire him on piece work. He gets paid for what he produces. He brings his old customers with him. You get to call the shots and remain 100% ownership. You have total quality control. And at the same time get to learn from him and receive all his years experience. And if you need to part ways later on their is no financial mess to clean up.

I also worry about his burnout. What did he mean by that. If he becomes a partner but only shows up 1/2 the time, how are profits split? If he is an employe you pay him for what he produces. One word of caution hiring a piece work upholsterer. Watch his work to make sure no shortcuts are taken. Be cautious of the upholsterer who says, I can show you an easier way to do that.

[scottymc]

We have one word in oz for this situation , KISS, keep it simple stupid.

[Mojo]

The idea of having a built-in teacher/mentor is an intriguing one.
He says that he got "burnt out" 4 years ago. How has he been putting food on the table since then? I suspect that the only thing burnt, was his credit with his suppliers. Now he's looking for a fresh name to order under.

Seen this many times before. In the end the innocent party gets screwed. Big Time.

Spot on Dennis.

Chris

[JDUpholstery]

Well I nixed the partner idea, for now at least..and got him to agree instead to work on a per job basis for percentage, there was a lot more to the story about why he quit, but I wont go into that here....needless to say I think he would make a great addition to my shop as an employee, understands that I maintain complete control; however, I welcome his input.

I have to go by his shop tomorrow as he has a ton of tools I would love to buy from him, and I want to see what and how much...so far his prices have been fair, I purchased his button press, with a #22 and #30 Die and Cutters, plus 10gross box of #30 and 5 gross box of #22 (both partially used) for 140 bucks, also bought his Eze staple gun and his supply of staples for 40 bucks.



I think as long as I maintain control of the shop, I would not mind have a master upholsterer to learn from (he was in business for 25 years) and with his experience the 2 of us can probably push out jobs in a more timely fashion....seems strange that the apprentice is the masters boss...but we can get past that lol

[baileyuph]

This is kinda where I thought you would end up JD.  You might have a win win situation going.

Just don't give him keys to the shop.


BTW, what is an Ezz stapler?  I might know and just forgot, but my mind is blank at the moment.

Good luck,

Doyle

[JDUpholstery]

http://www.upholster.com/toolkits/staplers.html

they sell them here for 124 bucks so 40 was a decent price

[kodydog]

I think as long as I maintain control of the shop, I would not mind have a master upholsterer to learn from (he was in business for 25 years) and with his experience the 2 of us can probably push out jobs in a more timely fashion....seems strange that the apprentice is the masters boss...but we can get past that lol

There have been more than one time I've worked for someone who didn't know which end of the gun the staple came out of. The guy I currently work for has been in business 50 years and has done very well for himself by hiring key employees to do the things he cannot.

[sofadoc]

I think as long as I maintain control of the shop, I would not mind have a master upholsterer to learn from (he was in business for 25 years) and with his experience the 2 of us can probably push out jobs in a more timely fashion....seems strange that the apprentice is the masters boss...but we can get past that lol

The only potential problem that I see is..... if he's the one with all the experience, at some point he may start calling the shots. Then you'll have to remind him whose name is on the sign outside. But hopefully that won't happen.

Kody says that his boss uses more skilled employees to his advantage. On the other hand, I'll bet that Kody doesn't try to assume control.