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Porsche Porsche is offline
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Join Date: Feb 2006
Posts: 91
Partnerships with Friends???

Hi everyone,

Just wanted to ask peoples oppinions on partnerships, particularly with friends.

I have a friend who I am going to propose a business to. I'm only inviting him to join this business because he has experience of the industry but most importantly, he is a people person. I need his personality and his contacts to help the business grow.

However, he is also the fun loving type of person and has a very playful approach to life, but I'm hoping a business will ring a bell in his head and make him change his ways and start taking things (especially the business) more seriously.

If you were in my position would you risk going into business with him. The idea, the concept, the operation and potentially the future growth of the business, will, in my oppinion be based on my knowledge and research and experience in business, but it is his people skills which will be needed to help me gain the contracts and manage the staff etc.

Are there any safe options for me to protect my interests or do I really need to use my judgement. Has anybody ever started a partnership but included a buy back clause or will this be a disincentive to partners. The situation I'm most worried about is if the buisness gathers momentum and grows but he plays little part in the business but I'm stuck with him pocketing half the profits. Then for me to need to buy him out for a stupid price.

Thanx for any help.
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Martin Martin is offline
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One rule - Never work with family or friends. (At least I try keep to that)

Personally I'd want to see willingness to adapt to business life before deciding to work with them. Ask them about the future and what they see themselves doing and just try work out how far this playful nature goes. Does it mean he/she shuns responsibility, or would they take the easy route?

I believe people skills can be gained, but to truly want a business to succeed comes from the heart.
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moneyman's Avatar moneyman moneyman is offline
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no problem with family or friends but get a proper plan down first with who does what and how money is to be split. ltd company easiest with a decent shareholders agreement so that you can buy him out at a set formula should you need to. 50 50 or partnership is a bad idea with someone who might be unreliable.
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Widgey's Avatar Widgey Widgey is offline
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Working with family and friends usually causes nothing but arguments and it is suggested by many a big no no.
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Porsche Porsche is offline
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Join Date: Feb 2006
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Quote:
Originally posted by moneyman
no problem with family or friends but get a proper plan down first with who does what and how money is to be split. ltd company easiest with a decent shareholders agreement so that you can buy him out at a set formula should you need to. 50 50 or partnership is a bad idea with someone who might be unreliable.
Thanx for the replies everybody.

Just wanted to ask moneyman if you can eleaborate on what you mentioned above or if you can point me in the right direction where I can learn more about this. Is a 'proper plan' basically an informal agreement between me and my partner so we know which aspects of the business we should be involed with. Also, what do you mean by agreement to buy him out. Is this a set price, or a set agreement so I have the option to buy him out.

Thanx again
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moneyman's Avatar moneyman moneyman is offline
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it doesnt have to be formal as in legal terms. just make sure it is on paper. sort of you agree to do x i agree to do y. you will get %40 of all profits,
saleries to be capped at ... the rest to come out of profits.
no company cars,
only %5 of sales will be spent on entertaining expences.

when it comes to a selling price something like 4 or 5 or 6 times the earnings before interest and tax. (EBIT) or as calculated by ....accountants. the above only if he has done his part.

you can always change it if you agree as you go along but it stops the "how come i have the company van and you got a company porche/phone/expence account?" problem.
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mattley23 mattley23 is offline
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Hi Porsche,

Im in exactly the same position. I have a business that has been trading for almost 12 months and is very succesfull. I have 2 employees but need a certain type of person to come on board with me to help grow the business and reach its full potential.

Yes I could employ someone but I feel a partner would be in the companies best interst.

I too have someone in mind and yes he is family, but the guy brings over 10 years experience to the table and a great working attitude.

My advice would be to get everything down on paper that you both agree to so all eventuality is covered. You both know what is expected of you and what your rolls are.

Other than that I personally would take iknto account both your personalities and how you react under certain stresses and strains and ask yourself after all of that could you work together.

But the most important thing is: be totally honest and up front about everything. Business is business, its not personal.

Good luck
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Limeone Limeone is offline
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Just get the agreement in place

Friends and family tends to make the process less formal but it's business so just get the paperwork and partnership agreement in place.

We do a full traditional service where we draft to your specific requirements and guide you through everything and also provide a template service with instructions.
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Modica82 Modica82 is offline
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Hi,

Although this is not exactly the same senario. Before i started my company i worked for someone as the development manager. We needed a graphic designer of good ability quickly. One of my best friends (who still is one of my best friends) was available so i got him in. There was no problem with his work, he was excellent, where it became a problem was on a professional level where changes needed to be made and formal discussions (not attacks on his work which he took it for) were needed. Becuase you have that friend level, the formal approach sometimes is difficult to tackle. My friend is still and excellent graphic designer, and does do some freelancing for me, but i woudnt have him join my company becuase i dont need the addeded headache. this is not going to be same with everyone, and as long as you clearly define business as business and friendship as friendship then it can easily be beneficial for both of you, the reason i bring this up is my friend is a fun loving type of person (yeah i know, we all are!)

Good luck!

Rob
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mattley23 mattley23 is offline
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Great insight there Rob, food for thought.
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Porsche Porsche is offline
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Thanx for the advice everyone.
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febes febes is offline
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In a very similar situation. I have a friend who is at catering college and told him he could have a job. He then said he wants his own business and slightly discussed him being a partner but he is going to america at some point so he will have to be a silent one. The thing is, it is me who seems to be unwilling. I have been looking into this and discussing it etc and finally took the first step to making it reality, I have become slightly possessive. My business is MY baby!!!

But at the same time, it could be the start or stop of my business where funding is concerned. I suppose it depends how well you know someone, but I would make sure there was a legal contract in place!
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Porsche Porsche is offline
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Thanx for the advice everyone.

I'll try and explain the situation in more detail. I have been in a position to go into business for the past year. The things which have held me back are firstly the capital I have to invest into my chosen business and the fact that i couldn't find the right property. It is because of this that I am looking at alternative business's. The business which I'm looking at starting now is is in a line of work which my friend has more first hand experience. I'm hoping he will take more of a leading role in the practical side of the business and in management. He's also well connected with people who would be very useful to know and is the type of person who can talk to anybody and everybody and is very confident. In comparison, I think that I'm more business minded and am better at dealing with the planning, innovation and implementation. Ideally, we would work like two peices in a jigsaw but I have my other concerns. His background is that he's quite wealthy but his various bonds and investments won't mature until he is 24, although he still lives very comfortably without them. Whereas I'm more quiet and reserved, hes part of the in crowd, which is good in that it brings a lot of wealthy contacts and potential clients. However, my concerns with this are that he hasn't had a job for over a year and lives his life sleeping late and doing f'all, then if he goes out he is known to enjoy casual cocaine taking. For example, one sitaution which I won't want happenning is if he starts this business with me but still has the idea to put play before work, and drop the load on me. Basically, my other friends view of him is that he needs to sort his life out soon and I'm hoping this business can be a turning point in his life.

What are your oppinions on my friend. One more thing though. This friend who I've mentioned above. His brother is my best friend and has a mindframe similar to mine and who thinks his brother needs to sort his act out.
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BillT BillT is offline
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I think the question is - Can you seperate friendship and business? Can you tell him off if he turned up late etc?

My business partner is my good friend from uni. But we've still kept everything strict, our roles and responsibilities and percentages of the business are all written on the partnership agreement.

My opinion is if you have the slightest doubt about keeping things seperate then don't bother starting a business with your friend.

Bill.
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