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    3 Replies Latest reply on Nov 16, 2010 12:07 AM by summitlife

    New Business Beginnings; go alone or with partners?

    akeod99 Newbie
      I'm a young(ish) corporate executive in Alaska. The company I am with isn't huge, but a solid middle market performer (about $220 million in sales). I'm 32 years old and served in the military until I was 29. I have a BSBA and MBA. I've passed the AVA and CMAP cert tests but haven't had time to do the case study.

      After the military I started in business development for a subsidiary and then took over the strategy/M&A department for the parent company about a year later. I've been able to grow the corp by about $70 million over the last year through some strategic acquisitions that I spearheaded for the company. The acquisition team that I put together did a great job in getting through the acquisitions quickly and effectively so good on them - we were all proud of the work we accomplished. Anyway, I've been approached by some folks about starting our own consulting business with my part of the partnership focusing on strategic planning, business planning and development, gov't contracting assistance, and exit strategies/M&A assistance. The others are CPA types and would focus on accounting/book keeping, etc.

      In going with partners I think my personal risk is spread out a little bit. We have more potential clients to approach by bring in multiple partners. So my feeling is that going in together is likely the best approach. We are all single income homes and all agree that another source of income is good. We've identified a niche to go after as well. For those that have started businesses, am I correct in that partnerships might be better in the consulting world - assuming there is a good relationship to start amongst the potential partners?

      I've also been approached, as of yesterday, by a go getter who owns a couple of his own businesses about starting a private equity group with him. That's a whole other topic I think. PE is a tough business to break into. Getting investors willing to let you handle their investments in companies is a tough thing to do. I am a strategic buyer now and evaluate how to maximize the companies we invest in, but these are long term investments for us as a strategic buyer. PEGs aren't as long term. Plus, I'm not a Harvard MBA and didn't work at Goldman, McKinsey, Bain, or BCG. I had to work up the old fashioned way.

      Sorry...I'm really thinking out loud right now with this post I think. Just want to be sure I'm not taking unnecesary risks. Risk is fine with me, as long as I can function within the risk space and make it work. I've never started a business before, so I would love to hear your thoughts.
        • Re: New Business Beginnings; go alone or with partners?
          Adventurer
          I have advised small, new and home business for some years now and here is my feeling on partnerships:

          All partners are not created equally. In other words, analyze each potential partner (incuding yourself) and ask what value they bring. Would the company fall apart if they left? I'm thinking CPA's are easy to replace but the financial rainmaker (the one who brings in and secures the clients) is not. You may want to think in terms of the set up more typical of many law firms - a couple of partners (the most valuable to the company) and a number of associates under them until they prove themselves to be invaluable to the company for some reason.

          Also, keep the old song "Breaking up is hard to do" running in your mind. Think very carefully (get legal advice would be my recommendation) about how things will be handled if the partnership begins to come apart - as they often do. You can have the best relationships in the world and still not have it translate into a successful partnership.

          You must all be able to sit down and work on this together, including how any problems or conflicts will be settled. Put it all in writing in the partnership agreement. Get advice from a lawyer who specializes in this type of structure - they can help you think of all the things you may not have thought of yourselves. If anyone of your potential partners is unwilling to put in the time on this prior to starting a business, let that serve as a red flag to you.

          Honestly, you sound like you have all the potential in the world. I wish you the best of luck!

          Linda@thatsitforless.com
          • Re: New Business Beginnings; go alone or with partners?
            summitlife Newbie
            I agree with aim about not all partnerships being equal, but have found that in many cases it is a necessity. The work load of a new business can be overwhelming for even the biggest of over achievers, and this must be taken in to full consideration. My recommendation is to meet with some potential partners and see what they may bring to the table, if you find the right fit go for it (only after taking due diligence). If no one you find lives up to your standards, strike out on your own. I am sure you will have no problem if that is the case.

            ~B
            • Re: New Business Beginnings; go alone or with partners?
              Tracker

              Akeod99:

               


              As far as which business opportunity to go after, if money weren't a considering factor, which do you have a greater desire to pursue and which would be a better fit for your talents and experience?

               


              As far as partnerships go, they can be either good or bad. Yes, in a good partnership, you have the opportunity to share the risk ... and share the profits. In a weak or horrible relationship, you can increase your risk if your other partners don't live up to their original agreements or have a different set of ethics, drive, vision, and desire to cooperate.

               


              I have seen both scenarios.

               


              1. How well do you know the other potential partners?

               

              2. Have you seen them in challenging situations and if so, did you respect they way they handle the situation(s)?

               

              3. In addition to bring complementary experience and skills, do they also bring in strong business contacts that can benefit the partnership?
              4. Are all parties coming in with an equal amount of funds?

               

              5. Do you prefer to make your own decisions and get support through mentors, joint ventures and outsourcing providers?

               


              You sound like an intelligent person, so I think you understand where this line of questioning is going. Realize that partnership in a business is very similar to a marriage. Some people get caught up in the initial attraction and the honeymoon without considering if they are a good match and how they would react in difficult situations. This does take some time to get to know each other, discuss issues and whom would have the final decision if all parties can't agree to a solution.

               


              And as said previously, have a partnership agreement in place with ownership percentages, responsibilities, voting rights, rights of survivorship, etc... Basically, seek competent legal advice.

               


              I hope this helps.

               


              Doug

               

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