Offered partnership, need advice.

[TyrantDesigner]

I actually had a pretty decent partnership when I did art installations in my early college years. (you know ... corporate art, massive silk screened canvases, murals, etc) Starting it up was complicated though. I had 2 friends hounding me to start a company with them because "we would make so much money!" ... really they just saw what I did and wanted a cut ... after a while I relented, set up a business plan, ownership structure and figured out initial investment capital ... with me being 50% and the other two being 25% ... they never gained the capital but I was almost at 75% of the investment capital. Turned out a graphic design guy I sort of knew really just wanted to design stuff, get paid for it and really just be the salesman ... he also had the 25% needed. turned out pretty well, he sold the jobs, we split design work, I did all the rest (basically the fun stuff) ... we even started to get a few employees that were regular help. when I decided to move (changed colleges), he gladly bought me out ... I think he still does it under a different company name now. Really it just comes down to not involving family or friends, having a defined business plan and ownership structures as well as a contract on all parts, and for the love of all that is unholy ... get an accountant worth their salt to manage the books ... doesn't cost a lot and makes for an easier quarterly turn over of profit sharing.

Should also note ... Lost the friendship of the two guys that I mentioned in the beginning over starting up the company anyways without them. Good riddence.

 

[Redz Signs Inc.]

in my honest opinion the only thing he has to offer you is alot of money for start up ect...and has the ability to get you more jobs . so lets say that you do this deal ok and 5 yrs down the road you come to realize that the only reason that he wanted you as a partner is so that he can get you the additional jobs and profit from it IE its cheaper for him than to just give you the jobs now and addd amark up verses the 5 yrs that he made all of his money back and will continue to profit. and you sit and relize that you did all the work and you could have done this yourself with a little more time. and your half baked ideas are great ideas if oyu put forward on them and sell your ideas theres your additonal money that will shoot you into the big league. i was in kind of a partnership and the guy had millions!! gave me whatever i wanted from equiptment to selling me a house to new trucks i mean crazy money!! but in the end i cut the embilicole cord witch he was fine with but when i sit back and think about it i done need it i could have done it myself. it was nice to get thrown to the top but now id rather earn it artbot ur a smart dude you can deff do this on your owm and your in your 40ds comeone thats the new 20 you still got 40 left and put your best foot forward respectfully decline put ur nose to the pavement and make it happen ... im 29 today! and in the past 6 yrs i went from my basement to a 9000sf building and having a steady client flow and continung to grow . "you can do it" <~~~in that guys voice from waterboy.

 

[briankb]

Next April our business will celebrate 10 years. It was started with three "friends" and almost ended this past January because one of the three of us decided he didn't need to put anymore effort into our main source of income. It just concluded after 8 months of extreme aggravation and turmoil to say the least by myself and my other business partner buying out the 3rd. It was a nightmare and because we (I) did the shareholder's agreement it could have never ended because I didn't think of or leave in a clear clause for any of us to exit or a majority to push someone out who wasn't pulling their fair share anymore.

So with that said here are my thoughts and some it has already been said.
- find a GOOD attorney. I only thought we had a good corporate attorney until we got a letter from our 3rd partner's lawyer... Ask other business owners for a referral.
- Vet your potential partner extremely carefully. Hire a private investigator if you need to. Pull a credit report with their consent.
- have the possible exits already planned and in the shareholder's agreement, especially how to valuate the company. If you don't have a valuation plan in the agreement then you will be at the whim of the person who you want to leave
- Make one partner the majority owner with at least 51% if not more. There is such thing as "super majority" which I was not aware of until this ordeal. A good business attorney will know about this and other related issues.
- Two heads are better than one. We had three and together we were awesome. Until the two or three don't agree, which in our case was almost always the case. Think of Apple vs Microsoft. Apple has ONE leader who has complete veto power. Microsoft has a "CEO" but he's more of a figurehead than the ultimate decision maker. One LEADER is better than two or especially three.
- Leave out anything in the shareholder's agreement that isn't related to the actual mechanics of the partnership. Our shareholder's agreement that I wrote was a mix of shareholders agreement and employment contract. Keep them separate. With that in mind create BOTH a shareholder's agreement and an employment contract.

If I were to do it all over again. I would still partner will everyone but I would retain and NEVER give up majority ownership and the absolute power it includes and suggests.

One absolute leader is the key IMHO.

 

[Gino]

Partnerships are in my opinion, a recipe for disaster, just waiting to happen.

Sure, they eventually fail, but you can also fail all by yourself. However, you only have yourself to blame and you can get back up, clean yourself off and try it again after learning from your OWN mistakes.

With a partnership, someone always seems to become lackadaisical in their contribution. I knew a partnership one time, where the one guy was great at sales and the other guy was a great mechanic and hard worker. Well, the guy making the sales would wine and dine the clients, have all the fun and was known as the business. The other guy started to resent this and said to me.... he spends all the hard money I make... boozin' it up and taking these people out to dinner and I just work my butt to the bone. I'm getting a little tired of this. It was a sign/silk screen shop. I said to him.... get Joe in here and do some of the work with you and have him take you out with him for some of the fun once in a while. Share the tasks a little more. Seemed Joe didn't like this idea and told him..... Hey, I work hard at getting us accounts. This bending the elbow is for both of us. Well, they continued to get more and more jealous of each other and then..... "POOF'... one day, they just split up. Joe went onto selling something else in an entirely different field, while the other guy just went to work at some meat packing place or something.

There's only one thing worse than a partnership and that's one with a relative.... as Fred mentioned.


Other than my wife, I've been solo my whole life and had various opportunities to merge with a partner, but always said no in the end. Seems odd, they always approached me. I never once entertained the thought of bringing someone in.... they always wanted to join up with us. I always came back with the same conclusion.... I must be doing something right. 40 years later and we're still going strong. Not getting filthy rich, but making an honest living and loving it everyday and it's all mine.

 

[artbot]

all fantastic advice. it's great that i can bang out a quick letter and the next day get so much input to chew on. thank you everyone for spending the time to respond. i know we are all busy. so thank you very much.

@briankb ...that is my greatest concern. my "vision" is a "manufacturing/studio" much like a couture fashion house. super expensive over the top wall sculptures that "sell" the panels. so it's just not a panel. it's an "alldredge panel". sticking to a design doctrine that brands everything. ...being able to turn down large jobs because they don't fit. the possible partner discussed that maybe we had a $250,000 minimum if the panels had to say a logo like "reliant energy" instead of something that fit the design doctrine. but that certainly would not fit the couture marketing plan. gucci or prada will never suddenly offer a coca-cola bag. but i can see the rift that is possible by turning down such orders.

i've spent 28 years as a professional artist, and 4 years in the quasi art/sign/install business. i am finally getting stable after all the drama in my life. i really don't think a quick infusion of cash is going to save me. i can see losing or making money regardless of the equipment at hand. what his guy offers is this endless connections to architectural firms and massive building projects. it's unlikely i will ever be able to court those orders as an "insider". maybe as a vendor. but without the 800 lb gorilla showing my product, i'd be forced to spend hundreds of thousands of dollars to even attempt to get seen, etc. it's not a reasonable assumption that i could grow as big as quick, ever.

 

[Gino]

There's a recent thread about how someone here moved into a building and their landlord eventually figured out how to do what he does and are starting to cut him out of the picture.

You're looking at this as growing.... while they're probably looking at it as growing, also. However, once you show them and answer all of their questions.... how valuable will you really be ?? Perhaps, to cut costs, they would cut you out. Afterall, they could buy bigger and better equipment for you and you'll have a helper and once everything is in place, your place will be eliminated. This chit happens all the time.

Just be careful. It sounds a little too good and they're a little too eager.

Everyone is always open to suggestions and brainstorming, but most people come to the table with a hidden agenda.

 

[artbot]

that is my concern. the intellectual property. i've got the whole shop, chemicals, compatible substrates, software, mods, production methods, design styles up in my head. after they are sitting there in a big warehouse... i may be looking pretty expensive to keep around. i'd have to patent some of my printing invention first. bu then as soon as i modify an invention, ...would i protect that too? seems like a hassle.

 

[signswi]

A lot of hate for partnerships in here but every major successful business has been built up from a partnership. They're like marriages in that you have to be really careful about who you decide to partner with, a one person businesses usually plateau long before a good partnership ever will.

Sounds like a decent fit but you have a million details to work out, get your lawyers involved and really think on how compatible your skillsets and attitudes are. Culture fit is more important than any other detail. Each partner should bring strong, unique skills or resources that the other can lean on, which is what makes a good partnership magnitudes stronger than a solo operation. It sounds like he brings to the table a) resources b) clients c) business skills. Resources you can find without a partner (more or less), but business acumen and an established clientele are both very useful. His established business and presence in a very good market, one that fits your skillsets will, is quite valuable. Whether or not you can retain intellectual property will be up to your potential partner, most money partners want the property rights (or at least shared rights / buyout clauses) otherwise they're not getting anything really. Each situation is totally unique.

First thing I do when I'm looking at business decisions I'm not to familiar with is read the applicable NOLO book:

http://www.nolo.com/legal-encyclopedia/creating-partnership-agreement-29906.html
http://www.nolo.com/products/form-a-partnership-PART.html

Really it comes down to: what are you gaining from partnership that you aren't already getting from this guy, and is there a way to grab all that business without merging? And would you want all that business without merging? You pointed out you hate doing business backend crap and just want to create. Remember even fine artists have partners in the form of agents and galleries who manage sales and business for them in exchange for huge chunks of the profit .

 

[inthesignbiz]

I have had partnerships in different ventures before and can tell you that the first thought is to CYA!

Cover it from every angle you and anyone you know and trust for advice can think of.

As stated before, all partnerships end. Have an exit strategy.

Partnerships are like being married - pick the wrong partner and your screwed.

 

[Locals Find!]

Having had many partners. The best partners is a silent partner.

I have found the silent partner that just picks up a check and provides the cash flow and treats you more like a nice stock he owns. Works out best. You get to deal with day to day as you see fit. They get a nice return on investment.

Historically these kinds of partnerships succeed much better than partners who are active in the business.

 

[Just Another Sign Guy]

in the partnerships that I have seen succeed...both partners recognize each other's areas of strength and defer to the other in that arena. as mentioned a few times prior this potential partnership concerns me because it seems more as if one partner has the capital the other will be doing the production..but we don't know the whole scenario, if the only thing the other is really bringing to the table is money make him an investor not a partner imo.

beyond an agreement make sure that you set goals and expectations...and clearly define each other's roles and responsibilities.

i am a firm believer that MOST (not all) people should grow their business rather than invest an enormous amount of money into a venture at startup and there are many reasons for this but as related to this discussion, do you need additional operating funds or increased sales?

i see SO many ppl enter partnerships because they can't afford to hire employees or consultants, whatever, with specific expertise that is needed...this is almost always a recipe for failure...and almost always i recommend against it if consulted.

just a couple points that have already been mentioned.

~every business needs someone that can make an ultimate decision...someone needs to be 'in charge'. clearly define that role. no 50/50 partnerships.

~do not make your 'friends' your partners because they are your 'friends'; partner with the people who have strengths in areas where you do not that will help you reach the level of success you are striving for.

~have a formal partnership agreement, enough said.

~have a clear plan if things do not go as planned. at what point do you throw in the towel, what options does each partner have, etc.

I see too many ppl enter into partnerships for the wrong reasons...there is nothing wrong with partnerships if all parties agree on the roles/responsibilities/expectations/etc. But if you are seaking a partner for funding purposes you may want to consider other options, if it is because the other person has skills that exceed your own in areas you need to improve keep talking it through.

I've seen some WILD partnerships...and I've seen some WILD partnerships be very successful. If you have a clear, easy means of communication you have a good start.

 

[artbot]

@just another sign guy

great points. this guy brings to the table capitol of course. but also he's a respected heavy hitter in these construction projects. and has the sales, install, billing, legal, trained personnel infrastructure that i'm willing and honest to admit, i will never be the guy to put together. after all i am an artist/mad scientist. i could over time hire management, and bookkeepers, and sales people. but i know that it's not my passion to even do that part of the business well. there's only so much an imaging engineer can do in a lifetime.

currently, my projects are sold at net fifty. so if i have a $15,000 order that is a $30,000 project/install. theoretically the partner and i would not have a much different arrangement. his costs per unit are much higher than mine but, of course, he has many projects going at once. so i'd be interested in how he sees the split of profits should be.

the main thing we both need is what each other offer. he doesn't need to just buy equipment, a building, hire a designer and pray it works. i am a bankable designer and innovator and i will make sure whatever product is offered, the competition doesn't have the same capabilities. i like niche production.

he has the momentum that i may never ever get. he's cranked his business up and is a very wise patient businessman. he's very strategic and if he says he knows he can make a lot of money in a specific niche market, than i have to believe him. he's right there as the checks for hundreds of millions of dollars are being budgeted and wants to get more of those portions of the building's construction.

aa

...check this out. i emailed this to the possible partner today. it's a mono color frit/ink printing inkjet. of course it's $500,000 but it's basically the same printing style/system that i currently do with my jv3 only much more capable and using ceramic.

http://www.dip-tech.com/

 

[signswi]

Don't let your toy lust make the decision for you . That's one awesome toy though.

 

[Mosh]

Scurry away my friend.

 

[artbot]

@signswi after looking at the machine and what it does, i'm not that impressed. my machine practically does the same thing and can lay down way more than 80 microns. my product has optical characteristics. such as, if a window has my printing system it will cast lens effects like dancing water reflections on to the ground. this glassjet can't do this as easily. i just need flatbed, more baking and storage and shipping capabilities...space, sales, commercial name recognition....the list goes on.

here's a youtube clip of my digi-glass printing system. i can do it on acrylic or glass. everything is video is done with and old roland fj50 and proprietary coating machines. my jv3 does much more impressive work. i just haven't made a video of the projects.

http://www.youtube.com/watch?v=90FlTCCk1nE

 

[CheapVehicleWrap]

[absolutely disregard /on]

scurry away my friend.

[absolutely disregard /off]

 

[artbot]

not digging the "scurry" comment. yeah. i'm 5'5" and young by some standards. but the word "scurry" is disrespectful.

 

[CheapVehicleWrap]

scur·ry (skûr, skr)
intr.v. scur·ried, scur·ry·ing, scur·ries
1. To go with light running steps; scamper. He scurries across the water to tend to his crops. He walks on water everyday. He's the most interesting man in Nebraska.
2. To flurry or swirl about. He drives an airboat to work.

 

[CheapVehicleWrap]

Artbot, you got everything going for you and an opportunity to really move forward here regardless of the details not being hammer out yet. I think the two most important things are as mentioned, CYA and don't get greedy. Shape this so even if the partnership falls apart long before it should you still make out like a bandit. ohh yeah... send us postcards too.

 

[Mason]

Taking the advice of someone who has the word "Cheap" in their name, would be cause to seriously consider scurrying away, and quickly...

As I said, Partners are for dancing.
I once thought differently... lost more than I care to admit.