Business Partnerships - The good, the bad and the ugly...

In my line of work we run into business partnerships every day and we are often the ones trying to figure out how to resolve the myriad issues, problems and crisis that revolve around the small business partnership dynamics. A wise person once said famously,

"Choose your business partner twice as carefully as you choose a spouse..because your spouse can only take half of what you have."

Business partnerships can be a wonderful thing, especially in the early stages in the life of a small business start-up. The sense of mission and teamwork can be addictive. But what we often see is that the business partners didn't really agree to anything before they become partners.

Often the partnership conversation goes like this:

Mary, "Bill, I have a great idea. I'm going to make ice skates that have training wheels."

Bill, "Cool, I have some free time, I can help. Want to be partners?"

Mary, "Sure 50/50"

Bill, "Awesome, let's go to Starbucks and noodle out a plan."

There you have it, you now have your business partner and, as long as the business doesn't succeed or fail things will likely be o.k. However, every business, over time, does exactly one or the other. It either succeeds of it fails.

Good Business Partnership Agreements are All About the "What ifs?"

Business Owners and the Personal Guarantee

Often when people go into business or start a small business they really don't think through the details of what they are doing day-to-day as it relates to the long term health of the business or their personal financial health.

A classic example is the Personal Guarantee. When you go into business you will need to make financial commitments to various parties like landlords, vendors, etc. Most of these commitments are promises to pay. The real question is "Who is promising to pay?" Is it your company that is promising to pay or is it you personally that is promising to pay...or is it BOTH.

When you go into business did you form a corporation? LLC? Hopefully you did because those things can give you some legal protections that, if something goes wrong, you'll wish you had.

Small Business Management and Help

Every couple of years I re-read this book and every time I'm glad I did. I bet I've read it at least 7 times.

This year I'm buying a bunch to give out to business owners that seems especially receptive to the idea of creating a great business.

On a side note the Kindle price for this book is higher than the paperback version, does that seem right to you? Not to me.

Anyway, here's a link for it and yes, if you order it thru this link I'll make about 2cents, so thank you in advance, if you do.

Learning from is part of running and changing is needed to be successful over time. Here's a post on old school simple sales and marketing lessons I've learned though experience.

Either way, get your hands on this book if you run a business or should I say if your business is running you. Also, take a look at this article "Can Owning a Small Business make you Wealthy?"




For other interesting blogs from interesting people visit TheHub click here

Build Your Small Business Brand without a Big Advertising Budget

Here's a good article on low cost strategies that are highly effective.

Interesting Article on getting farmers help

Some creative Entrepreneurs are on the case  CLICK HERE

Big Ideas for your business? A lesson from Burger King's new big idea.....

Is your new big idea simply an attempt to escape your poor execution of your last big idea?

I often see business owners trying to do too many things and they don't do any particularly well.

Today I read a news report that burger king is experimenting with home delivery. My first reaction was...what a terrible idea. Then I gave it some additional thought and decided yep, it is absolutely a terrible idea.

Burger king has been an under performing biz for as long as I can remember. They seem to go from one idea to the next in an apparently useless attempt to hit the jackpot.

When i read the article I said to myself "really? Home delivery? How about you focus on getting me hot French fries at the drive in window. That would be outstanding!"

How good would it be know that every time you pulled into the BK drive-in you got fresh hot fries? I think that would generate real biz.

When I think about home delivery for BK I think..."why on earth would I want to wait for mediocre BK food when I can wait the same amount of time for decent food?"

The question for you is this. Does your business do a few things very, very well or many things all done poorly?

Interesting Article on Small Business........ Cold Hard Facts

Why do businesses fail? How many businesses are there? Where do businesses succeed?

Click here for the article.

Good article on getting work done - 7 steps to Better Personal Productivity

These ideas for getting more done make a lot of sense to me, I think I'll keep them handy so I can stay on track for the big projects. I've done #3 successfully and I've victimized myself on #6.

Read the article here.

When I first got into the workforce I had a boss tell me, the distance between good and great is not as far as we like to use for an excuse. I've always tried to remember that.

Another example of why Buy Sell Agreements are so important

This may be an extreme example but the fundamentals are in many business problems we see on a regular basis.

Just because your business partner is your spouse it doesn't mean business judgement should be suspended.

Read about the Los Angeles Dodgers bankruptcy soap opera here.

Why are Entrepreneurs Better for the Economy than Bureaucrats?

Entrepreneurs, "My business will lose a trillion dollars this year if I don't do something. I'm cutting back on everything right now!"

Congressman, "We'll have a trillion dollar budget deficit this year...we need committee meetings for the next 8 months."

I rest my case.

Time to Look at Smart Growth for Your Small Business?

Business owners often get caught in the squeeze between seeing opportunity to grow but not having the resources to hire people or get more space. Managing a small business needs to be a creative process.

If you find yourself in this position (and if not now you certainly will if you grow) spend a few minutes looking at a 3rd party fulfillment service. Think of it as an expansion that you can make without hiring people or signing a big lease.

Take a look here. 

What Does Patricia Kluge Bankruptcy teach us about business ownership?

A messy business failure can always be learned from. The Patricia Kluge bankruptcy has lessons for small business owners with partners, both known partners and unknown partners.

I once heard a wise man say, "Pick your business partners twice as carefully as you pick a spouse..because a spouse can only take half of what you have."

If you are going into a partnership in a small business make sure you set up the proper buy/sell agreements so that you don't wind up with a partner you don't want. How could that happen?

You and you partner are 50/50 with no buy/sell agreements in place. You've known your partner since high school and trust him completely but..... after you two are in business he goes thru a divorce and his wife winds up being your 50/50 partner. Now what? But wait it could get worse...she remarries and now you have another partner, kind of. You get the picture.

Get your buy/sell agreements in order before you go into business with a partner. A good business attorney can help you avoid a terrible situation, one which we see way to often out in the real world. You'll even find businesses for sale solely because of partnership issues that weren't planned for at the beginning and now selling the business is the only way out.

Here's a good video post regarding buy/sell agreements.

Uncertain Times, Reason to Act or Reason to Wait?

I am often asked "when is the best time for someone start a business?". As you might imagine, the answer is different for everyone and even then, the answer is never 100% evident.

If you wait until the risks are minimal the time might may never come, if you leap when the risks are huge your chances of success are reduced. So what to do.......................

My advice is to make sure you have thought about the opportunity and the risks. Knowing that you can never really quantify the risk. Here are a few questions:

• If the business takes a year to get going what happens?
• How much of my own money am I willing to risk?
• How much of others people money am I willing to risk?
• Am I as smart as I think I am?
• Do I have a bullet-proof plan for the first 6 months? If not, why not?

The last item is critical, if you have a bullet-proof, well thought out plan for 6 months...and you can execute that plan, your chances of success go up dramatically. The reason is simple. A great and accurate 6 month plan means you know enough about your market and your customers to give you time to adjust to changes. The ability to adjust is an essential survival skill in business.

If you really want to start a business, focus on a well thought out 6 month plan. Review it with people who are in business, be honest and do your homework. If you've done all that and the opportunity still looks good...jump in..and welcome to the world of the entrepreneur.

What is Working Capital and why is it Important?

Many small business owners don't understand or appreciate the need to have a good handle on working capital and how it is generated or consumed by the business. Let's take 2 examples on opposite ends of the business spectrum.

First a Day Spa. At a day spa the customer comes in, pays for the services and then gets the services - no accounts receivables to collect...no money, no service. Also, a Day Spa sell lots and lots of Gift Certificates. With gift certificates the biz collects $100 for a gift certificate and has the cash for weeks, months, years or even forever before the service is delivered. That's called negative working capital. I get your money before I incur the cost of providing the service.

Now lets look at an office supply business. A customer calls up, orders 5 cases of paper for delivery at a cost of $200 and the customer wants you to "bill" them. Which means they will pay in about 30 days. This $200 order requires a lot of working capital...you had to buy the paper, pay the driver, pay the person who took the order all BEFORE the customer pays you the $200. All those expenses you had to pay out before the customer paid you needs working capital to pay.

That's why understanding working capital is critical, if you are in a business that needs working capital to grow you'd better figure out where the working capital is coming from before you start to grow. Many. many profitable businesses have gone out of business because they didn't account for, and plan for, the working capital needs of the business.

The hard work of un-fooling yourself...........

As I've written before, during the 1st quarter of the new year I find myself trying to take extra time to plan and evaluate. Some of this is an natural reaction to reviewing the financials in preparation for filling taxes. Some of it is just my reaction to something I've heard or read somewhere.

During a recent walk I was thinking about something I read in a blog article by Michael Hyatt, by the way, if you are unfamiliar with him I recommend his blog. He writes a lot of good stuff about business and some interesting stuff about managing life. In one of his articles he hinted at something that I reformulated for my own use. What I'm talking about is trying to identify the business and personal habits, processes or practices that I automatically assume make sense but on closer investigation I'll find out the idea either was never a good idea or it's an idea who's time has passed.

Once I decided to take a look I couldn't believe how difficult it is to then decide which things to look at! I decided I'd look back at the prior week for some clues or direction. I had thought that the prior week was really pretty uneventful and not very interesting nor complex. But then I started breaking down the events and connecting the dots it got messy. I'm now convinced that many things are simple but few things are uncomplicated.

I then made the leap of logic that goes like this, "If I'm trying to figure out what I'm fooling myself about, then obviously I've already fooled myself and how will I recognize it?" Now what do I do?

It wasn't nearly as difficult as I thought. Here's what I did. I went to someone in our office and asked the brilliantly insightful question, "What do we do that's dumb?" Much to my surprise (and a bit of disappointment) they didn't need to think about it at all, nearly before the words came out of my mouth the person had listed 3 things.... bang..bang..bang!

To shorten this post I won't bore you with the details but here are the results of looking into the 3 things identified for me:

Starting a Small Business - What's the most important question to ask?

There are many issues to deal with and questions to ask when thinking about starting a small business.

Should I incorporate? LLC? C Corp? S Corp?
What name should I use?
How do I get or set-up my website?
How do I find a CPA? Do I even need a CPA?
How do I get a license to do biz in my state?
What accounting? Quickbooks? Excel?

And the list goes on and on...
But the real most important question is this...................

If I start a small business, how do I get out of my small business?

What is your exit plan? Your goals, time frame, limitations?

If you will think through, with honesty, this question - How do I exit my business?  You will make a better decision about how you go into your business. Do you want to sell the business? If yes, then there are things you need to do when you set up your small business...Want an example?

If you want to sell your business don't name your business after yourself. Believe me, Wizards A/C and Heat Service is easier to sell, and at a higher price, than John Q. Smith, Inc.

Send me your start up questions that relate to your exit plan, I'll take a shot at getting you useful answers.

What is CRM and does my small business need it?

Hard as it is to imagine, there was a time not terribly long ago when a sales or service person for a small business would go out into the field without a PDA or Smart Phone—or any phone at all. The reason for the current ubiquity of the communication devices in small business is obvious: it makes customer service or the new term, Customer Relationship Management  (CRM), easier and more effective. The success of any small business is built around this engine and the latest innovation in the field of CRM is also the most powerful yet seen, primarily because it is among the simplest-to-implement of all emerging information technologies. We speak, of course, of Cloud-Based Solutions.

Until recently any information gathered by, say, a serviceman sent into the field would have to be relayed through a series of data channels, each administered by an individual working within his or her own cataloging system, until it eventually found its way to the appropriate sales rep who is ultimately responsible for the client's satisfaction and continuing patronage of the business. Meanwhile, the client is already calling the rep and asking about progress on the issue. And the rep has no idea there was an issue to begin with.

Want to Know How a Business Appraiser Looks at Small Business Value?

Factors that Increase or Decrease Business Value

By: George D. Abraham

CEO & Chief Appraiser

Business Evaluation Systems

There's a range of key factors that can affect the value of a business.  While some of these factors are outside of the owner's control, steps can be taken to make the business as valuable as possible. Start planning well in advance and consider inserting an exit strategy into your original business plan. Then start implementing the factors that increase value and eliminate the factors that decrease the value.

Financial Statements

Just how good are your financials. Are they minimal or do they show an in-depth look at your business.  Can you easily track the flow of revenue and expenses flowing from the invoice to the financials to the tax returns?  Can your track the sales of your top 5 customers? Can you easily prove all of the perks you receive from the company?  Today's accounting software easily lets you do all of this and much more.  When a buyer is interested in a company, the ease at which the owner can prove the financial performance of his or her business has a direct impact on value. Incomplete or inaccurate financials tells the buyer that no one is watching and tracking the Company's performance and therefore the future performance (of real importance to the buyer) is unpredictable.  Value is created or destroyed by the ability to see the Company's future.  The longer the buyer can see that the Company will perform in the future as represented, the more secure they are and less risk is perceived.  To the contrary, when the future is a guess, risk is increased and value is decreased. 

It's a new year, winter is raging and opportunities await....

This time of year I like to take several days away from my day-to-day business, hide out somewhere cold but with a good fireplace and sort through the current opportunities and challenges of my business. I make it a point to seriously limit email and phones so I can think more clearly without the usual "noise" of day to day activity.

I'm always curious about how (or if) other business owners do the same and what approach they take to an annual review or plan. Please let me know your routine and your success with it.

Here's my approach:

Why would someone sell me their perfectly good business?

Often small business buyers wonder about this. There is an all too frequent buyer attitude that says "If it is a good business they wouldn't be willing to sell it to me!"
Here are some reasons we see business owner want to sell:

1. Divorce of husband and wife owners
2. Partnership disputes
3. Owner health issues
4. Kids don't want the business and the owner has gotten to retirement age.
5. The business has gotten bigger than the skills of the owner
6. The business needs professional management
7. The industry is changing faster than the owner wants to change (in this case the owner is always convinced the market is wrong and he is right).
8. The business is totally debt free and the owner doesn't want to take on debt to grow.

There are many other reasons that make sense to the seller, even if it doesn't always make sense to the buyer. the tricky part is, because confidentiality is so important it takes some work to locate a good business to buy. Finding a good business for sale and buying it from a seller who has a good reason to sell could be a formula for success in a business acquisition.