Plan Early for a Successful Partnership
Plan Early for a Successful Partnership
But, what happens when the bank asks for a personal guarantee of the company owners and one of them declines? Where do you go from there?
Let me paint a picture…
Three smart people get caught on the wrong side of a large corporate layoff. Despite their talent, hard work and contributions, the large consulting company for which they have individually worked for many years tells its employees that revenues are down, expenses are up and there is nothing left to cut except payroll. No surprise there… lately we are seeing it happen every week.
Fortunately, the corporate employer decides to offer generous severance packages to those leaving and the three smart people find themselves sitting in the company's cafeteria on their last day of work, sharing thoughts on next steps. They decide to pool resources and open their own business. In fact, their employer encourages them to do so and offers referrals of smaller project clients. So far, so good.
Twelve months later, the business has legs, but it needs capital. Capital to operate, capital to cover expenses while waiting to be paid by larger business clients, capital to pay the salaries that the founders have foregone in the start-up stage.
So they turn to their friendly banker who reviews the short track record, long industry experience and contacts, status of contracts, etc. In short order, our friends' new business qualifies for a $100,000.00 line of credit. The bank's commitment letter arrives and the three owners eagerly begin to review the terms. More good news, until… lo and behold, the bank wants the unconditional personal guarantee of each of the owners.
Such guarantees were standard requirements even before the economic meltdown and certainly not something which will be abandoned today. But when one of the principals balks, now what options are available?!
Well, how about we rewind those 12 months and consider a better game plan from the start:
Remember, as one of our founding entrepreneurs, Ben Franklin, advised, "An ounce of prevention…"
Plan Early for a Successful Partnership - To learn more about this author, visit Marijo McCarthy's Website.
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Forming a company with a few colleagues these days may make all the sense in the world. And combining skills, assets and business development efforts may very well be a smart move.
But, what happens when the bank asks for a personal guarantee of the company owners and one of them declines? Where do you go from there?
Let me paint a picture…
Three smart people get caught on the wrong side of a large corporate layoff. Despite their talent, hard work and contributions, the large consulting company for which they have individually worked for many years tells its employees that revenues are down, expenses are up and there is nothing left to cut except payroll. No surprise there… lately we are seeing it happen every week.
Fortunately, the corporate employer decides to offer generous severance packages to those leaving and the three smart people find themselves sitting in the company's cafeteria on their last day of work, sharing thoughts on next steps. They decide to pool resources and open their own business. In fact, their employer encourages them to do so and offers referrals of smaller project clients. So far, so good.
Twelve months later, the business has legs, but it needs capital. Capital to operate, capital to cover expenses while waiting to be paid by larger business clients, capital to pay the salaries that the founders have foregone in the start-up stage.
So they turn to their friendly banker who reviews the short track record, long industry experience and contacts, status of contracts, etc. In short order, our friends' new business qualifies for a $100,000.00 line of credit. The bank's commitment letter arrives and the three owners eagerly begin to review the terms. More good news, until… lo and behold, the bank wants the unconditional personal guarantee of each of the owners.
Such guarantees were standard requirements even before the economic meltdown and certainly not something which will be abandoned today. But when one of the principals balks, now what options are available?!
Well, how about we rewind those 12 months and consider a better game plan from the start:
- Begin with a consultation with a lawyer and an accountant. Advice and mentoring at the very beginning will often save well-meaning colleagues from reaching the kind of impasse at which our three friends now find themselves.
- Pay attention when counsel advises the creation of an owner's agreement (stockholder agreement for corporate owners; operating agreement for limited liability company owners). These folks have a world of experience in helping owners "fix" mistakes made when creating a "do-it-yourself" company.
- Spend the time now to hammer out the pesky (but essential) questions that, if left unattended, may come back to bite you later. Having to "unwind" the relationship due to one partner's unwillingness to sign a personal guarantee months down the line is just one example of a situation that you don't want to face. (Do you really want to find yourselves having that argument in front of your new banker?)
Remember, as one of our founding entrepreneurs, Ben Franklin, advised, "An ounce of prevention…"
Plan Early for a Successful Partnership - To learn more about this author, visit Marijo McCarthy's Website.
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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