The Risk Factor In Small Business Partnerships
The Risk Factor In Small Business Partnerships
The frequent expressions of surprise this advice generates has led me to put the reasons here for all to see.
Noted financial advisor Noel Whittaker writes: “Partnerships sound like fun. You and a friend go into business, make heaps of money and then both live happily ever after. Unfortunately the reality is usually the opposite and you end up deep in debt and on bad terms with each other.”
He gives an example of two women who decided to go into a dress shop partnership. Kay knew fashion but had no money; Margaret had money but no great fashion knowledge. They signed a 5 year lease and bought stock using the second woman’s credit rating. He writes:
"The shop never became profitable and the losses grew. The raised only [part of the money needed] at the closing down sale so all the creditors looked to Margaret to make good the shortfall. After all why chase Kay – she had no money.”
The fact is that each business partner can be held solely liable for debts incurred by the partnership.
And this liability applies even if you are taken for a ride on purpose.
Cairns business consultant Andrew Griffiths tells how he was once burned by a partnership that went wrong due to unknowingly partnering with a con artist:
“We owned a busy retail shop on a major highway [which] was starting to come good. It was my turn for a holiday so I … headed to sea for a couple of weeks. Feeling refreshed and relaxed I arrived back on dry land and rang my partner to see how business was.
“To my surprise the phone was disconnected… The day after I left my partner had a huge clearance sale and sold everything – shop fittings, the lot. He had ordered a pile of stock the day after I left so he had plenty to sell and he walked away with a couple of hundred thousand dollars. I was left with the bills.”
OK, you say, he was conned by a crook – it couldn’t happen to me…
So let me give you a third and final story that happened to someone I know personally.
A hairdresser and a beautician started a hair and beauty parlour partnership, which became a thriving small business. The beautician’s husband, with her knowledge, borrowed a large sum from the joint business bank account, which they forgot to tell the hairdresser about.
When the books were discovered to be well out, the beautician accused the hairdresser’s father (who did the books and had largely funded the shop’s establishment) of stealing from the account. End of friendship … and end of shop.
There are many stories like these. My advice is not to sign into a business partnership unless you happen to be already married to or legally defacto with your proposed business partner.
Sure, things go wrong with personal relationships too. But your business activity is then based on the foundation of a committed relationship in which both have an equal stake
The Risk Factor In Small Business Partnerships - To learn more about this author, visit Susan Regier's Website.
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In my small business workshop, I always advise people not to enter a business partnership, but to establish a company structure if they want to go into business with anyone else.
The frequent expressions of surprise this advice generates has led me to put the reasons here for all to see.
Noted financial advisor Noel Whittaker writes: “Partnerships sound like fun. You and a friend go into business, make heaps of money and then both live happily ever after. Unfortunately the reality is usually the opposite and you end up deep in debt and on bad terms with each other.”
He gives an example of two women who decided to go into a dress shop partnership. Kay knew fashion but had no money; Margaret had money but no great fashion knowledge. They signed a 5 year lease and bought stock using the second woman’s credit rating. He writes:
"The shop never became profitable and the losses grew. The raised only [part of the money needed] at the closing down sale so all the creditors looked to Margaret to make good the shortfall. After all why chase Kay – she had no money.”
The fact is that each business partner can be held solely liable for debts incurred by the partnership.
And this liability applies even if you are taken for a ride on purpose.
Cairns business consultant Andrew Griffiths tells how he was once burned by a partnership that went wrong due to unknowingly partnering with a con artist:
“We owned a busy retail shop on a major highway [which] was starting to come good. It was my turn for a holiday so I … headed to sea for a couple of weeks. Feeling refreshed and relaxed I arrived back on dry land and rang my partner to see how business was.
“To my surprise the phone was disconnected… The day after I left my partner had a huge clearance sale and sold everything – shop fittings, the lot. He had ordered a pile of stock the day after I left so he had plenty to sell and he walked away with a couple of hundred thousand dollars. I was left with the bills.”
OK, you say, he was conned by a crook – it couldn’t happen to me…
So let me give you a third and final story that happened to someone I know personally.
A hairdresser and a beautician started a hair and beauty parlour partnership, which became a thriving small business. The beautician’s husband, with her knowledge, borrowed a large sum from the joint business bank account, which they forgot to tell the hairdresser about.
When the books were discovered to be well out, the beautician accused the hairdresser’s father (who did the books and had largely funded the shop’s establishment) of stealing from the account. End of friendship … and end of shop.
There are many stories like these. My advice is not to sign into a business partnership unless you happen to be already married to or legally defacto with your proposed business partner.
Sure, things go wrong with personal relationships too. But your business activity is then based on the foundation of a committed relationship in which both have an equal stake
The Risk Factor In Small Business Partnerships - To learn more about this author, visit Susan Regier's Website.
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Dianne CramptonDianne Crampton is an executive leadership coach, team culture consultant, author and president of TIGERS Success Series, Inc. Dianne has been helping CEO's and Executives connect their employees to their core values and goals for over 20 years using the trademarked TIGERS team culture process, which stands for trust, interdependence, genuineness, empathy, risk and success. To download a free white paper on behaviors that build strong teams and behaviors that will predictably tear them down go here. Dianne's contribution to the 2010 Pfeiffer Consulting Journal (an imprint of John Wiley and Sons Publishers) entitled TIGERS Hearted Teams is available in November 2009. Her new book TIGERS Among Us: 5 Winning Business Team Cultures And Why, Three Creeks Publishing will release in March 2010. To receive publishing discounts, subscribe to the free TigerTracks Newsletter here. - Visit Dianne Crampton's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr'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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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan'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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