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Contract the fuck out of everything, and prepare to have your friendship tested
Agreed. Everything is fun and games until money starts flowing in. Then things get real. If it isn’t written down, it does not exist.
This is the answer right here.
So one of my very good friends had wanted to start his own business - a fitness business, for brevity - for years and asked me to go in with him. We had been working in the same industry (he got me my first job) and have complimentary skill sets. He handles the money, I handle communications, and we discuss just about everything. People thought it was weird when we wrote our first operating documents that we wanted to be 50/50 and didn't have a method of resolving disputes - in the end we put a coin flip in the document, but we've never needed to do it.
It's been seven years. We had a third partner for a while and I realized how rare it was for partners to get along as well as we do. We bought the third partner out just before COVID and someone else bought in, and she's just as chill as we are.
Honestly I think we got pretty lucky, but here's the advice I would give:
1. Divide up roles in a way you find fair. Sometimes he's done more work, sometimes I've done more, but we try to keep it even enough that we don't need to keep score.
2. Try to keep your ego out of decisions/disputes (this was a big problem with the former partner).
Damn, that’s some one in a million shit. Good for you, though I don’t think I’d be able to coin flip for disputes haha.
„˙ɐɥɐɥ sǝʇndsıp ɹoɟ dılɟ uıoɔ oʇ ǝlqɐ ǝq p,I ʞuıɥʇ ʇ,uop I ɥƃnoɥʇ 'noʎ ɹoɟ poo⅁ ˙ʇıɥs uoıllıɯ ɐ uı ǝuo ǝɯos s,ʇɐɥʇ 'uɯɐ◖„
Look into buying an existing business. Leverage your $30k with an SBA loan into for a $300k- $500k business.
Clearly define your roles - in writing
So use the 30k with a SBA loan and buy a franchise pretty much ?
Not necessarily. You can buy businesses from people looking to retire, maybe someone moving onto the next project, etc.
You can look for businesses for sale on loopnet.com and bizbuysell.com and other sites.
I understand you can get a franchise started with about the money you're talking about. I always thought a Chick-fil-a would be an awesome one to start near a major commuter area. Really nail the breakfast and lunch hours, as well as people picking up food for their families on the way home.
I live outside their distribution areas, so it'd be a no-go for me, but I still think about how successful it would be.
In-N-Out is another, they're expanding like crazy. Opened a few joints in Texas recently.
That’s great that you want to start your own business together.
My advice is to get all the awkward and difficult conversations out of the way first as they will be more difficult later if not impossible. Everyone is agreeable and open to talk about everything at the start when the business is nothing yet.
Start with a partnership agreement / operating agreement depending on your business formation type:
Things to talk about and address:
1. What happens if one of you dies? Is there a life insurance policy in place to buy out the deceased’s interest in the company so the company does not have next of kin as unexpected owners?
2. What happens if one of you want to leave? Are they allowed to sell their interest to anyone or does the other partner get rights of refusal to buy that interest? How is that interest valued? (50% premium on equity?, last years profits?, any number of metrics).
3. What happens if you want to add another partner? At what value do they need to buy in? What if it’s sweat equity? Needs to be spelled out.
4. What happens if one gets divorced? Is your company interest protected as a non-marital asset? Or is there a pre-agreed upon amount that partner and spouse have agreed to settle for if and when?
5. How are you guys getting paid? Ownership and working in the business are two very different things. If one person is an owner and the other one does all the day to day work how is that going to work? Ownership gives you access to dividends / distributions. Your day to day role in the company would be your employment and handled separately. Do you use a website to determine what the wages should be for that role? Obviously this will depend a lot on what you end up doing but its best to spell it out as best you can.
6. If the business needs a cash infusion, how is that handled? Equal participation for funds most likely but how and when is that paid back? Is it paid back first before salaries or distributions? Or will it be paid back at all?
7. What is the tie breaker for a split decision? If you both don’t agree does the motion fail? Some places have 50/50 split on equity shares but not on votes just so there isn’t a log jam of indecision.
That’s just off the top of my head, I’m sure others here have a number of scenarios they’ve faced and wish they had spelt out in writing first.
Another thing to look at is each other’s credit score. It may be awkward but the business will rely on your personal credit and any vendors you deal with in any business venture will need you both to sign a personal guarantee. Hopefully their guarantee is as strong as yours because if they can’t pay you have to pay for both of you.
Identify each other’s strength and weaknesses, and be honest with each other. Great friends don’t always make great business partners. When you do that you can identify who should be leading.
The more awkward shit you get out of the way at the start the smoother it will be later on down the road.
I'm not going to completely discourage a partnership, but a lot of them fail for many reasons beyond just having a bad business model. I think it makes more sense for you to each take 15k and start your own respective companies. One of the biggest problems with starting out doing a partnership is you have to think twice as big. Me personally, I can run my business with no profit for the first 3 years by paying my personal expenses out of the business account, that becomes a lot more complicated with two people. Then when the business becomes profitable you'll need to make sure it can provide a stable income for two people.
Again I'm not saying it can't be done, but if you two are dead set on a partnership then you need to plan it out that way from the get go. If you're bouncing ideas off each other, a good thing to ask yourselves is "could I start and run this business by myself?" If you answer yes then it probably isn't the idea for you. You need a business that will heavily involve you both AND be able to turn a profit.
Think about this example, a successful restaurant can work wonderfully for a partnership because two people can bring two skill sets together (e.g. culinary expertise & business management) to make a single thing work and great things can happen. Now imagine the same thing with two chefs. Now in theory your food is made twice as fast and you can make twice as much (if you could ever get two chefs to agree), but you haven't built the business to need that much food yet. The restaurant isn't being managed, the two chefs are redundant and unnecessary. They would have been better off both starting smaller individual restaurants or partnering with someone else.
At the end of the day, think about skills that you can both individually bring to the table and find something that actually needs both of you there to be successful. If it's a skill that you both share, then you could both probably do it yourself.
He loves to cook and I'm good at the management, finance, logistics part of it. Permits, and all other paperwork
What the fuck does being a woman have to do with anything?
Idk 🤣🤣🤣 someone just mentioned it
There's no women involved in this, just me and my friend
If either of you are dating/married to anyone it will come up. If your wife/gf makes a business suggestion that goes against your partners views the divide starts.
Partners in business is the best way to end friendships, 100% don’t recommend I ruined the relationship with a friend who was like a father to me.
If you start a business with anything labor related, you guys can kill it. Handyman stuff ($150 - $200 + per hour), mobile automotive detailing ($150 - $200 per hour).
I own a detailing business and routinely make $150/hr while working. You can get everything you need for $3,000 and make it back within 2 weeks. If you guys worked together on jobs, and put in 60 hours a week, you should be able to each pocket $6k - $8k per week after expenses.
Of you're hard working (which you are since you're willing to work 60 hours a week) and you're thorough (military dudes I've met are VERY thorough) then you'll have success in almost anything you try.
You've known eachother when you are under control by your sergeant and other bosses. Always doing what you're told.
It's a whole different world when you have no rules and governance and the defaults of character start to show
Goodluck to you, but I'd definitely not be doing this after my prior experience with partnerships.
If you're anywhere near a middle to large-sized city, you can make an absolute killing by transporting and installing household appliances.
I saw an ad on Craigslist where a company was offering the two people they wanted to hire as a team a minimum of $3,000/wk to do this. This means there's overhead there to pay the company owners for finding the work.
What I'm saying is, you and your friend could rent a box truck with a liftgate for a couple of weeks, make enough to then buy one, then make enough money to buy a second one. Then hire a team to drive that second truck. And on and on...
If you want to keep your friend, don’t go into business with him.
Good luck to you both.
As simeone who no longer has partners...the only ship that doesnt float...is a partnership.