[sandim]

Ever toyed with an idea or said "in the future we're going to....xyz!"?

Well, for us that future may be here sooner than we thought.

My husband and I are equal partners in our LLC. We are toying with the idea of adding on another partner. The split would be something like he and I 35% each and the new guy 30% so we still have majority.

Here's the situation.

My husband and this guy (Brian) worked together for another company for many years together. At one point the grand plan was for them to buy out the owner of that company, he would retire and my husband and Brian would become equal partners.
Well, the owner of that company went through a divorce and just let the business go in a bad way. Try as they might, he wouldn't let them do anything in the business and so it just slipped away. Actually it avalanched away, but that's beside the point. After a couple of years conditions got so deplorable they both left...about a year apart.

My husband and I started our business, and the year before Brian went to work for a garden center/landscape company. He's not been happy there for some time. He does some design work and goes out on a few jobs occaisionally, but basically he's running the garden center. This is not his cup of tea. He's mentioned several times that he's not happy.
He mentioned last night that he's going to start his "wiggle" in July. Gradually breaking away from the company as he's the owners right hand man and doesn't want to leave him high and dry. We were discussing some options and he said he doesn't want to work for another company as that's a lateral move.
If you know Brian like we know Brian, Brian is not the kind of person who would do well starting in business for himself. Not to mention in these tough economic times, that's a lot for a brand new dad and his wife would probably kill him.
I know there are tons of legal logistics to this, but before we even get as far as putting out a serious feeler to him and then doing the legal logistics, we wanted to bounce it off our sounding board (GTX).
Between the 3 of us we each have strengths the others lack. He's a L.A., and we know his work ethic and quality which paralells ours. We both think adding Brian into the mix would be a great thing for the 3 of us, but there are downsides as well such as the finances, legal schmeagals, and much more I'm sure we're not aware of.

We're currently in year 3 and growing by leaps and bounds. Near as we can figure it before really getting into a discussion, Brian's not going to leave until the end of this year, or the beginning of next...if that soon. That will finish off year 3 for us, we can really take a good hard look at our track record, where the business is, what it's worth, where it's going and where we expect it to go, so timing's pretty good. If we didn't know him, adding a partner going into year 4 would be crazy, but we've known him before business and into business and we've done business together and picked each other's brains on a regular basis.

Before we have the serious talk...what are all your thoughts? Very very appreciated!!

[4seasons]

why not just hire him as an employee and save yourselves the headaches.
If you do a search for Fine Edges thread you'll see how a lot of us feel on this subject.
good luck!

[dan deutekom]

Originally Posted by 4seasons

why not just hire him as an employee and save yourselves the headaches.

good luck!

I agree. This sounds like a recipe for disaster

[agla]

Why would anyone with almost three years of effort and money invested in a company that is growing in "leaps and bounds" give 30% of it to anyone? Something's not making sense.

How is he going to make up the difference for 30% of the value of the company and his salary, and then add to the profit after that?

[Honeybee Texas]

I'd agree that it might be a bad move. What is in it for you, other than being a good friend to Brian? It is noble, but you have to separate business and friendship in this case. I've recently attempted the same with a friend of mine. I started in March investing about $3,000 into equipment; he invested in some equipment (blower, edger, trimmer) and thought that he money in mowing lawns sounded great compared to his $10/hr as a maintenance man. I told him to put a hard Texas summer behind him and make his decision. It took about a month, and now he is going to move up to Dallas. He changed his mind VERY quickly, but for several reasons that I can't even wrap my brain around. I've known the guy 10 years, I love him dearly, but in this case mixing business with friendships is going to cost me a $1,000 buy-out of equipment he bought, plus I'm short-handed.

The point is: Why give 30% to someone who hasn't given 30%?

Maybe some coaching of Brian could lead to you helping him get some design jobs. Maybe you could give him some advertisement, some clients, some work, but not the whole taco. Maybe then he will have the tools to start his own business, or a sister business. Maybe then he'll have the confidence and motivation to work for himself. The clue-in that he needs to be self-employed is that he is running his current business and is not happy. He isn't happy because he isn't reaping the benefits of running the business. What makes you think he will be happy having two other people to answer to, when what he really seeks is freedom?

Be careful. Three's a crowd in this case.

[Stonehenge]

I've had employees ask about becoming a partner in our company, but I usually ask them a simple question - what do they bring to the table that I don't already have? Can they bring money? Can they bring clients? Can they bring a skill set important to the business that I haven't already taught them? If not, it wouldn't make sense to give them a piece of the business.

I'd ask the same questions of this possible relationship - what does he bring to the table that you don't already have? You mention he's an LA, but I don't know if your husband is, too. If not, that could add value to the company - but I don't know if it's 30% worth.

Shooting from the hip, it sounds like friendship and not business is what's driving this idea, which might not make it a great one.

I like the idea of bringing him on as an employee (give him a nice title and pay), and possibly set some hurdles to reach to become a partner in the company. That way you aren't just giving away a portion of the business you've built without him.

That's my $.02, anyway.

[sandim]

Hmm, all good points. Neither of us is an LA. I'm just a designer. We, as well as our clients, are very happy with what goes in, a lot of research and effort goes into each design and we've done some pretty impressive stuff even to myself, but I'm not an LA. No offense to anyone, I just mentioned it, I don't really know how important that is. Nobody has ever asked if the designer was an LA. I have a BFA and that's as close as it gets.
Oddly, we're not sure what he could bring to the table. That was going to be part of our discussion if we got that far. I like the idea of reaching some hurdles to become a partner in the company.
Part of what we like is the opportunity to expand geographically. Our current motto is "the owner is on every property", but as we grow I know that will have to change. People like that a lot. Adding Brian into the mix could help that.
Much to think about. Don't know what I'd do without you guys!

[agla]

He being an LA might (or might not) give you more fire power in the design. But will he be all dressed up with no place to go? In other words do you have a lot of leads for good design work from people with the means and will to pay for it? Or, does he have a reputation and his own stream of qualified design clients running to him?

If you have that stream of work, your capabilities already have to be adequate. The only reason to add him is if your design staff needs to be expanded. If you don't have it, you must either know or be expecting that Brian has that stream of clients knocking on his door.

If Brian has that stream, he'd be foolish not to work for himself and sub work to you and other contractors.

One thing that you really have to be careful about is whether Brian is generating his own leads or if he gets them based on where he is working. It may be true that Brian is a great designer, but a garden center is the best generator of design leads there is for mid level landscaping. It is often the first point of contact and is visited by hundreds of people all looking for plants, advice, and anything else to do with their yards. An average designer can be very busy in a garden center while a great designer can have a pretty quiet phone. Brian may be both extremely busy and a great designer, but if you take him away from the garden center no one may no where to find him and no one may be looking to find him. But, there will be people walking into that garden center and asking for a designer and his replacement will be just as busy as he was.

Don't confuse the source of leads if that is the big reason to bring in Brian.

[dan deutekom]

Originally Posted by Stonehenge

I like the idea of bringing him on as an employee (give him a nice title and pay), and possibly set some hurdles to reach to become a partner in the company. That way you aren't just giving away a portion of the business you've built without him.

Jeff :

That is exactly what I wrote in my original response but then I thought about it and deleted it before I posted. I think that having a friend involved in the business is just asking for trouble. A business has to be a business first. Friendships can develop from it but from my experience it is very rare for it to work the other way.

[TrickyDick]

I agree with Dan in general on the friends thing. We have hired a few friends over the last few years and it has always been a bad idea. There are just too many complicated dynamics at work. My partner and I have been friends since we were 11 (we're in our mid 30's now) and even so the partnership wouldn't stand a chance if we didn't bring such different and complimentary things to the table. That's really what it comes down to....what can he give you that will increase the value of your company, year after year by 30%. If you can answer that then MAYBE it makes since but I will tell you this...it is not easy making decisions and sharing power with one person. Two would be a lot harder.

[sandim]

Wow. Man, you guys are damned good! So many things I never thought about and I'm so glad I posted. Honestly, I don't know where I'd be without you.
I think the idea of partnership never would have come about if the original partnership hadn't come up. However, I now understand why they say it takes 5 years to make it in business. It's not what your business is, it's the business factor. Eric (husband) and I are fortunately completely in sync when it comes to our decisions about running our business.
After reading everything that everyone has said I am glad I posted before doing anything. I agree with all of you that it is not a wise idea to add a third party into the mix. Especially now while we're growing and learning. Every week my head swims with what we learn about business. As I'm telling everyone...landscaping is "easy", it's the business that's hard.
Thank you all so very much from saving us from making a potentially HUGE mistake. If any of you are ever in CT, let me know and I owe you a few beers, dinner, and so much more.

Thanks again. Your knowledge is invaluable.

[VoodooChile]

I had a good friend of 5 years, who became a business partner for 7 years.

Now he's neither.