[tdlandscape]

Hi everyone. I just discovered this forum yesterday, wow, what a wealth of information!
My business is very small and young (2 years), and is staffed by myself and my 'key employee', who is very knowledgeable and a hard worker. She wants to become a partner in the business. My gut tells me that this may not be a great idea, but I definately want to give her incentive to stay. She has worked with me from August to October last year, and started back in April. (We haven't yet figured how to keep ourselves paid in the winter). Does anyone have any advice? All is appreciated, thanks!

[Timber Lane]

I've owned many businesses and my experience is that partnerships don't work. Therefore, my only partner is my wife. We are working toward a common goal in life, so our thoughts and visions run the same course. And the profits go in the same bank account!

In partnerships with others, both sides tend to make assumptions without vocalizing their thoughts, concerns, and expectations. It doesn't take long before hard feelings emerge and the relationship goes down the tubes.

I wouldn't suggest taking in an employee as a partner just to keep them. I tried it once and it failed immediately. Instead, throw a cash bonus their way every once in a while. Make it unexpected, and don't hint at more bonuses coming or they'll expect it. Do it when you want to and can afford to and on your own terms. I always said, "Here, I feel like giving you this bonus" and leave it at that. Then I'd give another bonus a few months down the road when it suited me.

I guess my message is that I have found that it is easier to part with a disgruntled employee than a pissed off partner.

[tdlandscape]

Thanks, Timber Lane, you are re-enforcing what my gut has been whispering.

Besides bonuses, any other suggestions? I want her to feel both important and appreciated.

[Timber Lane]

I make a employee feel good by introducing them to a client as "my right hand man, ... and sometimes my left, too" or some other complimentary phrase.

Also, I might tell the crew "I'm paying you until 4pm, it's 3:30 now so lets knock off and sit around the table and have a beer or two on me". Or I'll stop at Dairy Queen on the way back to the yard and buy ice cream cones.

I sometimes give an employee a $50 gift card to Home Depot or Lowes.

All these things help boost morale and make your employees feel special.

[Stonehenge]

I think that making an employee feel like a worthwhile part of the business is going to be a good thing.

But I am a bit concerned that someone with 8 or so months of experience is talking about being a partner. Not knowing the exact circumstances, that's a red flag to me. Usually business partners are going to bring different, complimentary things to the table - one might bring experience while the other brings money. Or they both bring some money, one brings their salesmanship and networking abilities, the other brings project/labor management. If I were going to consider a partner, they'd need to bring something to the table that I don't already have.

You might have a conversation along those lines with this employee. Or you might find out what this employee's thoughts about a timeline for partnership is - maybe you could structure an arrangement where this person puts a portion of her paycheck back into the business to "buy in" as a partner, and after 5-10 years the person is a 49-51 partner (or some other ratio ).

If she simply wants ownership passed to her on a platter, I see problems on your horizon.

[bricknblock]

I agree with Timber about partnerships in general don't work...although I haven't run my own business for a long time, I have witnessed attempted partnerships come and go more than once, and it was even offered to me at one time...I turned it down because of what I had witnessed...I figured when I was ready for the business, I would handle things my own way...everybody thinks there way is the best, just creates arguments between partners, except under extremely rare situations

[TrickyDick]

I agree with Stonehenge. Definately sounds fishy but without knowing all the circumstances I can't really say.

This is my fourh season in a business partnership. For it to work you HAVE to be complimentary. Each person has to bring something different to the table or you will be constantly butting heads. My partner and I are extraordinarily complimentary- I'm good at everything he sucks at and vise versa, I keep him from making dumb, rash decisions and he keeps me from thinking about things for so long that I don't make any decisions at all- but even so it can be very difficult. It has worked so far because I think we both see that we do a better job together than we would do on our own.

I would be very careful about taking someone as a partner as you've described. What about starting with some kind of structured bonus, profit sharing type deal?

[tdlandscape]

Thanks everyone. Trickydick, any advise on how to go about structuring profit sharing?

[Timber Lane]

There is no way I'd offer any profit sharing to an employee who spent just 3 months last year and 4 months this year working for me. It's not enough time to learn their "dark" side.

I had a 5 year employee approach me about profit sharing last year. He wanted 5%. I looked at him and said, "What profits? I just spent $60,000 on equipment. I maintain a website, an accountant, insurance, workmen's comp, etc. Are you willing to pay 5% of my bills?" He was making $700 a week, plus a cell phone and unstructured bonuses. I'm the one arranging work, picking up materials on my time, and putting all the mental effort into jobs.

I think the bottom line in this thread is that no employee is indispensible. Offering a partnership to keep that employee won't work.

Incidently, that 40 year old employee & I parted ways, and I found a 51 year old guy with a much better attitude, arrived to work on time, and put new enthusiasm into the job that I hadn't seen in years. He's not as skilled as the first guy, but I'll take good attitude any day.

[TrickyDick]

We've never offered profit sharing...we've stuck with bonuses and perks for key people. I do think there is something to be said for giving someone a REAL stake in the success of the business and profit sharing or some other nkind of performance based bonus can do that. It won't work with everyone but for someone who really wants to care a little more than the average employee it can give them a reason to.

[Squizzy Taylor]

[i]Originally posted by Timber Lane
I had a 5 year employee approach me about profit sharing last year. He wanted 5%. I looked at him and said, "What profits? I just spent $60,000 on equipment. I maintain a website, an accountant, insurance, workmen's comp, etc. Are you willing to pay 5% of my bills?" He was making $700 a week, plus a cell phone and unstructured bonuses. I'm the one arranging work, picking up materials on my time, and putting all the mental effort into jobs.

Exactly
I had a partner who complained about not making enough money so I showed him all that...and the fact I was doing all the quoting, business dealings organising etc...and he wanted to work each day and take 50%. He's gone now.

[rbriggs]

I started wtih a business partner. Things were great for three months. Then one night, I was sitting in the office at 9pm working my butt off, and realized that my partner wasn't there. I began seeing less and less of him, all the while I busted my rear to make the business work. In the end, I bought him out for a very low price and things worked out. But I WOULD NOT recommend a business partnership situation to anyone.

[tdlandscape]

Thanks, everyone, for your insight on this matter. You have given me plenty to evaluate and think on. I have to admit in our particular circumstance, my employee does go above and beyond the 'call of duty' - drumming up new business, talking extensively (and intellegently) with clients (which also gets us more business), and sometimes knocking me out with suggestions that make my job easier. I have concluded that she is worth her weight. I'll let you know how it goes.....

[tdlandscape]

Well, after my employee realized that being a partner meant being responsible for the bills as well as the profit, she decided she's happier being a valuable employee. Thanks for the tip on unstructured bonuses- now we are both happy.