bringing on a Business development partner

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bringing on a Business development partner

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mattadams

posts: 10

Dec 26, 2007 10:31 AM ET Quote Report Abuse

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Hi, I am trying to seek advise and resources / articles / tips on having a partner buy in to our small design firm.

I started the company just over 3 years ago, and this individual has been a mentor for me for those 3 years. He has been great at helping me grow, pushing me to new levels, and i have loved our relationship.

Recently we had a conversation about him buying in as a partner (something he approached me about) . He would work on new business development, planning, and helping me with getting the firm growing in the right direction. I love the idea of all this, just trying to discuss it with others who have done this in the past.

We plan on there being an initial buy in (i would love help trying to figure out this value), as well as setting it up so he it only on profit sharing (no paycheck).

I`d love to hear any feed back on what you have done, or seen done, recommendations, tips, things to avoid and really anything you have on the subject. We do plan on having all of our agreement worked out with a lawyer.

thanks

zensufi

posts: 5

Dec 27, 2007 4:02 PM ET Quote Report Abuse

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Now that you are taking your business relationship to another level, the relationship objectives will change. Make sure you have your boundaries set and paperwork in order, so as to avoid any possible conflict down the road. When a mentor becomes a business partner... a whole new ball game starts. Your new business partner now has a much bigger stake in the game.

-m-

mattadams

posts: 10

Dec 27, 2007 4:41 PM ET Quote Report Abuse

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Your new business partner now has a much bigger stake in the game.

Thanks. Yes, this is exactly the point. Him having an actual stake, and monetary benefit in the success of our future growth.

Has anyone brought in a partner in the middle of the game like this? I know of friends who started as a partnership, But I dont personally know anyone who has done this. I know people have though. Just looking for as much tips and advice as possible.

KJC

posts: 69

Jan 07, 2008 3:22 PM ET Quote Report Abuse

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A big challenge you will face in bringing a partner in is to identify the value of your firm. There are a number of different ways to do this, one of the more popular ways being to discount future cash flows for a determined number of years (typically 5). You are discounting future cash flows to present value. You can then multiply this amount by the percentage of the firm your partner is purchasing. I am not sure how big your firm is, but typically people hire an accounting or consulting firm to perform such due diligence. However, if your firm is not that big, cost-benefit will come into play because having such work done can get pricey.

mattadams

posts: 10

Jan 07, 2008 4:17 PM ET Quote Report Abuse

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thanks for the reply kjc. We have actually come to a conclusion to establish a baseline. We took a business buy report we found online that helped us figure out our companies worth.

Now with a lawyer we are establishing that the company was originally worth X amount, and had X amount of debt. This allows us to have out partner come on with no buy, just bringing of assets, network and knowledge. Then he only makes a profit on the extra profit we make each year after the base line. The new work he is contributing to. Seems to make the most sense.

IdeasandInnovations

posts: 409

Jan 13, 2008 2:54 AM ET Quote Report Abuse

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there a million ways to do it and that is a good one. he gets a piece of additional profits,

I like that one,

as far as value goes, the value , when all said and done, is what ever you both agree it to be. because if He wants "X" and you say "Y" and neither of you are willing to compromise then there is no agreement.

I think it was already addressed, but make sure there is no confusion with who has what rights and responsibilities, it can get ugly real fast , since you are very used to the way it has been the last 3 years.

I am betting that you are motivated to take on a partner to even consider it, so make sure you remove your personal emotions and think objectivly,,, very very important.

MIke

CEOinBlack

posts: 5

Jan 26, 2008 4:38 AM ET Quote Report Abuse

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Hi Matt,

We are in the process of bringing a CEO on board. I`ll let you know how it works out. So far so good.

-------------------------

Sam Buck
Start-Up Phase Forum
www.startupphase.com

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bringing on a Business development partner

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