A small business client engaged me to come in and look at their business from several angles. The turnkey business was purchased from a fellow looking to retire (but still work part-time in the business). Both partners were new to the label “entrepreneur” and new to the industry in general. Going into their fourth year they were generating $325K plus in revenue and making a profit.
One partner was focused on the sales/production-end of the business and the other on the bookkeeping/admin end. Their interests and responsibilities looked to be a working match as were their short-term goals for the business.
As part of our work I brought in a financial advisor/wealth coach to help us look at what the future might hold for them. After an interview to drill into “big picture” goals, we loaded the advisor/coach with the requested information and met with him a few weeks later. In that follow-up meeting the advisor/coach presented options for the partners as well as projections for where the business could be financially if the current level of business held true. A shared goal for the partners was to build the business to a to-be-defined point and sell – using the funds toward their children’s education and to invest in another business opportunity.
Well into the presentation, the advisor/coach told us “…in three-to-four years your business looks to be valued in excess of $5 million.” One partner (sales/production) was all smiles and nodding approval, but the other (bookkeeping/admin) looked, shall we say, totally freaked-out. “I can’t do this,” he said. “I barely got out of accounting class and you think I know anything about running a $5 million business? I don’t think so….”
His reaction took all of us by complete surprise. Despite encouragement from each of us – the most coming from his partner – his position remained fixed. With apologies, he left the business to his partner and never returned to the office. He refused to discuss it and immediately went on to find another job in his former field.
This put his partner in a very tough place. The partner that stayed valued and depended upon his friend’s abilities, personality, AND friendship to do his half of the job. Longer story short, the remaining partner eventually gave the business away (almost literally) and walked away. It was not the outcome that could have been, that’s for certain.
In Closing: Be careful of partnerships forged from friendships, family connections, and the like. When the relationship drives much of the partnership. the necessary business and legal musts can be left undone. Circumstances, values, and people will change and this can negatively impact many things down the road if not addressed upfront. If getting the pre-work done creates conflict, then it’s probably not the best idea to continue into an even more obstacle-ridden and problem-pitted business relationship. A business guru I follow promotes a philosophy of “planning for 10x growth.” Thinking through what the business will look like if monthly revenues become ten-times the current level is an effective way to help uncover important issues that you may very well face in the months and years ahead.