Asking business types. Potential shop merger.

[Alpha12]

I know there are several larger company types here, and I have a few questions, but don't think I won't have further convos with attorneys and such. I am mostly looking for good/bad experiences, and possibly some 'wisdom' advice.

We are working on a potential merger/expansion where I will be installed as CEO. The partner in this deal is a very long time friend. I have had many friends try to entice me with similar proposals in the past, but I have a very short list of people I would work with. The current deal is with someone I trust well. Basic proposal is a new, huge facility with near limitless expansion potential as well as funding, internal contacts, and "greased wheel" deals that I otherwise cannot get. I bring in our current equipment, work, etc, and run the show. I cannot throw every detail on the net, but what we both are trying to figure out is a 'fair deal' to both parties. He is as much open to ideas as myself. He has several other sectors of business so this is sort of an "I back you and trust you" sort of deal.

But all well intentioned until something either goes wrong, or greatly succeeds and problems arise. He is not one built out of greed, but we are also not toying with this idea to lose money either. The concern I have is not having owner stake in the real estate. In short, I feel like instead of being an owner, I am going back to an employee type. But in some respects, I need some of the load off my back and let's me focus on the core of the business.

 

[Scruffy887]

DONT FUCKING DO IT. READ THE PROPOSAL. IF IT SAYS "HEADS I WIN, TAILS YOU LOOSE" WALK AWAY. He will not be your friend in a matter of weeks, maybe a month. Big ideas with big pockets that will want to fund everything with your money/credit. With a smile on his face.
I threw the fooker out. A month later he came after me and told me he was going to liquidate the corporation, he owned half of it. I told him to do it. He was an equal owner of the corporation. Corporation owned nothing, no assets. I owned everything as a DBA.

 

[metal-ica]

Sounds enticing and you only live once...so what the hell...go for it.

Assuming that if everything goes sideways, you'll still have a home, a nest egg and a wife that loves you.

Limit your risk and structure it so that you both win and lose together. Have divorce papers (with business partner) written BEFORE you get into the deal.

If one party want to pull the plug then there should be a penalty associated with that so it'll hurt a little to quit...and you know that going in so there is no fight going out.

If you're running day to day operations and he's more of a silent partner....you should be compensated for your time on top of splitting profits.

my $.02

 

[CatMan]

How do you feel working for this guy?
Are you OK with this guy being your boss?
Is the compensation package enough?

It sounds like your feelings are accurate. You will be any employee. Not saying that's necessarily a bad thing.

 

[mattthemuppet]

Doesn't sound like much of a partnership if you'll be working for him?

In my limited experience friendships and money don't mix well.

 

[AJ H]

There's a ton of anti-partner sentiment here, and for good reasons. However, it depends how ambitious you are. I don't know very many big swinging dick companies that are owned by one guy.

 

[michiganbuck]

If one of the partners should drop dead tomorrow be sure all basses are covered/safe.

 

[Booze Daily]

Largemouth or smallmouth or both?

 

[jccaclimber]

Note up front, I'm not used to playing the game at the level you are, so take everything I say with a boulder of salt.

I know there are several larger company types here, and I have a few questions, but don't think I won't have further convos with attorneys and such. I am mostly looking for good/bad experiences, and possibly some 'wisdom' advice.

We are working on a potential merger/expansion where I will be installed as CEO. The partner in this deal is a very long time friend.

Do you want him to stay your friend?

I have had many friends try to entice me with similar proposals in the past, but I have a very short list of people I would work with. The current deal is with someone I trust well. Basic proposal is a new, huge facility with near limitless expansion potential as well as funding, internal contacts, and "greased wheel" deals that I otherwise cannot get. I bring in our current equipment, work, etc, and run the show.

Is there a reason this can't be structured as commissioned sales and grown from your current facility? I've had a lot of successful people in the past tell me that partnering with them will bring me X, and so I should give them Y. I've typically responded that I'll give them Y, even plus a bit, the day that X becomes real. X nearly never actually shows up.

I cannot throw every detail on the net, but what we both are trying to figure out is a 'fair deal' to both parties. He is as much open to ideas as myself. He has several other sectors of business so this is sort of an "I back you and trust you" sort of deal.

I don't have all the details, but I know exactly one guy where the partnership (so far) has worked out. I'm not privy to the details (more letting you know such a thing exists), but they structured it somehow so that the people actually doing work/bringing profit are getting paid. IE if the silent one stops bringing in work he stops getting paid.

But all well intentioned until something either goes wrong, or greatly succeeds and problems arise. He is not one built out of greed, but we are also not toying with this idea to lose money either. The concern I have is not having owner stake in the real estate.

Can you package in some sort of long term lease with options such that your risk is removed, or are you worried that the real estate might be your main sellable asset come retirement?

In short, I feel like instead of being an owner, I am going back to an employee type. But in some respects, I need some of the load off my back and let's me focus on the core of the business.

"Installed as CEO" and "let's me get back to focus on the core" seem slightly contradictory.

This sounds a lot like selling a part of a startup to a VC. They hope for a high return, you can't expand as you want without their money, and you hope their network/active guidance will make you better. You do it because you can't hire that quality of guidance/get funds in a traditional way at a lower rate. Is that the case here?

 

[atex57]

Its been said many times, don't deal money with friends or relatives because soon you won't have friends, relatives, or money.

If you do, get a lawyer to set it up so you, and he, have a way out without being skinned alive.

Sounds kinda coldblooded but necessary.

Ed.