Too Many Partners?

Discussion in 'Growing and Managing a Business' started by reddogzl, Aug 8, 2011.

  1. reddogzl

    reddogzl
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    I'm sure most of you will think I'm crazy for attempting this, but I'm hoping you can help me come up with a way to make this nine-member LLC work. I'll try to keep it short.

    Some friends of mine have been working on a clothing company for about three months (well, I know two of them). They've been talking about marketing ideas and designs for that time, but other than creating a few designs, really haven't acted on anything.

    They need an online store to sell and market the products, but lack the money to have one made (at least $5000 for what they want); this is where I come in. I have built two online stores, one for my company and one for a very successful tooling company, so I think I bring a lot to the table.

    I am in quite a predicament because I am the ninth member, and the other eight are pretty good friends. They decided that the company would be divided up equally among all nine members (11.1%), but I think this is unreasonable since there is simply not enough work for some of the members. I am the most business oriented in the group and when I try to bring up these issues of individual contributions, knowledge contributions, and motivational factors, I seem to aggravate some members. I've been trying to get input on an Operating Agreement and a Buy/Sell Agreement, but I still seem to cause aggravation. To me, these are essential to a business - especially one with nine members.

    There is one crucial thing to keep in mind. I love this idea and the clothing. I think that it has incredible potential if it is done correctly and I want to be a part of it. I don't know if it's worth it to risk my time, but I have never been so confident in an idea.

    Another thing to keep in mind is that most of the members have been friends since they were ten years old (we're all around 21-22 years old). They don't want to hurt anyone's feelings, which I understand, but it's also not a good start to a business.

    I am perfectly fine with keeping all nine members, I just want to be compensated a little better (well, a lot better) for what I'm contributing to the company. And to give you an example of the difference in work, we're talking about a person like myself that will build and manage the online store, manage QuickBooks, etc. opposed to a person that will be writing blog posts for the same amount of ownership.

    I really want to find a way to make this work. Right now I'm thinking about backing out, but I'm hoping someone can help me come up with a way to please everyone involved. Any input would be greatly appreciated.

    Thanks
     
  2. Fergal

    Fergal
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    I agree with you on the importance of an operating agreement, if this can't be written up and signed by all members I'd be very reluctant to be involved in the business - there is just too much potential for a major disagreement and for endless discussions that result in nothing being done.

    Your experience does sound invaluable to the group and what you can contribute will play a fundamental role in the success of the project. Would it be possible for you to be paid for your work? If you are contributing something so valuable, it would only be fair that you get rewarded in some way. The operating agreement should cover who does what in the business and any reward structures, so perhaps once that is written up, this issue can be clarified.

    Nine people is a lot to be starting a business with. Do all of them have a positive contribution to make to the business? Are all of them committed to the business?

    Welcome to Business Advice Forum reddogzl, thanks for joining and posting your business questions.
     
  3. reddogzl

    reddogzl
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    Thanks for the response. I agree that nine people is a lot to start a business with. I have tried to express my concern with little luck. I think the members all make a positive contribution and are committed to the business, but when it comes to writing a blog, I don't think it's wise to cut someone in for so much. Why risk 11.1% on blog articles? They can be outsourced (or the remaining members can contribute) without giving away a stake that really doesn't reflect the skills or work load as some of the other positions.

    I need a way to gain some more control in this company, for my own security. I'm not looking for a power grab, but I would like for my ownership to reflect my contributions. Has anyone ever written an options clause in the BSA? Something where I would have the option to purchase some of the other members' ownership on a certain date?
     
  4. scifi

    scifi
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    few wods only..As I am experiencing the almost similar problems--

    Golden Words of advice is make this company to stand up and virtually gain strength to move on ahead in life alone for ambitious and hardworking people are rare to find.

    And if anyone finds them they don't let them go, since they know that this ambitious man will carry their burden too for the sake of his ambition and fire or passion for his ambition.!!

    Learn, Earn and Move On!!

    :)
     
  5. Fergal

    Fergal
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    I haven't actually written a clause like that. However, if you can get the others to agree, there is no reason why you couldn't include a term like that in the agreement. Basically the term would recognise that you are providing the eCommerce set up and that if it achieves a certain level of sales, your share of the business will be increased to a certain percentage. It's actually a great idea and it's not unreasonable, given that the success of the business basically comes down to the success of the website.
     
  6. James Greg

    James Greg
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    I think you should divide the work load in departments like production, marketing and whatever you seem appropriate. Then divide the share of the departments according to their work load, this might make your work more prominent and you might succeed in gaining a bigger share.
     
  7. firstchoicecar

    firstchoicecar
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    Upon reading your post, I felt that you have a strong personality and has a big capability to manage your own business. If i may just ask, have you ever think or ever comes to your mind to put up your own business as a Sole Proprietorship? With your knowledge and ability I believe that you can actually do it. It is nice to have a business partner at the same time they are your friends, but however when it comes to business the instinct still "BUSINESS IS BUSINESS". One more thing if you think that you feel uneasy or uncomfortable with your partners it is not good to have business with them because every time you will going to have a discussion there's this feeling of outcast. If you think that you can run it on your own it is much advisable to try it for yourself. This is just a point of view outside the box. Hope this make sense for you. :)
     
  8. daytrader

    daytrader
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    Not that I don't like the business idea. But nine?
    "The more the merrier" or "two brains is better than one" i think don't apply to partnership like this.

    have you sense something to anyone that seem like not part of the group?
     
  9. James Greg

    James Greg
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    I have seen a partnership of 25 running successfully but the reason simply? They have their shares according to their investments and if a partner is serving in it he receives a salary just like all other employees. Partnerships can be successful but don't make any hasty decisions. Discuss everything with everyone and then go on to sign anything.
     
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  10. reddogzl

    reddogzl
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    Thanks for all the replies. I decided it was best for me to walk away from the business about a week ago. Pretty tough to do because I see incredible potential for the product. I know I didn't please some of the others with my decision, but I was just saving myself from future headaches. I'm focusing on another business right now that I'm doing by myself and I'm pretty excited for it.

    Perhaps it's a little harsh, but the way I see it, you're in business to make money, not friends.

    Thanks again
     
  11. James Greg

    James Greg
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    It's sad you had to walk away but you are right business is not about making friends, glad you made a decision early.
     
  12. Fergal

    Fergal
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    Thanks for the update reddogzl and good luck with your new business. If you have any questions relating to it please do post them in a new topic and we'd be delighted to chip in with our advice and suggestions. Hopefully you will also have a look round at some of our other discussions. Once again I wish you every success with your business.
     

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