Is it time to partner up?

[hitch]

Hey everyone. I run a pretty successful business fulltime (I'm also a full time MBA student).

I have a friend who has been wanting to partner with me for a while, what he brings to the table is CASH (and lots of it) and fresh ideas.

My main hesitation for partnering up is that I feel the selfish desire to want to do it all my self. I know the amount of money he is willing to bring to the table, I can make in a few months and re invest it back into the biz, so sometimes I think that there is no point.

I run the business all by myself, I handle ever facet of the operation and sometimes I think that having a partner may help.

We talked about it before, he was willing to do a 50/50 split. He would buy into it, basically doubling our bank roll.

The other thing is, if I really wanted to the money I could easily go get a loan (i have great credit) or I could goto prosper.com and put up a business loan request.

But I'm not sure. I can't keep doing things all on my own, but then again I could hire some part time help that would cost less then a 50% steak in ownership.

As you can see I'm totally on the fence. On one hand this guy is really smart, he made millions in another business venture of his but on the second hand I feel like I can really do everything my self...I just don't know what to do.

Maybe someone can help me sort out my thoughts.

Thanks!

[mattnelson]

These are the truly difficult questions to answer that are asked on YE.

The things you need to weigh up is:
1. Do you have the time and effort (even in a partnership) to dedicate to the ventures predicted growth with the additional investment, or are you satisfied with how things are going at the moment in terms of workload and study commitements?
2. Is a 100% of what you currently have, better/worse than 50% of what you will potentially have?
3. Do you value your friendship? Even with iron tight contracts, business puts a strain on friendships, even if the business is highly profitable and there are no problems.
4. Would you rather have an investment by a friend or a prosper loan? Prosper you have to pay back, but whats a few thousand in interest compared to a 50% stake in your business)
5. Is it a possibility to hire staff? (Either in your country or somewhere in the world over the net? and by somewhere in the world I don't mean a $2 an hour indian/filipino, I mean someone in a different timezone on a decent rate to maximise your time)

[hitch]

Matt,
Thanks for your input and providing some questions that I need to answer. Most of my answers lean me to not wanting to go the partnership route.

My biggest pro:

Having someone else to do business with, almost like a person I can just talk to about thing where we can motivate eachother. My friend and I have a great business relationship, we met in a business setting, we're not too personal. We may hang out on a rare occasion but we're mostly business.

Biggest con:
Giving up 50% of my business when I can do it all on my own effort, and if I want to seek out some money I'm sure I can get it.

I will think about these things for sure.

Thanks!

[Ruman]

I am slightly confused by the numbers you are referring to. You are saying your friends has made millions in other businesses, but wants to invest in your business in an amount similar to what you'd get on a prosper loan. Aren't prosper loans in the $0k-$20k range? If this is only the amount you'd be getting from him - and you currently can make that in a few months in your current business, I would not go into business with him. $20k is not worth a 50% stake in the business. If you can secure the loan elsewhere at ~10% interest, that is $4k/yr in interest. Assuming you are making $80k/yr on your business(you can make $20k in a few months), is it worth giving up $40k/yr from now forward, to save $4k/yr in interest?

[hitch]

Ruman,
If you read my post above yours you'll see that my biggest CON is from a financial perspective there is no point. Unless I plan on expanding greatly, he asked if I could use more then 30k, of course I can, what small biz can't but he said if he invested 30k ownership would be 40/60 his way. No thanks.

[Southern_Lenders]

How well do you know this friend of yours? I hope he doesnt think he is going to take over your business because he's "been there and done that", and thinks that he knows whats best for your company more than you do..?. I wouldnt give him a 50/50 split just because he's going to give money. For someone that has millions it seems, and is only going to put up a few 1000.00, for a 50% ownership doesnt seem fair.

Your risking everything you made for yourself if you give him half. Thats just my opinion. Where was he when your first started?..why does he want in NOW, compared to before.

[hitch]

When I started the business I did not know him. We know each other through another venture where we developed a friendship.

He first proposed the idea over the summer. He see's a huge potential with the business, and frankly wants a piece of the pie.

[borisfowler]

I'm on the fence too. On one hand it makes no sense from a business perspective, on the other hand, partnerships are a great asset. I think you need to hold off on letting him join. Also, having your legal documents in place will be crucial. You have to maintain control of your business legally. It will affect everything. This article talks about co-founders and what to look for and avoid. Seven Startup Co-Founder Partnerships From Hell | Hot Sauce!

Good luck.

[grnthmb55]

I would strongly advise against going into any partnership if you feel you can do it yourself on your own. My first business I started with a partner. I found that I was doing about 90% of the work and forking over 50% of the profits to my partner. A lot of people would love to be your "silent partner" where they put up some initial investment, probably small potatoes to them, then expect you to do all the hands on work and return them a fabulous percentage on their investment. So, when I saw opportunity to expand that business, I decided to start another business, of which I am the sole owner, and do all further expansion under that name. It was hard to do this without my partner's money, but I managed through credit card access checks, credit cards, and balance transfers. Now it's all paid off, I paid very little interest on the money I borrowed because I was creative and took advantage of special offers, and 100% of the profits are mine. In my opinion, a partnership would not be a great asset to someone that already knows all facets of operating their business. If you need more help, hire someone and add them to payroll.

[Parvaze]

Go with your gut instinct and don't do it.

If you really want to take him on as a partner though, let him come in with a minority stake as there is no rule that a partnership has to be equal stakes :-)

[mattnelson]

Hey Hitch,

After reading the rest of your posts, I can say quite confidently that you shouldn't accept his offer, as it is clear from your posts that you really do not wish to (even if you don't realise it yet).

My advice from this point on would be to try and get a prosper loan, rather than keeping the business at your current level. The reasons behind this suggestion is that you feel that you can cope with expanding the business, and since the offer of investment you have probably thought of a dozen ways to spend the investment to improve the business. If you get a prosper loan congrats, if you don't, your in the same position you were in last week which you were probably quite content with whilst studying.

One last point, if/when you decide not to partner up with this friend/joker, keep him friendly, but steer the conversations away from your business operations etc, as if he is as keen as you say, he may start up in direct competition to you.

Matt

[hitch]

Thanks everyone for your input. I think I'm going to hold off partnering up for the time being, and really I don't think I'll partner up in a situation in which I lose half of my business.

It just doesn't make sense. Down the road, if I do partner with someone, I think they will have to bring more to the table besides cash.

I'm very comfortable with the earnings now as it's allowing me time to focus on my school work, and interning. Next semester, some part time help will most likely be the next step.

Thanks everyone for your input again,
Hitch

[GotLiveChat]

Just look at the history of Facebook (and all the players involved with lawsuits) and that should help you steer clear of partnering up with anyone, especially for such a large stake in the company. Put in "Facebook ownership" and let Google's auto-complete of suggested phrases show you what's most commonly associated with that phrase (dispute, lawsuit, etc.)

If you're not in dire need of the $$ then why risk ownership issues down the road?