Inside Small Business | Small Business & Home Business Marketing

Business Partners & Employees

LW: You keep saying us and we, so I'm assuming there were some kind of business partnerships going on. What do you think the pros and cons of having a business partner are or were?

Brian: There's a many-faceted answer to that question. We started off with four partners and quite literally we sat in a conference room for six months on evenings and weekends before we agreed to start the company. We argued through, and I would actually use the term argue, a lot of the terms and conditions of the partnership. What would be the income sharing agreement? How would we value the company? What would we do in order to bring in new partners? What would we do if a partner exits and how would we value the company and value the partner share as the partner exits? There are a number of questions around survivorship. You know, if one of us dies, does our wife become owner of the business? And I would say that having legal counsel that can help highlight those issues, legal counsel won't answer those questions for you but they will highlight what questions you should be asking and resolving, and having somebody who can help you navigate through that was vital for us.

The reason I've said we in here several times is that we started off with four partners and through some other life events, two of those partners have elected to leave the business. So because of that, if we did not have those structured agreements in place it would have been a very difficult discussion to value the business and break those two partnership shares away from the core of the business and still allow our business to continue running. They were breaking away at a point where we hadn't really made a lot of money but it was enough that should they have taken their entire share it would have actually really impacted our ability to perform.

LW: So aside from the nights and weekends in a conference room, were there good things about having these partners?

Brian: Yeah, they're all very funny. I think there are a lot of good things, and I think from a consulting standpoint we all brought different disciplines to the table, different ways of thinking about things. Some of us were more analytical, some of us were more freethinking, and having those different styles and different abilities in the room made our overall presentation and our overall market presence much stronger than if any one of us were doing it alone. It definitely was a synergy thing where having different thoughts and capabilities in the room really was an asset.

LW: Do you have other people working with you who aren't necessarily partners? Did you start hiring employees? What were some questions you had about that?

Brian: Quite honestly we did look at actually doing hiring. And to be honest, hiring employees brings with it a whole bunch of headaches that we really didn't want to take on as a small business. As soon as you bring in employees you bring in benefits, you bring in health care issues, you bring in workers? compensation, insurance issues and a whole host of things and then the requirement to manage all of those things and also manage a whole bunch of taxation and federal government reporting things. I'm not saying any of those things are bad but they just add exponentially to the amount of headaches you have to deal with. So our model has been to handle all of our consulting engagements with a 1099 contract and that basically defines the contracting agreement. But our consultants are on their own independent contracts themselves and that's something that allows us to keep our business model pretty simple and keep out of those administrative details I was talking about.

LW: And with these employees did you decide to use any family or friends in your business?

Brian: Actually we did. The two remaining partners, my partner Greg and I, both of our wives also had Big 4 consulting backgrounds and so they both understand all of the business aspects of it. My wife actually is our CFO because she takes care of all our back office and financial dealings and things like that. And so we do have some family members involved in it as well.

LW: What do you think the good or the bad of that is?

Brian: Well I always know what's going on with our financials, so I think that's probably good. But I think we all work well together and that part of it is good. I'd say that probably Greg is probably a little less comfortable with it because since it's my wife doing all the financials, he doesn't get a chance to see it all. But I think he understands as well.

Previous: Funding Next: Legal Issues