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Old 05-25-2011, 09:32 PM   #1
Dan Salinger
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Partnership in a new affiliate

Need some help from you guys. We have a new affiliate and have four partners. We have gone through the honeymoon period and no have to get down to business. Our dilemma is that how do we structure the affiliate to reflect how we are partners not just, one majority partner and others that work for him/her. How to delineate responsibility two at least three who want to be a intricate part of the business, (coaching, programing, nutrition counseling etc...) If we don't figure this out I think we will have a hard time working together.

My thought is that there is the business owners share, and there is the respect of partnership. Please help, we want this to succeed, and enjoy working together but can see the writing on the wall if this doesn't get figured out.

Dan
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Old 05-25-2011, 10:36 PM   #2
Rob Hefley
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Partnership in a new affiliate

I own one business of my own, partner in another one and trying to start a crossfit affiliate in the future. I have had a few partnerships in the past and I have learned a few things the hard way. The biggest thing is that every one needs to know their role. If they aren't clearly defined from the beginning one person usually ends up spending more money, or one ends up working harder and their usually tends to come some resentment pretty quickly. The best partnerships are ones that require people to invest their time and money, because no matter where you are in life one of these things are really important to you. So I'd require these from everybody. I know there are always situations where you have to have a money man who invests little time, but is it worth it taking someones money to dilute your vision?
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Old 05-25-2011, 11:28 PM   #3
Sam Ser
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Re: Partnership in a new affiliate

One option is the simple exercise for handling this problem that appears in "The E-Myth". It boils down to each of you sitting down together and drawing up a list of responsibilities that you all agree need to be handled by *someone*. Then, you divide those responsibilities among yourselves, with each person signing off on their roles and responsibilities.
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Old 05-26-2011, 12:04 AM   #4
Katherine Derbyshire
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Re: Partnership in a new affiliate

First, there's the difference between owners and employees. If someone signed up with an expectation of a regular paycheck, they are an employee. If they signed up with the expectation of a share of the profits (and losses) they are an owner. Employees can be managers, but they are still employees, just like owners who happen to draw regular checks are still owners.

If all of your potential partners are owners, the next question has to do with size of investment. Someone who didn't put in any cash but lived at the gym working his tail off for three months straight during the build out is at least as significant an investor as the guy who wrote the check for the equipment. You'll need a lawyer to hash this part out, but you need to delineate just how much of the business each partner owns, how to determine a valuation if one partner wants the others to buy out his share, that sort of thing.

And then there's the distribution of responsibilities. Size of investment should not define who gets to be head trainer, training and management ability should. Likewise the other roles. If someone wants an active role, they should get it because they're good at that role, not because they put in X amount of money. This can be the easiest part, or the hardest. If John is the best trainer anyone has ever seen, but can't manage his way out of a paper bag, while Linda can run a business in her sleep but has ten thumbs and two left feet, it's easy. If there's a job that everyone wants, or one that no one wants, it's hard. This division has to be handled pretty carefully to avoid hurt feelings and resentments that could ultimately break up the partnership. It wouldn't be a bad idea to consult a business coach, or even just a friend who knows all of you but is distant enough from all of you to be objective.

Good luck!

Katherine
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Old 05-26-2011, 05:07 AM   #5
Brian Strump
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Re: Partnership in a new affiliate

I would either all invest the same, time AND money....or find someone to loan you the money, and then you EMPLOY them.

I'd suppose the only reason why there is 4 of you is because you want/need more funds to get started? There is going to be an awful lot of down time when you first get started to feed 4 mouths. Is there another reason for all of you to become partners? Or is it just 4 friends thinking it would be cool to own a CrossFit affiliate?

IMO, having a business with 4 partners is one of the simplest ways to lose 3 friends.

With 4 people, who would have the final decision? At the very least I would try to cut one from the picture, so you can at least come up with a majority for a business decision and agree that the majority rules.
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Old 05-26-2011, 12:18 PM   #6
Dan Salinger
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Re: Partnership in a new affiliate

Thank You for your impute. We are 4 partners, or 2 couples. We have no problem as far as the money, and the profit sharing aspect. We came to a mutual agreement awhile ago.

The problem is responsibilities. The responsibilities that have an influence on the direction of the business is not being shared, One or two have the Training, Bookkeeping, Programing, while the others have office work and maintenance. I am looking to see if there is titles that could be given that would allow the structure of the partnership to share responsibilities. Any Ideas? (E.G. Lead Trainer, Lead Programmer, Business Manager etc..)

I understand that partnerships are hard, and eventually if things don't workout completely I think one or more, may just go into a silent partner relationship. I hope not, each individual has gifting that would help the business in the long run.

Thank You for you honest feedback.
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Old 06-04-2011, 07:10 PM   #7
Thomas Sayle
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Re: Partnership in a new affiliate

Have to agree with Brian on this one. 4 is a lot of hands in the jar.

I would also take the advice of finding someone to loan you the money and then hire them to do the work needed.

Remember, a partnership is a marriage of sorts. Everyone feels great at the beginning, but it becomes extremely expensive to get out.
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Old 06-04-2011, 07:56 PM   #8
Dave Traeger
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Re: Partnership in a new affiliate

Being 2 couples further complicates it - what if one of the couples splits up, or has a child or has a death in the family etc - it effectively removes half of the business. Hope none of the above happens, but need to have contingency.
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Old 06-05-2011, 05:46 AM   #9
Thomas Sayle
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Re: Partnership in a new affiliate

Dan,

I own a business as well as my new affiliate. I can tell you from prior experience that this came up with my current business. Upon forming my company, we tasked our lawyers with putting in a divorce clause inside the operating agreement.

This basically protected everyone's interest in case something like that happened. I believe that you can actually set percentages, or how much money someone would get.

I would think that because the 4 of you are all equal interest (or that's what I am guessing), if that were to happen you will now have 1 couple and 2 people that hate each other as ownership. That sounds like tons of problems.

In most divorce situations, the couple will settle on a $ figure, or buyout. So, if my wife and I were to get a divorce, the operating agreement states that she gets a certain amount of money from the company, and that it is paid out in a certain way. But, she does not maintain any ownership level inside the company, only money.

I am not an attorney, and I would suggest that you talk to one on this. It sounds like it might be the best money spent.

Last, someone mentioned reading E-Myth in an above response. I would also recommend that. Gives you an excellent viewpoint from someone that got their teeth kicked in as an entrepreneur.
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