Now we’ve spoken a lot about building partnerships to expand the strength and value of our small business, but one question that must always be asked is this one – how can you effectively bring onboard new partners? While there are a number of ways, there are several questions to ask in the due-diligence phase. When you have those answered, what do you do?
For starters, you can dissolve the respective businesses and create a new business with the partners, then issue stock certificates for the new entity that have a distinct value and reflect the total percentage of ownership. Of course, the real downside is that you lose name recognition within the area and although you may serve the same clients, valuable months can be lost – along with data – in the transition.
A far more plausible option is to choose the name of one of the businesses and continue that, announcing the merger through press releases, social media, and the like and the business that is consumed could continue as a division in an umbrella corporation. This eliminates any loss of client base in many cases and great branding can keep the client base safe.
These are great ideas, but why make it so hard? At the small capitalization level, a trip to your business attorney’s firm and a few hundred dollars can form the joint venture LLC and the work can begin in earnest. Issuance of stock or LLC certificates can handle the founders and ownership questions as well as valuation of the business and you can get to work together on the next Monday – no time lost, no customers lost, and no patience lost.
To tell the truth, bringing in new partners is the easy part. Vetting them is the hard part! You absolutely need to know that they are aligned with you and the goals you have set for your company, and this can only come about by really spending the time getting to understand what value they bring to the partnership and what their goals are.
A great example of this came from Georgia a few years ago. An aging owner was looking for a younger partner to bring on in a firm with the expectation that the new partner would ultimately buy out the elder upon retirement. Throughout meetings, the new partner was carefully interviewed and his growth expectations and beliefs were carefully vetted and ultimately, the partnership was formed. After two years, the original owner was able to step into semi-retirement and receive a monthly payment for the sale of the business as the new owner, now armed with more experience and two more partners, continued to grow the company with the same corporate culture as the founder.
Remember, growing is never easy, but perseverance and planning will allow you to bring on new partners and co-founders to achieve the growth that you want!