Choosing a Partner - Friend or Family?

by Brian Acord

I was recently asked whether or not it was a good idea to have a business partner who is a friend or family member. The following highlight my response.

Finding the right partner is always a very tricky decision. Deciding on a partner who is a friend or family member definitely exacerbates that decision and can strengthen or destroy the previous relationship. I believe that there are three big issues at hand, namely:

1) Do you really need a partner? If you have decided to pick a business partner then you are typically looking to fill some deficiency that you couldn’t otherwise hire. There is nothing wrong with recognizing your weaknesses and finding help to fill that role, but my advice is that you never partner with someone you couldn’t hire unless it is for this exact reason. (aside: When you don’t know what you don’t know, you are guilty of unconscious incompetence…everyone has their blind spots and a partner can be a good way to work around them.)

2) Personality fit. Can the individuals in question work together without pulling the relationship “trump” card or rubbing your nose in an issue over Thanksgiving dinner. I have seen family based companies that do a very good job of separating the office and the home and I have seen others who make each other feel guilty for taking a vacation to the wrong destination or wearing the wrong shirt.

3) Does your potential partner really have the skill set, experience, and insights necessary to complement your company and your management style? Too often friends and family members are chosen because it is a quick, easy, and convenient decision. Unless you are opening a lemonade stand on the neighborhood corner, I do not think you should partner with anyone unless they match exactly what you are looking for. Making a quick decision now will cause great pain and consternation in the long run. No matter what your current concerns and issues are, they will not be solved in the long run by bringing in the wrong partner today. Take your time to conduct a thorough search, use your network, and make sure that if you partner, you find the right one and not necessarily the closest one…and yes, sometimes that can be friends and/or family members.

Employee Salary at Start-up phase

by Tetsutaro Mameda

During the start-up phase, many entrepreneurs need to deal with tasks by themselves. It is hard that one person possesses all kinds of business skills. Therefore, entrepreneurs hire whoever they support the business. However, start-up companies do not have enough finance to hire enough talented employees. “Cash is King!” If cash is running out, a business ends as Eastwind Trading Co. case. An entrepreneur wants to keep money but he/she wants to hire employees who have business skill for help out. One of the option to generate salary is that using equity and stock options. The option does not need to cash. It also tends to motivate employees. However, the business owner may lose control the business if someone owns share even though it is 1% even though the owner have control it theoretically. It is because the business owner needs to start dealing with the shareholder.

How should we deal with that situation? Hiring one by cash and generating revenue then hiring more employees?

I think that a business grow faster if hiring enough employees at first, but other thought is that do not lose control for the business and profit when the business is successful.

Which ways are better for you?

Cash is King!

by John Finlay

“Cash is King!” I heard this phrase for the first time this week. The phrase references the fact that at the end of the day, what matters most to the survival of your business is how much cash is left in your account at the end of every day. It doesn’t matter how much your revenues could be tomorrow, if your cash is negative today. It seems so obvious, yet businesses often fail because they forget this.

Take Eastwind Trading (a Harvard Business case) as an example. Their company encumbered a large amount of debt and investor equity to start up the business. The business opportunity had potential to be very profitable, but they could never get to that point because in the beginning they depleted their cash reserves so much faster than they received their revenues. Instead of trying to cut costs, they tried to get more investor funding. In the end they went bankrupt because they didn’t manage their cash flow.

Contrast this with the example of the Baby Einsten company (related article can be found here). They funded their business with $10k from their personal savings with the goal to never accrue debt or be under the thumb of an investor. They kept costs to a minimum, and often had to forgo releasing new product or advertising campaigns because they didn’t yet have the cash to fund them. Cash was more than “king” to them, cash was “god”.

Many people feel that they can supplement a negative cash flow with debt not realizing that the end of the heavy chain of debt and credit cards is held by the grim reaper of bankruptcy.

The Proper Categories for this Blog - Simple vs. Complete

If you had to boil every entrepreneurial topic and every entrepreneurial issue down to ten categories, what would they be? Could you reduce the list to five instead of ten? At what point does simplifying categories have a noticeably negative effect on clarity?

I would like to keep the comments on this blog focused on all topic entrepreneurial but I would also like to keep things simple and organized. I am going to begin by posting roughly 15 categories that should be broad enough to cover most things entrepreneurial. Over the next few months I will monitor the various postings on this site and use your feedback to shift and consolidate where appropriate. I would like to eventually narrow down the topic list to roughly ten and then find one contributing blogger that will be responsible for each specific category (although I would still like to see five or more contributing bloggers working in each category).

Take a minute to review the categories currently in place on this site and please send me your thoughts and suggestions on what should be added / removed / changed etc. Also, when you are posting your blogs, please try to limit the number of categories you choose for your postings to one or two.

Now…let’s get to work!