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seb451

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Hello people!

I have a little dilemma with partnering to run a business.

I had this idea a few weeks ago to start an ecommerce that sells fresh vegetables in packs, e.g. kale+lettuce+mini tomatoes and so (distribution only in one city). The idea is partly validated tbh. But I better started doing something about it.

I decided to partner with my mother (because she owns a little store that sells this kind of products in a local market) and she loved the idea of making a more scalable bussines together. She'd run the operations side (inventory and distribution) and I'd run the digital channels and marketing. So far, we've developed the offer, calculated the costs, make some promotion and getting us to know.

Initially we were going to run the business 50/50, which we both agreed. But like in a week, she decided to include another partner around her age, who would provide us with capital to start (like a venture capitalist at a lower scale) but in exchange of 50% of the profits. He's a great person and she and I have worked with him before. The thing is, I don't know if it is that wise to go that way, although I don't have a problem giving a major participation to my mother if she will be working full time on it (35% for her, 15% for me), I don't feel comfortable with the idea of giving away half the effort to an investor, specially at an early stage.

Finally, she never asked me before making that decision, which is fine is she followed her intuition. From what she told me, she's looking for a good safety net to start. Maybe we don't have the same expectations.

From one side, I think I should feel grateful that someone is willing to invest in this and take it as experience (in sales, marketing and running a business in general) but with a lower participation role. But in the other hand, I'd feel badly controlled if someone else owns 50% of the business, being told what to do is not what sparked my interest in the first place.

I'd love to hear any comments if you have.

Thank you very much.
 

Lex DeVille

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Hello people!

I have a little dilemma with partnering to run a business.

I had this idea a few weeks ago to start an ecommerce that sells fresh vegetables in packs, e.g. kale+lettuce+mini tomatoes and so (distribution only in one city). The idea is partly validated tbh. But I better started doing something about it.

I decided to partner with my mother (because she owns a little store that sells this kind of products in a local market) and she loved the idea of making a more scalable bussines together. She'd run the operations side (inventory and distribution) and I'd run the digital channels and marketing. So far, we've developed the offer, calculated the costs, make some promotion and getting us to know.

Initially we were going to run the business 50/50, which we both agreed. But like in a week, she decided to include another partner around her age, who would provide us with capital to start (like a venture capitalist at a lower scale) but in exchange of 50% of the profits. He's a great person and she and I have worked with him before. The thing is, I don't know if it is that wise to go that way, although I don't have a problem giving a major participation to my mother if she will be working full time on it (35% for her, 15% for me), I don't feel comfortable with the idea of giving away half the effort to an investor, specially at an early stage.

Finally, she never asked me before making that decision, which is fine is she followed her intuition. From what she told me, she's looking for a good safety net to start. Maybe we don't have the same expectations.

From one side, I think I should feel grateful that someone is willing to invest in this and take it as experience (in sales, marketing and running a business in general) but with a lower participation role. But in the other hand, I'd feel badly controlled if someone else owns 50% of the business, being told what to do is not what sparked my interest in the first place.

I'd love to hear any comments if you have.

Thank you very much.

You should talk with your mother about this. If you are partners, then learning to discuss business matters will be important going forward. You will need to set expectations and boundaries for your roles.

This is not a family relationship. It is a business relationship. Family-style relationship rules usually cannot apply in business without someone getting butthurt. The problem with using family-style rules is a higher risk for damaging both relationships eventually.

That said, if discussing business matters with partners makes you feel too uncomfortable, then you may not be ready for 50% or more responsibility in a partnership yet. In that case, you may need to go back to the drawing board.

Ultimately, whatever you allow to happen is what will happen and you will have to live with it all the same.
 

seb451

Contributor
Read Millionaire Fastlane
Apr 9, 2020
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48
107
Chile
You should talk with your mother about this. If you are partners, then learning to discuss business matters will be important going forward. You will need to set expectations and boundaries for your roles.

This is not a family relationship. It is a business relationship. Family-style relationship rules usually cannot apply in business without someone getting butthurt. The problem with using family-style rules is a higher risk for damaging both relationships eventually.

That said, if discussing business matters with partners makes you feel too uncomfortable, then you may not be ready for 50% or more responsibility in a partnership yet. In that case, you may need to go back to the drawing board.

Ultimately, whatever you allow to happen is what will happen and you will have to live with it all the same.
Thanks four your input, Lex

I actually talked with her about this issue.

For the most part she refused to take responsibility of her precipitate decision and said it was a good opportunity and I should understand, that without that capital we wouldn't do anything and she was looking to work without the struggle of not having enough money.

Also she wouldn't feel comfortable telling him to get a lower percentage because that would go against the original deal.
 

_Seba_

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Hello Seb!

My thoughts on this one are:

1. You‘ve lost 85% of your potential profit margin before you even started, I think that‘s not a good situation.

2. Partnering with friends or family can work, but only if the roles are clear and the participans are able to communicate in a rational way. It seems like that’s not the case here.

3. Bringing another partner in business without asking me would be a total red flag in this case.


I would definitely talk about it with your partners or leave this business before these problems become heavy.
 

Sethamus

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How much capital are we talking about roughly and is there any way to afford it yourself, or with a loan(not credit card).
Besides capital is this guy bringing any other value? If not, then why him?

I understand the initial thought of working with your mother, but if she is persistent who is the advantage? You with the digital side and the actual plan to expand or her with the produce? I’m sure there are many people you can source the products from locally.

I’m not saying to drop your mother, but when push comes to shove who would be able to go execute this without the other? That is who has the power in this “business “ , this is not as lex said a family relationship. She doesn’t get automatic power over you. This is hard for parents and probably why I have not ever worked with my dad. We are both too hard headed and have different trains of thought and it takes us forever to get something done as we both have to explain where our thoughts are.
 

seb451

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Apr 9, 2020
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Chile
How much capital are we talking about roughly and is there any way to afford it yourself, or with a loan(not credit card).
Besides capital is this guy bringing any other value? If not, then why him?

I understand the initial thought of working with your mother, but if she is persistent who is the advantage? You with the digital side and the actual plan to expand or her with the produce? I’m sure there are many people you can source the products from locally.

I’m not saying to drop your mother, but when push comes to shove who would be able to go execute this without the other? That is who has the power in this “business “ , this is not as lex said a family relationship. She doesn’t get automatic power over you. This is hard for parents and probably why I have not ever worked with my dad. We are both too hard headed and have different trains of thought and it takes us forever to get something done as we both have to explain where our thoughts are.
I think we could start with around $500-600. We could probably do it ourselves, but she's is more concerned with having a safety net in case things go wrong. The value he could add is more related to facilitating vehicles, more financial stability to rent and fix a place, although those are not totally required.

Since she's currently selling this kind of products in a physical store, she has more knowledge/expertise in handling the inventory, sourcing products, and managing people to do the work. But she's not likely to dedicate time to start and grow an ecommerce store and neither is our new partner.

Given the partnership situation is a bit tricky and our communication doesn't seem to be straightforward and rational, I decided to leave the society and provide services to them as a freelancer: run their ads, ecom platform and marketing in general. It will work as a good way to learn and earn some money while I finish school and also not being attached to the business.
 

Tiago

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I'm sorry, but I'll be blunt here:

All I read is red flags, red flags and red flags.

"For the most part she refused to take responsibility of her precipitate decision and said it was a good opportunity and I should understand"

As @Lex DeVille mentioned, you need to be able to discuss important business matters.

This IS important. It's the profits of the company, something you're investing your time in.

If I were you, I would sit down and discuss this openly, as difficult it might be, but if one partner makes important decisions without letting the other partner know, that's not healthy.
 

Sethamus

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If the model works for your mom with you as a freelancer you could take this and expand it to different cities with different people using this as a proof of concept. With C0VlD there are many local farmers that are going direct to consumer now and the profits are higher. Make sure you charge enough for your service if you are providing results.
 

Kak

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I was on the golf course the other day with a guy that was passing a bottle of scotch around. It was about $5-600 dollars a swallow. No occasion. It just was. A swallow is not enough to start a (real) business...

There are more investors in the world than that guy. Look around. Maybe you be responsible for the better deal. I agree with your mom about being well capitalized. Also, don’t just resign yourself to digital crap. Learn to lead and actually run a company.
 
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Tiago

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Sorry, not to hijack this thread, but @Kak, I've seen you mention a couple of times that being capitalized is important, and there are tons of people out there with spare capital and want to do something more with it rather than sitting in a mutual fund.

I would love to learn more about this mindset. Have you talked about this perhaps in one of your podcast episodes?
 

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I'm pretty firmly against 50% partnerships in most cases and even more firmly against getting into business with family, generally speaking.

50/50 means neither of you have overriding authority over each other which gives arguments and disagreements like this literally no place to go.

In situations where 50/50 partnerships do exist, there should be a well fleshed out partnership agreement that explains who is responsible for what, who has authority for which situations, how to arbitrate disagreements, how to dissolve the partnership, etc...

In the instance above, for example, you could have said that she's fully responsible for operations but include a clause that states that any non-transactional business decisions relating to how the finance and profits of the business works requires unanimous decision by both partners and any disagreements should be brought to a neutral third party for binding arbitration.

This would have given her control over the day to day operations activities but not given her the authority to re-direct profits to a third party without your permission and in the event of an impasse you could bring it to someone you both respect for their final decision.

That all being said - when family is involved, most of the legalese I'm referring to goes out the window because it's all too easy to yell "you're my son, you do what you're told because I know best".

Bottom line for me - if you aren't willing to surrender the business entirely and at a loss to the other partner, or you aren't willing to risk losing your relationship with your partner, you should not be partners.

Example - I would get into business with my son, but only if I was genuinely okay with surrendering the business to him at potentially unlimited personal loss at any point in the future. Losing my son's relationship is not acceptable so I must be prepared to walk away in whatever manner is needed to maintain it.
 

Kak

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Sorry, not to hijack this thread, but @Kak, I've seen you mention a couple of times that being capitalized is important, and there are tons of people out there with spare capital and want to do something more with it rather than sitting in a mutual fund.

I would love to learn more about this mindset. Have you talked about this perhaps in one of your podcast episodes?
Yes, I have indeed. There are several episodes in the roster that might have touched on it. Why don't you DM me some questions and maybe some hypotheticals and I will give it a fresh perspective hopefully this week. :thumbsup:
 

seb451

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Apr 9, 2020
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Chile
Thank for you input guys.
Also, don’t just resign yourself to digital crap. Learn to lead and actually run a company.
This kinda opened my eyes. Thank you @Kak .

Bottom line for me - if you aren't willing to surrender the business entirely and at a loss to the other partner, or you aren't willing to risk losing your relationship with your partner, you should not be partners.
There's no problem between us actually in terms of reaching an agreement, or dropping the business in order to preserve our relationship. It is only this recent situation that made things a bit awkward.

As @Tiago and @_Seba_ mentioned, there were several inconveniences in this case (authoritative behavior, lack of communication). Therefore, this society wouldn't work well.

I think working for them as a freelancer is a great place to start, as they already (sort of) have an ongoing business relationship and if they go this way they would only be missing this "digital" piece of the business, that I could perform. It should be decently profitable and a great opportunity to learn.
 

Phikey

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Agree with everything everyone else said. Red flags all around and I wouldn't personally ever go into business with a family member. But there's still a big opportunity here.

What I would do:
  • Start the brand your self and use your mom as the supplier. Treat her current business as a separate entity that you are using as your supplier for your products.
  • You build the store and run it yourself. You'll take on risk there by assuming all the costs, but you'll also gain the whole profit as well as the huge wealth of learning experiences that come from it.
  • And honestly, with Ecom, you'll just need to pay for your Shopify subscription and ad spend.
  • You could even work out a dropshipping relationship with your mom so you don't hold any stock. When an order comes in, you pay for the vegetables at a cost-price and ship them out.
  • Even if it fails, you'll learn so much and not harm the relationship with your family.
  • You'll also retain full control and run the brand as you'd like. You won't need to worry about her making these huge business-changing decisions like cutting your profit in half (seriously, that's crazy and I'd run for the hills).

If you're early on in your entrepreneurship journey, you really want to just dive in, get as much experience as possible, and fail fast. The faster you get to failure, the quicker you'll learn. I'm not saying your goal should be to fail, but a lot of people get stuck in the ideation phase and never get their hands dirty. This looks like an amazing opportunity to do just that, and the risk is so small here and you'll learn a lot.

All the best!
 

seb451

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Read Millionaire Fastlane
Apr 9, 2020
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Chile
Agree with everything everyone else said. Red flags all around and I wouldn't personally ever go into business with a family member. But there's still a big opportunity here.

What I would do:
  • Start the brand your self and use your mom as the supplier. Treat her current business as a separate entity that you are using as your supplier for your products.
  • You build the store and run it yourself. You'll take on risk there by assuming all the costs, but you'll also gain the whole profit as well as the huge wealth of learning experiences that come from it.
  • And honestly, with Ecom, you'll just need to pay for your Shopify subscription and ad spend.
  • You could even work out a dropshipping relationship with your mom so you don't hold any stock. When an order comes in, you pay for the vegetables at a cost-price and ship them out.
  • Even if it fails, you'll learn so much and not harm the relationship with your family.
  • You'll also retain full control and run the brand as you'd like. You won't need to worry about her making these huge business-changing decisions like cutting your profit in half (seriously, that's crazy and I'd run for the hills).

If you're early on in your entrepreneurship journey, you really want to just dive in, get as much experience as possible, and fail fast. The faster you get to failure, the quicker you'll learn. I'm not saying your goal should be to fail, but a lot of people get stuck in the ideation phase and never get their hands dirty. This looks like an amazing opportunity to do just that, and the risk is so small here and you'll learn a lot.

All the best!
This is incredibly helpful. Thank you!!
 

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