I have been asked if I would like to become a partner, what to do? 2

[Mack454]

I currently work for a small engineering firm (35-40 people) and have been here for about 12 years. I am 41 years old and love what I do. A business opportunity has been proposed to myself and 4 other managers in the firm to obtain ownership of the company. Details on how this would be done, length of time, etc have not been discussed as of yet.

I realize those details could play a big role in my decision, but since I do not know what they are as of yet I need to focus on what I do know. Out of the 4 other managers, I could really only see myself partnering up with 2 or 3 of them. At least 1 of them I see as a horrible manager, always passing work to others without doing anything himself, always complaining there is too much work on his table, but then is nowhere to be found at 5PM, those kind of things.

It has gotten to the point that I do not enjoy being around this person at all because of his work ethics (he is lazy really) while I will do whatever it takes to get the job done and keep the client happy. He has been at the firm for 20+ years, so the owners do not see his everyday work habits (or lack of work I should say) and are blind to it all.

Sorry for the ramble, but I guess my question is should I even consider this? My neighbor mentioned to me that maybe I get in with these others to obtain ownership and build a stronger client bond, then branch off later. There is no doubt in my mind that I will feel that way in say 5 years as I know this guy will not change, it is just the way he is (at work and home). On one hand the ability to obtain ownership and build $$$ for a future departure or possibly starting my own business would be great, but on the other hand I do not want to screw the other managers who I have great respect for and believe could do a great job running a company.

Then on top of that, the detailed end of cost to gain ownership, etc will come into play and is the $$$ worth it for a company that I feel needs a lot of changes (the current personnel really need a boot in the behind, but the current owners allow it to continue because they have us picking up the slack).

Again, sorry for the ramble. I am brand spanking new to this and am really lost. Any help/suggestions, or even previous experience would be greatly appreciated. I find that everytime I try to come up with a positive reason to do this, I always fall back to the negative side. Would there be any positive at all in doing it even if it fell apart a year later? I almost feel like I am getting married and am already thinking what I will be expecting from the divorce.


John Nelson

 

[DRC1]

Not every oppertunity that comes along fits what you want. if you jump too soon, then you are not in a position to take advantage of other opertunities. Owning a piece of a firm is not a guarrentee of wealth. It sounds like there is a problem with moral in general. You know an incredible amount about this firm and the voice inside your head is saying don't do it. Have along conversatio with the voice. There are a lot of good firms that will be looking for Sr. people. Alot of owners looking for someone to transition to. It sounds like you are open to ownership, but it sounds like this might not be the best investment. Start looking around. Another oppertunity is out there.

 

[Mack454]

Thanks DRC1, everything you listed makes sense. I am starting to see a couple of the others feeling the same way, great opportunity, bad timing and 1 or 2 of the wrong people are involved.

 

[Mack454]

Well, I got a couple of details from the owner the other day. The way he would like to see us start is to purchase into the company (using our own $$$) to purchase roughly 20 shares of stock. That would allow all 5 of us to have equal shares. Over the course of the next few years, we will purchase the remaining stocks directly from him until we have full ownership.

The original buy in price was actually lower than I thought it would be. My wife and I have the ability to get in without tapping into our daughter's college savings if necessary. The owner recommended that all of us (not including him) sit down and discuss how we feel about this offer and how we feel having each one of us as a partner. I think this is the chance to get everything out on the table, partnership or no partnership. I do not want to hammer the guy too much, but I will start easy and see how he reacts at first.

More details and progress to follow.

 

[wes616]

Good luck Mack.

I said it before, and I'll say it again... go see a lawyer ASAP!



Wes C.
------------------------------
No trees were killed in the sending of this message, but a large number of electrons were terribly inconvenienced.

 

[MikeAnd]

Make sure that you've taken a look at the financials of the business and that you feel comfortable with the valuation of the business that's implied by the stock price that they are asking you to pay.

Then, I would definitely talk to a knowledgable accountant and lawyer.

Congrats! It sounds like this is a great opportunity.

Mike

http://www.partnerup.com

 

[GregLocock]

I'd be very leery of anything other than a complete majority share now.


Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[peterjn]

As suggested strongly, get yourself a GOOD Attorney to represent you. My past experience 15 years ago with stock ownership with 3 other partners, if the company goes out of business how much is your stock worth?
And we had 1 person on the team who after the fact we discovered he wasn't worth having around.
Your very lucky to know this up front.
Have fun and good luck!

 

[DrMurphyDurfy]

No one has commented on the fact that the bad-seed engineer being considered for the partnership has been with the company for 20 years. I would be willing to guess that one of two applies:

1. Current ownership knows that this person is this way and routinely ignores this (and even offers partnership), representing a current management problem of ignorance that should be on on the top of your list as a new owner should you decide to accept the terms/ conditions.
2. Current ownership does not know this person is a bad-seed, which represents an even bigger problem since this person has been employed by the company for 20 years, representing a current management problem of being "asleep at the wheel" that should be at the top of your list as a new owner should you decide to accept the terms/ conditions.


Also as board room discussions go, some people find it difficult to confront these issues directly, but once you are tied financially to this person there's no alternative to being direct. I recommend voicing your concerns before tying up an investment.

Finally, get a lawyer and understand stock valuation, current accounts receivable, no-compete clauses, and other t&c's.

 

[Mack454]

Sorry I have not been back to update, things have been a little nuts lately.

Well, all of us sat down and had a nice little chat, basically talking about everything and anything that we see an issues between ourselves and the others that work for the company. A few of us expressed our concerns with this one particular potential partner. He was actually quite shocked to hear it, but took it well. Since then he has made making an effort to change his ways, but I do not know how long it will last.

We have all been in contact with an attorney who will be used to overlook the entire process and hopefully help make the transition a little easier (and protect all of us if necessary).

I would be lying if I said I am past worrying about this one particular person, along with the outlook of future work and the current staff that will need to step up to fill the void we leave. It appears this one particular person is pushing to run the entire show, top of the ladder which is pretty damn scary, but that has not been determined as of yet.

I know I will give it my all, whether things are rough or smooth, but will others follow the same way? This has really been the toughest decision in my life, and for some reason I always had this vision that if I had this kind of chance in life, it would be something I would not have to think twice about accepting.

 

[ajack1]

Mack 454 welcome to the world of owning a company.

If you are like me all these doubts will be the norm from now on, whilst nearly all-engineering decisions are based on facts and figures management ones are often based on gut feelings and common sense.

When you get them right it is hugely rewarding, but when you get them wrong they can be very costly and sole destroying and there will be no shortage of people telling you how you should have done things differently. Hindsight is a wonderful thing try and buy some in the January sales.
;-)
Good luck and enjoy the roller-coaster ride.