Business and Partnerships

Hello. I am seriously considering starting an office cleaning business with my sister and her husband. At the start we have to deal with the possibly sticky matter of how to split the profits. What I would be bringing to the table initially, is the capital. My sister would be bringing some experience, from when she lived in a different state -- she recently relocated. She is also a good sales person. When the business is up and running the plan would be for the three of us to be paid wages, based upon how much we each actually get directly involved in the cleaning.

The chief question I would like to throw out to the folks in this forum is how should the business profits be split. Should my sister and her husband be treated as one half of the partnership, with me as the other, having the profits being split 50/50? Or is it more equitable to spilt the profits three ways?

Gerard

Hi Gerard,

Partnerships can be Difficult in the Best of times.

Especially, family partnerships!

Lots of Personal decisions to be made...

We can all recommend Percentage advice But it's probably Best to know and read more about...

Family business in general.

http://www.family-business-experts.com/
http://www.nolo.com/product.cfm/Obje...B3426/111/228/
http://www.familybusinessmagazine.com/

Phil

Gerard,

Thanks for ASKing about partnerships.

I am seriously considering starting an office cleaning business with my sister and her husband.

Do NOT do this for a few reasons...

Reason # 1: It is your sister - a sibling. I don't care how good you Think you get along, you will bring Sibling Rivalry into the business.

Reason # 2: There are Three people in this. Two people, free of coercion or Outside influence, can come to an agreement unless one of them is looking to get values for nothing. Three people cannot. What will happen is, two join forces to over-ride the third. In your case, two have already joined forces and gotten married.

Even if you decide to Only go into business with your sister, Her husband has her ear all night long at home. And you cannot argue/debate/discuss points when issues are the issues of the invisible Third Party.

Two people can do business with each other. Three cannot. It WILL end in disaster. And, in fact, all fights and the like are the result of an interfering third party. You have been informed. No you can make an Informed Decision.

When the business is up and running the plan would be for the three of us to be paid wages, based upon how much we each actually get directly involved in the cleaning.

Wrong.

Do you think The Donald gets paid for how much he is Directly Involved in building?

The largest cleaning company in Australia is Tempo - they do supermarkets as well as 50 storey office buildings. Do you think the owner is paid for how much he is Directly Involved in the cleaning?

If you want to keep the business small and do all the cleaning yourself, then just get yourself the gear and begin marketing - sounds simple, doesn't it. Do it All yourself. Only get Other People in - as hired Subcontractors - As You Need Them.

A word or many on marketing...

It is somewhere in the archives but I'll paraphrase it here...

A person/business will only hire a cleaner for a few reasons...

Reason # 1: They are unhappy with their existing cleaner and want a new one. They will only look for a cleaner at that point.

Reason # 2: They have been doing it themselves and are finally fed up with it or have become injured. They will only look for a cleaner at that point.

Reason # 3: They are smart business operators stating a new business and want to hire a cleaner from the get go. They will only look for a cleaner as the time draws near.

You will Not Convince a business/individual to use yor service over someone else's, if they are happy with who they have - even if you lower the price (there are Some exceptions to lower prices, but why would you want to compete on that, and why would you want a customer who goes with Price Only as the next lower price will see you lose that customer).

You will Not Convince someone to use your service instead of doing it themselves, Unless they are already fed up with it.

And the other category - new start up - cannot be convinced to use a cleaner unless they have already decided to. Remember, in the beginning, a new start up can have a Cash Flow Crunch going on and money is tight.

What this boils down to is, people will use you when They decide the time is right. Because you do not know that time, your only choice is to keep marketing until They need a cleaner. At which point in time they see your marketing.

Case in point of the above... I sent a letter - now lost somewhere on my computer on one of my hard drives (shrug) - and three or four months later I got a call from the business owner about doing the cleaning of their business. They kept the letter that entire time and called me because they were finally fed up doing it themselves.

Having actually run a cleaning business myself for Many years - both doing the work and having others do it for me - I feel I am in the Best position to offer this advice.

Should my sister and her husband be treated as one half of the partnership, with me as the other, having the profits being split 50/50? Or is it more equitable to spilt the profits three ways?

You cannot have Three Bosses. See comments above about Partnerships - I have Multiple first hand experience in these too. Successful ones and not successful.

If you - assuming YOU are THE boss - want to Pay money, then decide an hourly rate and pay it - though I prefer that a Job is Worth $X regardless of how long it takes. Otherwise, you'll find people working slow and racking up the hours. But splitting profits three ways sees your sister's team - her and her husband - making twice as much as you. Thus, with 66% of the money, THEY are the bosses, right?

Final word, if you have never done cleaning for money, then get yourself a job as a cleaner first. Get paid to learn - learn what to do, how long it takes, etc. You'll find out whether this is cut out for you and whether you can handle it on a physical level. It is far more physical than you think.

Also know this...

Domestic clients - and many business clients - keep a cleaner on because they like the person themselves. They are hiring the Person.

Now questions for you... is this Partnership Your idea or your Sister's idea? Have either of you run a business of your own before? Why do you want to go into business?

Michael Ross

I have had two parnerships and they were not related. One last a month and another lasted 5 months. It is not a good way of doing business for many people. I still do joint ventures. They seem to work a lot better. And you can do it with a hand shake or one piece of paper legallizing it.

Originally Posted by Gerard

Hello. I am seriously considering starting an office cleaning business

Great!

with my sister and her husband.

Bad idea.

What I would be bringing to the table initially, is the capital.

So you are an investor, not the hired help.

My sister would be bringing some experience, from when she lived in a different state -- she recently relocated. She is also a good sales person.

Some experience and relocating would say to me, no stability and unclear definition of experience level. Is your sister's experience in cleaning or sales? Have you checked her references. I'm dead serious!! Relatives have a tendency to imbleish what they know, when someone else is fronting the money.

I also noticed, that your brother-in-law brings nothing into this arrangement. He's just tagging along to see what he can get out of this. I would keep my eye on him. Things can easily turn ugly, if something is said or implied that someone may not be pulling their weight or doing their job, and your sister's husband will come to her aid before yours.

When the business is up and running the plan would be for the three of us to be paid wages, based upon how much we each actually get directly involved in the cleaning.

So who is going to do the measuring? You are the investor, you do not get wages. Now if you want to take part in the actual hands on then your investment needs to be paid back and be included in your initial business plan, and then you would share in the profits as the company grows, because as an investor you would receive more. Then their is the possiblity that your sister and her husband would buy you out, as part of the initial business plan.

The chief question I would like to throw out to the folks in this forum is how should the business profits be split. Should my sister and her husband be treated as one half of the partnership, with me as the other, having the profits being split 50/50? Or is it more equitable to spilt the profits three ways?

If you go forward with this, you should be the principle share holder. You have the greater risk. You could lose your shirt, they would lose only their jobs. You should have at least 51% control of the business. IMO you should have 100% control and hire your sister and her husband to work for you.

My question is, "If your sister has experience, then how come she is not trying to get this off the ground?"

If she is a good sales person, as you mentioned, then she should already be lining up clients. A good sales person doesn't wait for work to come to them. They go out and get it.

I really think you should not go into business with your sibling and her husband. If they are as good as they want you to believe, then let them prove themselve first, before you invest a cent in this venture.

From the Trouse
Woody Quiñones
PS. I've extended the Seeds of Wisdom offer until the end of this month. After that the offer will end.

I appreciate all responses to my question. I admit I have been having reservations about a partnership. I trust my sister completely, but it's true we are very different people, who are often on different wave lengths, and who often recall facts differently. If we did form a partnership we would definitely need to put as much as possible in writing.

My sister and brother-in-law are presently in tough financial straits, and will probably declare bankruptcy. There are a number of reasons they got where they are now, but key is the fact that my sister's husband lost a well-paying job. He had been earning $100,000 annually, then got a job in another state -- after a year trying -- at $30,000. A little over a month ago he suddenly quit that job, saying he couldn't put up with the hassles. That shocked my sister as they had virtually no savings. I am trying to get involved to help my sister and her family out. Still, I also need the money, although I am much better off than they.

Since they told me they are likely to declare bankruptcy I will not be getting entangled in a legal partnership with them, although perhaps some other joint effort will be considered. Frankly, my chief concern is about my brother-in-law. He is an accountant by training, but has been having a very difficult time rebounding from his setback. Now that he has just up and quit his previous job I suspect a new position will be even more difficult to acquire.

Regards,
Gerard

You are wise to recognize that even though you and your sister share a great relationship, it's not the same as a business partnership. That nawing feeling you have is there for a reason!

Gerald, you sister has shared more than you realize and you would be well-served to read between the lines.

No doubt they are under a lot of pressure and it's easy to see why you would want to help in any way that you can. However, steer clear of a business deal as that has no good ending in sight.

If you want to help them, go out and make more money yourself and then save yourself a headache and give them a gift. But don't risk what you have worked so hard to accumulate. They may be great friends and relatives but there are signs that they have poor financial habits. You can bet those would be carried over into any business deal you set up. Financial pressures can lead to amazingly poor decisions.

Think of it like being on an airplane and the oxygen masks drop down. You can't help anyone until you help yourself first - and that's the instructions they give on each flight: put on your own mask first.

You sound like a good guy, Gerald, and a great brother. Put on your own mask first. Then you can help them without risking your own financial future.

Hope this is helpful!

Take care,
Business Development Coach Dianne

Hi, Gerard,

Didn't realize this was your thread here, too. After reading through the thread, and in view of the new information gathered here, I know that this venture was NOT meant to be and is a bad idea all the way around.

You know that financial pressures can really put a strain on people. Your brother-in-law's suddenly quitting a job they sorely needed is evidence that he has been pushed too far already. What do you suppose the stress and strain of a business start-up would do to him?

Your sister may be a wonderful sister and all that but she is pulling your leg when she indicates she can be sooo much help in the business. I was in sales for years, and in management after that, and I can tell you that selling when you're under extreme financial pressure such as they're going through is almost impossible. I've seen it happen far too often. The best skills in the world get distorted and the anxiety drives purchasers away.

There are sales skills and then there are sales skills. Being an order taker in a retail establishment is a far cry from going out knocking on doors, or calling cold and setting up appointments. Dealing with consumers is far different than dealing with business people. And so it goes.

If you really want to help them, go into business and hire them at a fair wage...your sister to assist with the appointments and sales, and perhaps some of the miscellaneous office chores, and your brother-in-law to do the books for the company and whatever else you two can agree on. Do NOT put either of them on straight salary. You might consider base + commission arrangement which would provide incentive to work harder which will help everyone.

When your own cupboard is filled to over-flowing, then do the charity thing. Until then, charity begins at home...that means YOU. You stand to lose everything, including your relationship with your sister, if you proceed with the partnership thing. Do it yourself and let them share in the harvest through their own efforts in working for you or someone else. They don't need the extra stress and strain right now and you don't need the added hassles and potential loss of what you have.

Good luck.

Sandi Bowman

[MMacGillivray]

Hi, Gerard - you already know that there are two completely different issues here; helping your sister and setting up business.

I don't know what "declaring bankruptcy" translates into in terms of outstanding debts in your sister's household. A family way to help there MIGHT be to see if there was a way to secure a roof over their heads so that they could concentrate on reducing other indebtedness. But if you were to go that route, I'd make sure there was a legal agreement in place so that you all know the financial obligations 5/10 years from now. If you bought their house and became landlord, giving them an option to buy back at an agreed price in X years, that would be a possibility. But it's a risk for you.

As for going into business, I'm with Michael as far as the reasons for hiring a cleaning company are concerned. Also, my feeling is that a cleaning company should be built from the ground up; if the owners don't understand the logistics and problems encountered cleaning offices/shops/homes, then they're on a hiding to nothing when dealing with employees. Also, it doesn't sound to me as if they're in a position to deal with slow-paying customers and cash-flow issues if you don't invest. If they're looking for quick cash, then they should already be out cleaning houses/windows/gutters - and that way they could be building the foundations of their own business. (Maybe they are already doing this?)

I hope that things work out for them - it's tough fighting your way out of a financial hole.

Best
Margaret

ps - several years ago, one of my sisters helped me finance my shop; we paid interest monthly and repaid the capital. BUT - it was a business arrangement and we made sure it didn't interfere with our family relationship.

M