Strategies for the Pros if business is tough right now.

Rob Keeble

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Location
GTA Ontario Canada
Note this is a leaf out of Larrys book and I am merely trying to pay it forward.

I have just recently been involved with an associate helping a client with a joint venture and the drafting of a Memorandum of Understanding to be handed to the legal guys. A post from Tod about the availability of second hand machinery becoming more available got me thinking that some of the Professional Woodworkers out there that are part of the Family Woodworking Forum might benefit from this advise given the tough times many businesses are going through. I hate to think of guys selling machinery to pay the bills. So here goes.

Being in a small business can be very rewarding but also challenging especially when tough times hit. One option you might want to seriously consider is an acquisition, merger or joint venture with someone else in the same or very closely aligned business especially if they are a similar size to you.

Rather than continue to try and be chief cook and bottle washer and do everything yourself, when the times call for a much more dedicated and focused approach to certain aspects of the business, consider the potential benefits of a partnership, merger or joint venture.

Don't poo poo the idea, I can visualize several of you saying being there done that and aint going back there again. But sometimes survival may depend on it. Tough times are a good time for consolidation. You will see several industries doing this in the coming years in order to survive.

I know it has a negative side but it need not be. Things usually go sour only if the two parties to the agreement did not sit down and trully examine all the issues that face them.

For any coming together of two entities there has to be a clear understanding of the intent. Just like a marridge. The better the expectations and planning that are done before hand the better the chance of success.

Here are some of the more positive points you might want to consider if you find this idea attractive.

1)Reduced overhead you don’t need two accounts departments or two accountants etc or two premises.
2)Increased income over which to amortize overheads
3)Potentially another partner where one can focus on operational efficiency and the other on sales and marketing. Sharing the load of running a business.
4)Potentially a reduction in cost of sales as a result of high volumes of purchases from the newly combines operation.
5)Greater customer support leading to more satisfied customers. This comes about because of the dedicated roles the two new partners take on.
6)Reduced competition thereby preserving margins to some extent.

I realize this is a woodworking forum but since I am a hobbiest woodworker I dont have the skills to help the Professional Woodworkers out there with their projects. What I thought I would do is use my business skills to offer some advice that might help some Pros struggling at present in return for all the contribution they make on this forum. I would hate to see a real pro having to chuck in the towel on his woodworking business when a merger with a guy down the road could have helped them both.

There is more to this than what i have written here but if any Pros want further input don't hesistate to PM me and I will see if I can help you. Small payback for what you do for all those who benefit from your advise here:thumb:.
 
Can't argue with a thing there.
But (there is always a "but") independant businessmen are generally independant because they are independant people.
Owning a small business is not unlike raising a baby. (been there, done that with both businesses and babies) It is yours to feed and nurture. Someone else coming along telling you to do it their way would not be welcome.
My father went through five partners who were friends. After the bitter break-ups, they were no longer friends.
 
i too have had "partners".......makes for a very strained relationship especially during the rough times.
good advice though, thanks rob!
 
Guys thanks for the comments whilst I used the word partners I dont neccessary mean a legal entity of partnership. I think the issue I am suggesting is there are options to surviving this recession and one needs to look at all of them.

I give you an example. One of my clients wanted to grow a certain amount (revenue based) in a certain time. This would have all been organic growth had they continued. Organic growth is high risk as you have to either by way of more product to same clients, more clients or higher priced products to the same.

I mentioned to them the aspect of acquisition and they nearly had a fit. This is the usual reaction some people give me when I bring up this subject. But then I proceeded to discuss the subject with them. They were of a particlar ethnic group and had several family members in their company and most of the employees were from the same ethnic group. So they could not see how they would handle mixing it up so to speak with an acquisition.
I pointed out to them that they dont just go down the road and acquire the first business that presents itself. First they should draft a set of criteria that they would need to be met before they even look at another business.

Well the short story was that after this discussion and me higlighting what i thought would be some of their needs, they went out and bought a company that fitted with their needs and the prior business owners needs and both were happy and are still happy and succesful.

Part of what made me post this offer of help was a more recent experience. Related to a joint venture.

I find that many people in business have a desire to do a deal which if you examine any deal takes at least two parties. Then they look at the pure upside but never openly discuss the downside, the what happens if side, the how will we deal with succession side, etc.
Then one party hands over his perception of the deal to the legal guys. This is when the mess starts. The legal guy puts in all the clauses that would protect his client. Clauses that were never discussed (but still should be in the agreement). I am not bashing lawyers they serve a good purpose and will look after your interests but when you are getting together in business allowing the lawyers to write the agreement before you have discussed all the issues and resolved that you have a amicable acceptable way of handling them creates perceptions of mistrust on one or other side of the equation. Time spent in the beginning drafting a basic letter of understanding and covering in a mature business manner the pros and cons will aid in the aspect of trust and openess. People are often to pressed to do the deal and dont want to confront these aspects. Thats when later the issues start to come out.

That said there are very succesful businesses that have been built through merger or acquisition or joint eventure. The handicap of many a small business is just the fact that the owner is too independent. Often the small business is built on the technical skill of an individual, but they fail to recognize their blind spots when it comes to other aspects of the business and the business suffers for it. Nobody can do it all and in the tough times ahead this will be a very good route to survival for those that deal with it in a sensible and mature manner and dont leave it to the last minute when under total duress.
 
I had a partner for almost 10 years before he decided to retire and pursue over interests. He was almost 20 years older than me.
He was a great teacher.
He treated me like a son, and always respected any decisions I made.
I was one lucky person to have had a partner like him.
 
Rob, You give some good advice for one to contemplate. If I may, I'd like to add another resource I recently came across and have started to utilize. I don't think they are going by the same name now, but SCORE (Service Corps Of Retired Executives) is a great resource for any small business to check out. One can go to their website to locate a local office and setup an appoint to meet with a counselor to discuss your business or potential business plans. They even have lawyers available for setting up LLC's and legal advice for free.

http://www.score.org
 
Those look good. But as for my 'wood artistry' business, I'm looking to have a better year than last year. (I'm just not going to pay my kids and tell them they got their room and board :rofl: )
 
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