Partnerships! Sometimes my
clients would like to go into business with a friend or relative. It seems so
logical - share the cost and the work load. But partnerships have their
challenges. Starting a business for most is a new and challenging experience. A
partnership can just add another level of stress. There are some partnerships
that do work out, but many don't and some end badly.
Our story this month is about a
gentleman that was in a career transition and wanted to diversify his income by
owning a business and running it in partnership with a relative. There were
several "curve balls" thrown along the way, but our entrepreneur this month was
up for the challenge.
Congratulations Ron, and welcome
to the world of entrepreneurship!
| |
Ron Knight
Five Star
Painting
| |
Ron Knight is a numbers guy. He
has an accounting degree from Northern Illinois University and an MBA from
DePaul. Over his career he held positions as Financial Services Manager,
Controller and Director of Finance for various companies in the greater Chicago
area.
Ron and I met when he attended
our Franchise Expo in the spring of 2011. Two weeks prior to that his employer
had gone through reorganization and Ron found himself without a job. He received
a severance package which included outplace services. His focus was to find a
job, but he also had the itch to explore his entrepreneurial options. His
parents had owned a restaurant so he had the business ownership gene. He also
realized from the experience of his parents that a restaurant was not for
him.
Ron wasn't exactly sure what he
wanted to do. He thought that perhaps he could find a job and his wife would run
the day to day of the business or perhaps he could do something with his brother
who had concerns about being downsized in his job. What he did know is that he
would like to diversify his income so he wouldn't have to rely on all his income
coming from a job. He told me that he wanted to be self-sufficient and have more
control over his future.
Ron is a detail oriented,
analytical leader. He also has good organization skills and is an excellent
communicator. If he was to have a job and run a business, he would be able to
put these skills to good use.
We went through our initial
assessment of his strengths, goals and of course the life he was trying to
create for himself and his family. We also built the business profile to meet
these goals and needs. Initially we focused on four different business models --
retirement and financial planning, drug and wellness testing, a factoring type
of company and a painting business.
After some initial validation,
the factoring company and the painting business started to rise to the top. His
wife's sister and her husband expressed interest in partnering with Ron in his
future venture.
Ron was initially attracted to a
franchise called Interface Financial Group which helps small businesses with
cash flow issues. They purchase a receivable from the company in need of cash at
a discount and collect the full amount from the payee at the end of the 45-60
day payment terms.
Since Ron's sister-in-law,
Rochelle, worked in the credit department of a large company, he thought that
she could utilize her connections with bankers to build this business. Ron
proposed this idea to Rochelle and she had interest.
In conjunction, Ron continued to
explore the painting business franchise. To his surprise, he was impressed by
the business model and the scalability of the business. But after discussions
with the franchisor, he wasn't happy with the territories that were available
near him. He asked me if there were any similar franchises that had better
availability and potential. I made the introduction to two franchises with a
painting model and Ron started his validation with them.
One of the painting franchises
was part of a corporation that owned several franchise brands specializing in
the service sector. Even though corporate had an excellent track record, this
was a newer franchise concept for this company and Ron was not comfortable with
the lack of history for this particular franchise.
The other painting franchise,
called Five Star Painting, Ron found very attractive. Management had years of
franchise painting experience and had designed their business to take advantage
of technology. They put in systems though websites and search engine
optimization to attract clients. Their national call center would answer the
phone inquiries and schedule appointments. Their proprietary software would help
manage the business and provide on site estimates. They also had a lower
franchise fee and graduated royalty fee compared to the initial painting
franchise he had validated. Five Star also offered a second income stream in
holiday decorating around the Christmas season.
Ron, Rochelle and her husband
Steve got involved in validating Five Star Painting. They liked what they
learned. Rochelle was willing to quit her job and run the day-to-day of the
business and do the estimates. They would hire independent painters to do the
painting so both Rochelle and Ron could concentrate on the business side. About
this time, Ron took a part time job with a software start-up company. The pieces
of their plan were starting to fall into place.
But they had not ruled out
Interface Financial Group. Ron, Rochelle and Steve had discussions on the pros,
cons and potential of both businesses. In the end, they decided that Five Star
Painting could be ramped up quicker, had a larger clientele and more
scalability. They decided that the two families would become partners and go in
50-50.
Ron is a big baseball fan.
Although he lives in the Chicago area, he would often come up to my home town,
Milwaukee, to watch his Cubs play. When preparing for this story Ron was telling
me about his progress during the past year and he mentioned that "sometimes life
throws you curve balls." Ron went on to describe some of the unanticipated
events of the past year.
Ron and Rochelle had a learning
curve in hiring the right painting crews. They also learned that dealing with
the public had its challenges. But the biggest surprise came when Rochelle told
Ron that this was not her ideal career and she wanted out.
I always caution clients about
partnerships. Everyone goes into a partnership with great expectations, but most
often, the partnership dissolves and sometimes badly. Fortunately this was not
the case for Ron and Rochelle. Ron cared about Rochelle's welfare, and offered
to buy out the share of her and her husband. Rochelle and Steve accepted.
Ron hired a family friend to run
the business. This person was about 6 months out of college, had sales
experience in insurance and was fluent in both English and Spanish ("A lot
of my painters speak Spanish."). Ron did some of the training and also
sent him for sales and operational training at the franchisor in North Carolina.
The business was doing well during the cold months but when it warmed up he
found that his new manager really struggled with exterior estimates. It turns
out he had some pretty severe personal issues that caused him to be hospitalized
for a couple weeks.
Ron hired a replacement manager
that is still running the business today. He has an extensive amount of
experience in the construction and painting business and the business really
picked up. Ron commented, "Luckily, I have a home-based franchise, so the
level of overhead expenses isn't too bad. I was forced to invest more cash to
keep the business going during the transition between managers. My new
operations manager built the business back up and overall my experience has been
pretty good."
Ron worked through his "curve
balls" and has a stronger business as a result. He is leveraging his
relationship with other Five Star franchisees in the area to share marketing
expenses and painting crews. I asked him about lessons learned, and here is how
he responded:
"- Partnerships are
difficult
- Try not to put all your
eggs in one basket (I'm looking to hire a second person as business ramps
up)
- Hire people that are
subject matter experts"
When I asked him to comment on
his experience and methods that we used to help him find his business, he went
on to say: "Marty provided a lot of insights that were very valuable. He
also provided me with another point of view and a different perspective with
which to look at my decision making processes that allowed me to make more
informed decisions. A lot of this was due to his many years of business
experience and ability to identify many other attributes to consider when faced
with an issue or opportunity. Marty also helped me through many tactical
processes in forming a business such as filing the proper paperwork with
government agencies and even referred me to the attorney that I used who
specializes in franchising."
Formed in 2000, Five Star
Painting Inc has grown to nearly 100 franchises in the USA, Canada, and Brazil.
Customers of a Five Star Painting Franchise receive a Five Star job without a
five star price. As one of the fastest growing franchises in the service
industry Five Star Painting works with industry leaders to deliver business
opportunities to entrepreneurs committed to a high level of customer
service.
If you or a friend or relative
has a need for a paint job and lives in the Northwest Chicago or the northern
suburbs, give Ron a call at 847-239-5385 for a free estimate, or check out his
website at www.fspchicago.com. You too can be on the receiving end of a Five
Star paint job with out the five star price.
Ron's initial intention in going
into business was to accomplish that in partnership with a relative. There were
several "curve balls" that Ron had to address and eventually the partnership
dissolved. Ron responded successfully to these challenges and has a stronger
business today. He is an entrepreneur in my book.
If you're thinking of going into
business with a partner, it can be done successfully. The key is to understand
all the pitfalls or curve balls in advance and have procedures in place to
address them.
| |
