Five Star Painting - Ron Knight

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.