Managing my business in partnership

The first business I owned in San Francisco was a gourmet cheese shop, called Cheshire Cheese, located in the Fillmore District. In a previous blog post I shared how my business partner, Michael, and I decided to go into business together and start Cheshire Cheese. Here’s the story of how we managed and expanded our business partnership.

Seize the opportunities

Six months after we opened Cheshire Cheese, the retail space next door became available for lease and the primary lessee offered us the master lease. (He also gave us his Pacific Heights mailing list and all his demographic studies on the neighborhood!) We discovered that our sublease was already 75% of the master lease so we jumped at the chance to take over the entire lease. We successfully negotiated a new 10-year lease with the building owner. Now we could double our size with the security of a long-term lease.

With limited capital to cover the expansion, Michael and I created a new partnership. We found two women who could bring new strengths and additional capital to the business. Tara was a graphic designer and display expert and Lynn was experienced with HR and motivating employees.

With the new next-door location, we added a small café and expanded our identity. Cheshire Cheese became Cheshire Cheese & Mad Hatter Tea. With the infusion of additional capital, we could now afford to hire more part-time employees.

Communicate openly

We were now four owners who each brought different skills-sets and personalities to the business. We had our differences but we were in agreement where it mattered most: our vision for the business, the impact we wanted to have in the community and, most importantly, how we would manage the business together.

We decided on a consensus-driven approach to management. (An early philosophical decision was to continue only offering vegetarian items and to not expand into wine sales.) We created a written agreement that reflected our values and our equal ownership.

We held “official” business meetings every Wednesday after the store closed. We used this time to plan work schedules, discuss personnel, review financial statements, prepare for holiday celebrations, and eat all the free samples that new vendors would drop off for us to taste. Transparency and honesty was essential for us, so we made sure we talked about money — how we were doing both by the day, the month and based on our annual budget.

Build on lessons learned

Every day was a team learning experience. We learned about the subtleties of food products, how to serve customers well, how to make strong relationships with vendors, and how to follow health department codes. Through a lot of trial and error, we were also getting better at running the business profitably, managing it jointly, and working through management and personnel challenges along the way. The best lessons learned were from hands-on experience.

Plan our exit

After running the business together for five years, two of the partners wanted to move on – one to another business and the other to go back to school. We all decided we would sell the business. To get ready to sell, we had to learn how to value our business as an asset, organize our internal systems, leverage our long-term lease, and negotiate with potential buyers. After several months of planning and negotiation, we successfully sold the business to new owners! (Cheshire Cheese & Mad Hatter Tea continued to operate for 15 more years.)

Business partnership means attending to both the business and the relationship

Like a business with one owner, a business with multiple owners must be based on a viable business concept and a solid plan for marketing, money and management. Unlike a business with just one owner, co-owners must be constantly attuned to the needs of both the business and the owner relationship(s).

Starting off, Michael, Tara, Lynn and I were aware of the qualities that each of us brought to the business – our personalities, passions, purpose, work styles and areas of expertise. Once we were in business together, we had to pay attention to the dynamics between us — how well our individual strengths or weaknesses meshed, and how well we communicated and made decisions together. Our written partnership agreement was key — both as a guide for managing the business and as a road map for how we would approach our business exit.

Owning a business with others took a lot of work! But it was also incredibly rewarding. With business partners, we didn’t have to tackle business challenges alone and we all got to share in the business’ success.

Are you starting a business in partnership or already managing a business in partnership? At Paul Terry & Associates we help both new and established business partners understand key business issues and how to work best together. We help co-owners define roles, address key financial issues and minimize areas of conflict. We also help business owners write partnership agreements and create business action plans so that they can move forward with clarity.

My first business partnership

The first business I owned in San Francisco was a retail food business. It was a crash course in how to launch a small business and what it takes to start a business partnership.

Behind the counter at Cheshire Cheese

Know your business partner

My business partner, Michael, and I were good friends before we ever thought to go into business together. We lived in a house with six other people and spent a lot of time in the kitchen. We enjoyed cooking big meals and feeding the rest of the house.

At the time, Michael co-owned a small manufacturing business. As we became friends, I volunteered to help in his business. It was soon clear that we had complementary work styles and had a similar approach to business management. We both saw small business as a vehicle to the principle of “right livelihood” and shared a collaborative approach to decision-making. It didn’t take long before we connected on a common business idea and decided to start a food retail business together.

Start with a good foundation

By the time we agreed to go into business together, we had a solid foundation for a business partnership. Michael had already started a business from scratch and had the technical and computer skills essential for smooth business operation. I had been to business school and had helped other friends start businesses. But what was most important was that:

We liked and trusted each other,
We knew we could work well together,
We had complementary skills,
We were both committed to working hard, planning ahead and taking on the risk, and
We shared a passion… for gourmet food.

Agree on a viable business model

Our first idea was to start a catering business, making and delivering gourmet lunches to corporate offices. We thought we could use our home kitchen to keep it simple and lower costs. But we quickly learned that making food in a home kitchen wouldn’t be legal. It also couldn’t easily scale.

We then researched taking over an existing restaurant. We found a restaurant that we could acquire. We researched the legalities related to using the kitchen, building out the space, and hiring staff. But the size and complexity of the restaurant was going to require more capital than we had or could raise.
Given our skills, timeline and budget, we decided to compromise and start a gourmet deli.

Do the shoe leather research – street by street

We scouted several commercial strips in the city looking for a location with good foot traffic and reasonable rent. We pounded the pavement on Haight Street, Potrero Hill, West Portal, Noe Valley and Upper Fillmore. Finally, we found an available narrow storefront on Fillmore Street. It was an old laundromat available for sub-lease from the tenant next door, a tennis racket repair shop.

The space was the right price and we negotiated a fair lease. There was a hospital nearby and many new retailers moving into the neighborhood. But now we had another problem – competition! There was already an established deli right across the street. So we pivoted to focus on cheese. We signed the sub-lease and named our new gourmet cheese shop Cheshire Cheese. We were off and running!

Share the load

We spent the next six weeks building out the storefront. It was a community effort. While we focused on legalities and plans, we recruited friends to help with carpentry, plumbing, interior design and graphics. We figured out how to share responsibility for the business, each taking charge of certain aspects given our interests and skills.

Our partnership success

The success of our partnership and, I believe, any business partnership, was based on:

A shared passion and common purpose
Compatible personalities and work styles
Complementary skill sets and areas of business expertise
Good communication and joint decision-making, and
A solid plan for how to market and manage the business… and make it work financially!

My partnership with Michael started with Cheshire Cheese and continued on into two other businesses. This hands-on business partnership experience continues to inform my consulting work today.

Owning a business with others can be an incredibly rewarding experience — but to work well it must be based on a solid foundation and good planning. Are you starting a business with others? Check out these three important steps when considering a business partnership or joint venture.

At Paul Terry & Associates we help both new and established business partners understand and assess what they each bring to the partnership and how they work together. We focus on partners’ expectations, strengths and weaknesses. We help define roles, address key issues and minimize areas of conflict. And then, we help create a written agreement and a plan for how to move forward together.

Starting a business partnership

Starting your own small business can be a leap of faith. Starting a business with others can be an even bigger leap. How can you be sure that your business partner(s) will be the right fit – with you and the needs of the business?

First, you have to ask a lot of questions – both of yourself and the other person. You need to understand what you each bring to the business, how you will work together, and how you will handle the challenges.

When our clients start a business in partnership or create a joint venture, we suggest a three-step process:

STEP ONE: Self-assessment

Before getting deep into conversations with a potential business partner about the details of the business relationship, each person should ask themselves some initial questions:

Why do I want to do this business?
What is my work style and my strengths and weaknesses?
What are my goals for the business?
What is my level of commitment to the business?
What roles do I really want in the business?
What are my expectations from a partner?

STEP TWO: Dialogue

After each person has a better idea of what they want and what they could bring to the partnership or joint venture, they need to sit down together to discuss mutual expectations. By talking it out, it will soon be clear if this could be a good business relationship.

Do you share similar values and a similar approach to business ownership?
Do you trust each other?
How will your individual qualities and skills work together?
In what areas do you agree or disagree?

A strong business partnership or joint venture should have:

Good chemistry

You and your business partner must actually like each other! You will be making many important decisions together. A foundation of mutual appreciation and respect is essential to get through tough times and make being in business a lot more fun.

Clear communication

You both/all need to be comfortable and willing to talk with each other regularly. You need to be able to share opinions and feelings honestly and deal with them promptly. You also need a framework for making important decisions and a process for how to deal with conflict.

Benefits for all

You each must be contributing something unique to the relationship – such as specific skills, an area of expertise, or a management style that will complement the other partner(s). Each person should bring something critical to the business, such as financial resources, marketing expertise or important connections. And both you and your partner(s) should feel you are gaining something from the partnership to make it worthwhile.

STEP THREE: An agreement in writing

After going through the self-assessment and dialogue with a potential partner, you may discover that a partnership is not the best business relationship for you or the business. Great discovery! Maybe one person would be better as an employee/contractor for the business instead of a co-owner. Or, there is someone else out there who would make a better partner.

If the process thus far makes it clear that you still want to proceed as partners, a written agreement (signed by both/all partners) is critical. It should include specifics related to roles and responsibilities, ownership percentages, compensation, decision-making and conflict resolution. The agreement should also include a process for reviewing, amending and exiting the agreement.

Take the time necessary to figure out that you and the other person(s) are the right match and you all have what it takes to start the business together. Then put it in writing! This solid foundation is essential for any business partnership.

At Paul Terry & Associates we help both new and established business partnerships and joint ventures. We focus on clarifying expectations, defining roles, addressing key issues and resolving areas of conflict. We help business partners create written agreements and action plans for how to move forward together.