New Buisness partnership advice needed

[JohnnyD]

Best advice would be to consult a lawyer. A few hundred dollars now to save you hours of your time and heartache later.

Some informal suggestions as options to consider researching further (maybe to ask the lawyer):
-Get all agreements in writing in the form of a formal contract
-Consider forming an LLC with the woman
-Consider contracting with her as a consultant, where she pays you a fee plus XX percent of profits

Quite frankly, I would never allow any sort of "informal partnership" if I'm making an investment of any type(time, knowledge and experience would your investment - and a very valuable one). Been burnt far too many times in my business and some people that come off as the nicest people in person can turn out to be the biggest scumbags when it gets to money.

Make sure you have a goal. Working and teaching her without one is setting you up for let down.

She is interested in maybe forming a separate mushroom business with me in the future. For now she wants to do a some what informal partnership. Ill supply free labor and knowledge and she will supply the space, capital and her distribution network. Then we'd spilt the profits .

I would remove any "for now" type of mentalities. "For now" is right next to "Good enough" in my book and to me is a mindset that you're accepting that the situation is not good enough and will have to be changed in the future - why not make the necessary adjustments right away? Begin the working relationship with a solid, well-defined foundation and build from there.

Unfortunately in today's business world, a person's word with a handshake means nothing. Cover your rear and talk with a lawyer.

[cheferson]

Thanks! Great advice! That's kind of what I had been thinking. Im very green on the business end so any and all advice is appreciated! Any others?

[zacs]

It sounds like a good idea, and I can understand not wanting to get too bogged down with legal nonsense, and on the other-hand, wanting to cover your a$$ too.

In my opinion, the big question is... how are you going to determine "profit."

Profit = Sell Price - Cost.

So how do you determine cost?

Cost of Materials... easy enough.
Labor.... you say your labor is free. So you don't calculate it into the COG? That isn't really fair to you and isn't what I would call a partnership. If you don't calculate it into the cost, then basically it gets added into profit and she just got half your wages. But I guess if that is what’s in it for her then so be it.
Overhead... this is where things get tricky... consider cost of using the space, electricity, insurance, water, gas/oil, etc... Then there is other stuff like taxes, depreciation and whatnot, but I am not an accountant, i just have some business experience.

What I know is that cost is complicated to determine, and you want to make sure this is ironed out before you start, so that when you go to market and sell $100 worth of mushrooms, she does not come back and say profit was $2, so here is your buck....

Personally i can't stand dealing with lawyers. If this is someone you really feel like you can trust, then I would just sit with her and try to work out all of the details & expectations ahead of time. I would not hold any punches & be as completely direct as possible. If you are thinking something, better to just get it out in the open and discuss than to beat around the bush. Once you are both on the same page, get in the dark and start growing shrooms.

That is my opinion - fwiw

[cheferson]

Good point on what will determine what the profit is. I don't mind the labor part so much as she is supplying the funding, insurance , space, etc that would be impossible for me. PLus she alread has the brick and mortar and distribution all set up . SHe even told me to talk to a lawyer too . I do get a good vibe from here , but as other have said best to cover your ass on all bases.

[zacs]

Originally Posted by cheferson

...I don't mind the labor part so much as she is supplying the funding, insurance , space, etc that would be impossible for me.....

Don't forget, that all of that is getting covered in the Cost ( in theory). So everything she puts in comes right out (agin, in theory).

She is also building HER brand I assume? That has significant value that is very difficult put #s to.

Don't sell yourself short.

And don't forget your exit strategy.

[BigFish]

If you are not careful she may treat you like a mushroom.....keep you in the dark and feed you lots of s-h-i-t! I don't like the smell of it Chef....she has all the money invested....what does..."split the profits" mean?? 50/50??? 60/40??? 70/30??? See a lawyer if you like......I would just plain want to be paid for my time......keep all the info to yourself.

[cheferson]

I hear ya BF, but the alternative is working for mousilini , getting the shaft daily, nit picked , for chump change and 24 hours a week now , and 32 in the summer . Yey!!! NOT!

[Nebe]

After some thought, I would say that if i were in your shoes, i would say partner up or nothing... by her saying she might want to do something down the road, is pretty much telling you that she wants to keep her options open with you, but get everything out of you that she can. What is between your ears is worth a lot to her and it is worth it for her to commit something to you.. Right now, she is giving you nothing really.. As zac said, what are profits? she can say that she is operating at a loss for years and you will get nothing. If she agrees to 50% of gross sales, then OK.. she is willing to eat the loss and you will walk with some $$$

[afterhours]

a very wealthy man told me many years ago- partners are for dancing...

[cheferson]

But no partner means , this goes on the back burner for me for a few years until I have the money . Mean while she is building her mushroom business regardless of what I do , while Im still waiting....

[Nebe]

all these guys are posing very valid points.

is she single?

[Raven]

all sound advice from JD

people many times learn the HARD way not to
ever do (again) what your proposing to do.
so my point is that your relationship professionally
has to be ROCK solid.

that being said..........

rather than going into it Blind ....or based on wishful thinking
you need to get your expectations actually heard and recorded
so that ALL cards are out on the table.leave none unturned!

I would discuss scenario's with her that covers things like
Ultimate success... or failure and EXACTLY what "each other's"
responsibilities (expectations) ARE ...where you'd hope to be in 5 years (very important)
and how long she actually wants to be committed to the shroom project.

[cheferson]

She has just started the mushroom aspect of her operation , it has had lots of great feed back and interest . So this is kind of still the test phase .She already has a successful microgreens operation going. This will be to supplement the microgreens . She is at this farm for the haul, she plans to die there . Her goal to make everything worth while and to benefit is to eventually gross 1 mil + .

Thanks Raven