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Choose your business partner – CAREFULLY!

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One of the best pieces of business advice I ever got was “You can’t do a good deal with a bad partner.”Having had many partners over the years, I can say that this statement holds true. So I thought I’d offer some personal experiences I’ve had with partners both good and bad. Finding the Right Business Partner by Robert Kiyosaki.

A new line of business

We’ve been considering expanding our business to include ‘after school’ classes for students as a way to supplement our main program and stench defections to other schools that already provide ‘after school’ classes. We have lost a fair number of good students on this issues, students who were making great progress in their language development, but whose parents didn’t quite understand what we were doing, and how our student development programs differ from the more ‘traditional’ programs.

After school classes
In Taiwan, there are many schools that provide these kinds of services; in fact, the ‘industry’ hires thousands of workers to provide for tens of thousands of students. We already know that this is a viable business. And, if we wish to grow our main program further, it may be something that the market requires us to do. However, none of the partners have the skill set to provide this kind of teaching to students, and we’re already quite busy anyway. Inevitably, this means we are forced to choose between hiring an employee or finding a partner.

Finding a partner
We’ve already investigated the possibility of finding a partner, and we found a person who might be very suitable. Unfortunately, she didn’t have any cash to invest in the business. While investing your labor is, indeed, a well recognized form of investment in many countries, it had repercussions for the person concerned. So she brought in a friend of hers, a self-confessed business woman, who had BIG plans, much bigger than we could afford, much bigger than we imagined, and much bigger than we felt viable in our market area.

Therein lies the problem: in finding one partner, we’d have unwillingly gotten into bed with two partners, one of whom was an unknown entity to us; and one who would certainly have wanted a larger piece of the pie.

Cashflow, cash low and rosy predictions
But that wasn’t the only problem: it is likely that the addition of an extra staff member and partner combined with the additional cost of running a business on life support would have drained our primary business beyond what we could have reasonably handled. We’ve always been quite conservative in our predictions from day #1. In fact, when the school managed to pay a full rent on its first three months in business and pay nominal salaries, too, we were all QUITE surprised. We’d budgeted for six months of full rental payments and expenses, until the business started generating cashflow.

Cash, loans, cashflow: Going, going, gone…
 In Taiwan, over the years, I have seen so many businesses come and go. In fact there are several slots on the main street near where we live that regularly change business. In some examples, the businesses are gone in just two or three months. In one location near here, the first business started out as a baby or children’s clothes store, then it became a woman’s clothing store, then it was empty for a while. Now it is a hair salon.

In other places, I’ve seen supermarkets open and close in less than six months, bakeries come and go, etc.. Perhaps in some cases, the business owners have misunderstood the market. In many situations, though, insufficient provision for cashflow while business is building has been the principle problem. Combine this with overly rosy income projections for the first six months, and you’ve got a recipe for disaster. In some cases, I suspect the initial capital was borrowed from friends, family, banks, etc., and once used, there was nothing to follow up!

It pays to be cautious…
So, choosing a partner who understands your business and your own situation, who accepts the risks of running such a business, and who has the financial wherewithall on their own account (without borrowing the cash) is crucially important.

Have you experience working with unsuitable partners? Or suitable partners? How did you find them? Did you deal with the problems?

Buzz: Never Be Ashamed When You Promote Your Business

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100 1020As many of you know, I’m a TESOL Teacher working and living in Taiwan. But I don’t work in a regular school, I own what’s generally called a supplementary education language school teaching TESOL to children. I’ve done this for many years, and I love the job. I love the challenge, but would appreciate a holiday… Anyway, today’s story!

On the left you can see one of my favorite classes (but shh! don’t tell them that! they might get ‘big’ ideas! and then I’ll have to double their homework!!)

It was many years ago, when I first hit the streets touting my old boss’s business. She was needing advertising and straightforward word of mouth at that to increase enrolments, so we hit the schools with demos and performances, etc. to increase our visibility. But I remember being vaguely embarrassed doing that kind of work… I don’t know why. I think it was ‘beneath me’ in some way.

Recently, I had the ‘opportunity’ to witness other people handing out flyers, and when I looked at them, it was obvious that they hadn’t done this before! They were stiff, unnatural, perhaps trying to get out of doing, and definitely not enjoying it! It took me straight back to the times I used to feel similarly embarrassed! Looking on from the outside still provided me with little insight!

100 1280Today, however, we went to a local school to hand out flyers! And I had to do the same thing! And it was great! We passed out over 100 flyers in twenty minutes! They were flying out of my hands, and they weren’t THAT attractive if you know what I mean! But the fact that we enjoyed ourselves really helped to soothe our self-concsiousness about this.

Then I realized: I had nothing to be ashamed of, nothing could harm me! And it was all good fun! So go ahead! Tell people about your good works, your fun, and your business! Do in good humor! Don’t apologize for doing it and NEVER, EVER be embarrassed! People need to hear your good news… and there is NO ONE better qualified to tell the story than YOU!

We had a great time last Halloween! As we really did go out and show people who we were… some very scary ghosts! Look at the photograph to see if you can see some of our ‘little devils’!

Or ME, as it was today! So, go out and tell the world the great things you do! And if they don’t want to hear, MOVE right on to the next person! Some will want to read or listen to what you want to tell them! But be polite, be sensitive, push when you can, but stop when you sense you’re getting nowhere (sometimes rather quickly!).

And always, always SMILE! Your positive humor, excitement and warmth will radiate out and people will come to you!

What Would You Do If You Lost Your Job?

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Bargaineering recently asked: What Would You Do If You Lost Your Job? from Blueprint for Financial Prosperity

Indeed ’tis a knotty problem for most people. But for me, it’s not so difficult. You see, I have my own business, so if I lost my own job, then I’d have to fire myself. At one point, though, I was considering not hiring myself: I was costing too much for the company.

To explain, our business is a small language school in Taipei. We’ve been around for about 7 years in several guises, but since September 2006 we have experienced a sudden slowdown in our business, due to larger numbers of students exiting the program at the older age levels. Naturally, this wasn’t unexpected, but there was weakness in several other segments that didn’t make up for the exit of so many students.

Result: an unhappy proposition as our expenses remained static, but our income dropped by about 10~15% y-on-y (enough to wipe out our profit margin!). Since then, we’ve acted to minimize our cost structure as much as possible by cutting out everything that wasn’t ESSENTIAL to the operation of the business. Out went food subsidies which was cut to 0%, then we cut out non-essential refunds, and so on; but, eventually, though we had to re-organize our staffing structure. Three staff members were either terminated, asked to reconsider their job with us, or reassigned duties. In fact, we had expected two of them to take their job more seriously or take on a new set of duties than they had, but they chose to quit instead.

At one point, though, I was considering firing myself, because my contribution to the business couldn’t be financially rewarded. I thought this would be a good way to offset the expenses, but I was persuaded out of it, as I was a revenue generator for the school.

Throughout the whole period, it was quite unsettling, but I’m glad that we went through it. I don’t know longer term if our business will survive, but we have learner or relearned the importance of financial goals, as well as professional and business goals. Before that, we weren’t as focused on managing our financial assets as we were on the teaching side of things. Now looking back, all of the partners are aware of how much money we frittered away on non-essentials. Kinds of makes us a little queasy.

But then valuable lessons never come cheap.