While
most of the reader accounts we publish here concern government
mismanagement, we occasionally publish a story taken from the private
business world. Our blog today is such an account; it is highly
edited to pass muster with our attorneys. For that we apologize to
the gentleman who sent the information, but we believe it still gets
the point across.
From
a reader:
I
have been in the counter top business for 20 years, having always
worked for others until I had the opportunity to go into business for
myself with a partner whom I'll identify simply as BAD. He contacted
me about forming a partnership. It seemed simple: I had the knowledge
and he had the money. Originally, I assumed this was a 50-50
arrangement, but after I quit my job he tried to negotiate a 70-30
split. I finally managed to get a 60-40 split. He claimed he had the
business experience, so he wanted a controlling interest. I agreed
simply because I had already quit my job. BAD also made me sign a
non-complete agreement so that I couldn't quit. This was a huge
mistake on my part. Also, we agreed that he would be a silent partner
since builders with whom we did business would not buy from us if
they knew a partner was a competitor.
We
then began “Counter Top Gallery,” and almost immediately BAD
began to tell others he was an owner in the business. I'm guessing it
was due mainly to his ego. We were immediately successful since my
contacts brought in plenty of work. In a year's time, BAD said we
needed to move to a larger location due to this growth, but I soon
realized his true intent was to add cabinet manufacture to the
counter top business. He placed an ad in the local newspaper naming
himself as an owner, an ad of which I knew nothing.
This
became a huge problem for me since much of our work came from
builders who competed directly with BAD. I soon learned that he
wanted the cabinet shop to be run by a family member and that I would
receive no share of the profits. Almost immediately, regular
customers who were builders began to place orders elsewhere, and we
quickly started to lose vital business. Sales dropped approximately
70% in the next year.
During
this time frame, I was both 40% owner and employed as the shop
manager. My wife was hired to run the office, but BAD began to
micromanage and commented on almost every aspect of her job
performance. Needless to say, she found this very upset making. With
working conditions and business decline, my situation became
untenable. I decided to offer to buy BAD out. He agreed if I would
pay him 250K. We had borrowed only 100K to finance the business
originally, so I then asked if he would purchase my 40% share. He
replied that my 40% was worth nothing; yet his 60% was worth 250K? I
informed BAD that I could start my own business for 100K, and my
troubles really began...
We'll
have Part II of our reader's story tomorrow unless our promised
breaking news has finally developed. In that case, we'll run Part II
on Wednesday. We hope it will serve as a cautionary tale to all those
who enter partnerships with an unknown entity.
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