Question: A few of my college buddies and I want to start our own consulting business. What do you think of the pros and cons of starting up a business that has more than two partners?
Answer: It depends on a lot of variables. One of the key components in setting up any partnership is whether you complement each other.
Here are some of the questions you should ask yourself (and each other) before entering into any partnership:
How are you going to make final decisions?
How will you assign who has primary responsibly, i.e. for finances, marketing, management, client relationships, etc.?
What about work ethic? Do you have the same philosophies, share the same ideals?
What happens if this changes? You must think about what would happen, down the road, if one of you decided to “smell the flowers,” and the others still wanted to continue working at the same pace. How should the economics change at that point?
Another important question to consider would be your exit strategy something all businesses must consider as they start, oddly enough.
No matter if you have two partners or 20, if you can’t come to terms before you start your business, just think of the conflicts you will encounter after it’s making money!
Q: My business is in a highly competitive industry that’s becoming sophisticated. There are many issues that we have been dealing with independently, but we would like to figure out a way to maximize our clout with regulators and new clients. Are there any merits to setting up a trade association?
A: What do you have to lose? It would seem that having a trade association could only be a benefit to your company and your industry.
The minimum you might achieve is an organization that could put together educational conferences, marketing presentations, public relations, travel packages, etc. If you are in a regulated industry, you may want to consider setting up a lobbying group to deal with those issues.
But as I see it, bonding as a group and sharing information, costs and savings can only be a good thing.
Q: As a small toy manufacturer we have some really big, tough competitors. How do we compete with Hasbro’s “Star Wars” collection or Mattel’s 125 different Barbie dolls?
A: Mass customization. Design your toys/games for the new digitized, have-it-your-way economy of the 21st century.
Next, turn your competitors’ “largeness” against them. As a smaller company, you have the ability to be more flexible.
Do your homework check out how Michael Dell put together his multibillion-dollar computer catalog business from his garage. He did it by adopting (or in his case, reinventing) mass customization to produce and deliver his products and services.
The concept of mass customization could well become the new organizing business principle for the new millennium just like mass production was in the past one. So everything you might have learned in business school about mass production is almost the direct opposite to what you will need to do with mass customization.
In your case, you will need to design products for your customers in a way that fits their individual needs. Obviously, you have the unique ability to use technology as both your development vehicle and your platform, i.e. creating CD-ROMs and online games and toys for kids to play with.
As many of my friends who have younger children tell me, kids are giving up their traditional “toys” for video and computer games earlier and earlier some as early as 8 or 10 years old. So if you don’t get with the technology program, you may be relegated to compete only in the infant to preschool age group.
You’re obviously based in Southern California, so it might be interesting to develop a niche market with young people growing up here. We have a unique ethnic mix of cultures and nationalities, so you could design toys and games for a wide variety of children that could easily be translated around the world.
Video and computer games designed for girls could be another focus. I know that there may be some companies in this area, but I’m sure there is still room for growth.
It’s never easy to compete with Goliath. But we live in a world today that has produced a lot of very successful upstarts. There is no reason why you can’t become one of them.
Q: As our company keeps expanding and we keep adding new employees, I find it is becoming increasingly difficult to bring everyone up to date. And, besides not having the new people on board, the existing staff seems to get bogged down training them. What can we do?
A: Set up an orientation program. It may sound a bit bureaucratic, but you may need a little more structure as your company moves up the food chain.
What you don’t want is to have your new employees starting off eager and enthusiastic, only to lose interest because things appear chaotic. And you must immediately relieve the pressure you’re placing on your existing staff so you don’t lose their productivity.
Having an orientation program doesn’t necessarily mean time away from work. There is a company called Greet Street that doesn’t have an H.R. manager, personnel department or anyone with a title waiting for new employees on their first day of work. What it does have is what they call the “job in a box.”
Everything is waiting for the new staff member desk, phone, computer. That’s the new employee’s first assignment to set herself up. The package also includes a manual. This can help the second phase of orientation work giving the new staff member the chance to learn more about how things get done in the operation.
After that, give new people a two- or three-week period just to get acclimated. I know that’s really hard, particularly because you can use every able-bodied person to do the work you need done. But starting someone off slowly will also keep the rest of the organization intact without burning out the old staff and discouraging the new ones.
Lorraine Spurge is a personal finance advisor, author of “Money Clips: 365 Tips That Will Pay One Day at a Time,” and business news commentator. She can be reached at (818) 705-3740 or by e-mail at [email protected].
