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HOW TO RUN A CAFE WITH BUSINESS PARTNER
Running a cafe is not an easy task. There are several ways to run a cafe, via franchise, single owner operating, under a management or finding yourself a business pattern that can either operate the cafe with you or run as what we call partner operator help you with the day-to-day tasks and also very popular a couple (married) partnership.
We have been supplying specialty coffee and providing support to over 50 cafes during the last 7 years and 5 of these 50 were our own enterprise. If you are thinking about opening a cafe with a partner or getting yourself a partner to operate your business, read through this article before doing anything, as we are pretty sure it will add tremendous value to you.
Having a business partner is like entering into a relationship. At the beginning every is great, love and excitements, emotions most of the time prevail over the rational and then in time, the problems are beginning to emerge and if both parties are not able to manage correctly, the partnership can end right quickly and somethings things can get real ugly.
The more work and rational thoughts is putted before starting a partnership, the higher is the likelihood of success.
Start thinking about partnership by challenging yourself with the following questions:
- Are you trying to help your family or friend just because they are nice people and you care about them? It is very common friends or family starting a business partnership, and it is also very common that such as partnership to turn out to be a disaster. If you thinking about making your friend of life a partner or a family member just to help them, think twice.
- Have you worked with this person before? If you are thinking of making partner a person that becomes your friend from the time you both have worked together and you have proven to have a combined strength with this person, then your partnership is likely to work better.
- Are you choosing a partner that complements your skills or a partner that his or her skills an ability are exactly the same of yours? There is no wrong or right on this, however, our suggestion is if you are choosing to operate together with your partner, your are better off having different skills and abilities altogether so the combined strength leverages the operation and the overall strategy of the business. If you are thinking about NOT operating the business, then you may want to consider having someone with your abilities and skills to be your copy inside the business.
- Do your responsibilities and skills overlaps of your proposed business partner? if yes, then you better of reconsider, because Trust is one of the key element of a successful partnership.
- Do you a Partnership Agreement or the Unit holder Agreement if the business is held under a trust? ok this is a MUST and it needs to be done prior the commencement of the partnership, doesn’t matter if your partner is your friend, family or wife, without rules the it won’t work. Ensure getting an attorney to assist and ensure both parties are legally bound. Partnership agreements or Unit holder Agreement for a business before opening the business or hiring the partner, this is a legal document that protects and describes all the terms of the partnership.
The key elements of a successful business partnership or unit holder agreement are:
Operation of the Business
In this part the partners need to set the governance regarding the hours of the business, how it will be operated weekends and public holidays, schedule of each of directors during the week and load of hours.
Entitlements and duties of each partner
What are the duties and responsibilities of each partner, what is the percentage of profit each partner will receive, how often this apportion should be paid off (weekly, monthly, quarterly), this is a question to be discussed with the accountant.
Reinvestment in the business
Reinvesting in the business is essential part of growth, what are the rules regarding investing the profits or part of the profits in the business? What is the percentage? What are the priorities? Is there a budget for marketing?
Each partner or unit holders discretions
What is the authority of each business partner? Remember that if you are in a partnership entity you are equally liable for any decision made by your business partner. Terms such as all unit holders/partners must primarily receive the agreement of all partners or directors or unit holders are strong recommended. You can also setup a ceiling for purchases so you don’t have to micro-manage the person, say for instance “Purchases above $500, all unit holders/partners of this trust or partnership must receive 100% consensus from all directors of partners of the Partnership/Company or Trust.
Death of illness
What happen in the event of a death or illness of one of unit holder, partner or director of the entity? setup the terms in this document. You can go with something like: all portions belong to this unit holder or partnership or director shall be for paying off creditors, distributing any remaining asset to the partners or shareholders and then dissolving the business by solely discretion of the remaining director, unit trust or partner. The remaining unit holder or director or partner of the entity must pay the residual amount to the direct beneficiary of the wind-up party. (We recommend you seeking legal advice).
Sale of the Business and Exit Terms
What happen if one of the partner/unit holder or director decided to sell their portion of the business? The partners, unit trust or director must meet some requirements:
- The party which intends to sell must offer the portion of the business to the remaining partner/unit holder at a reasonable market price.
- If the party that is offered is not financial viable to purchase it from the departing party, then the departing partner/unit holder has the option to purchase the other party as long as he or she is financial viable.
- In the event of, none of partner/unit holders are financial viable to take over vendor’s party, then the party that initially intended to departure from the business can only departure once the all business is sold in the market.
- In the event, one unit holder succeeds in purchasing the other unit holder’s units, the unit holder departing must ensure all liabilities of the business is fully paid at the settlement day by signing a statutory declaration.
- In the event, one unit holder succeeds in purchasing the other unit holder’s units, the unit holder departing must immediately resign from the position of Director if it is a company or dissolve the partnership if a partnership.
Execution of the Agreement by PARTNERS OR UNIT HOLDERS in accordance with the provision of section 127 of the Corporation Act 2001(Cth):
Signed, sealed and delivered by
Partner 2/Unit holder/Director
Now that all partners or unit holders must to be legally covered.
lets see what are the key cultural elements that business with successful long term partnership has:
For a partnership to be successful each partner needs to feel a sense of support and optimism about the collaboration. When partnerships are supportive they are infused with hope. What sustains motivation is the belief that with partnership things can only get better.
When people feel supported in a partnership they become inspired to more clearly visualise the process of achieving the goal. Therefore, it is essential the partnership be grounded in an unwavering belief in the integrity of the goals and values of the desired purpose.
Each member in a partnership must see the reward involved in coming together. In successful partnerships rewards are based solely on each partner’s worth and significance to the bigger picture.
There is nothing that more deeply inspires continued motivation than to make another person shine in their own importance and contribution.
Successful partnerships require partners who are consistently attuned to what is happening within and outside of the relationship, and the possible impacts on the partnership. All members pay attention with an open mind. They set aside preconceived notions about the other partners and see each person for who they are and for what they bring to the relationship. Great partnerships enjoy the element of being surprised by the other members’ and their achievements.
Solid partnership’s respect that constant intervention will block their process and slow progress towards their goals. A certain amount of openness and personal freedom is what makes these teams rise to the top in business. These partnerships aren’t locked into things being fixed in any certain way.
As we mentioned before, even if you’re a dog person, every successful partnership needs cats.
Both partners must to have common long term goals for the business, so both have to be pointing in the same direction for the relationship to work.
Trust comes with time and a pattern of actions and not with world. This is why is so important to have previews co-existence with the person you are patterning with. According to Howard business review, trust is the social glue that holds business relationships together. But, how do managers decide whether to trust a potential partner outside their business? And how does culture influence this decision-making process? To answer these questions, the authors interviewed 82 managers from 33 different national cultures. And they found variations across cultures. For examples, managers from Western cultures said they generally assumed a potential new business partner would be trustworthy while those in East Asian cultures explained they carefully assess the competency of the potential partner. The variation is associated with two cultural factors: first, how much people are willing to trust strangers in everyday social interactions; second, the extent to which there is monitoring of social behaviour and consequences for being caught violating social norms, which is often referred to as “cultural tightness-looseness. Overall, if you cannot trust on people, you better off not doing any partnership at all.
An effective communication as part of the overall culture of the business has extreme Importance for the long term trust between not only partners but also among employees. Studies says that in Business Organisation, effective communication helps wiht:
- Efficient and Smooth Running of an Enterprise
- Proper Planning and Coordination
- For Higher Productivity at Minimum Cost
- Morale Building
- Democratic Management:
- Binds you, your business partner and your employees together
- Basis of Decision Making,
- Morale Building
For the full article about the effectiveness of communication, click here.
Overall a partnership can be a great input for the business, as long as both partners are lined up with the best interest of the business in the first place. Hence, follow this guideline and ensure having a very detailed agreement between the partners to ensure a great partnership and a smooth exit of any partners at any time with minimum consequences for either the business or for each of the patterns.