Keeping squabblers from each other’s throats may simply be a matter of working out an agreement beforehand.
Robert Derr’s grandfather always warned him: “A partnership is a bad ship to sail in. “If not for his partner and wife, Christine, Robert insists he’d still be sole owner of Hair Craft/Nail Craft in Gilbertsville, Pa. With more than 15 years in the industry, Robert certainly has the experience to continue running the salon on his own. In fact, the hair and nail divisions advertise separately, and their names are generally not run together.
Robert does hair; Christine does nails. Separation of duties is one way the couple has managed to maintain equilibrium at work. Neither steps on the other’s toes. “If she was into hair, I think things would be a different picture,” Robert admits. “I’ve seen twice as many partnerships fail as I’ve seen work. The people have to know what they’re going into, to know in black and white what is expected of them.”
Cindy Fairchild, former co-owner and presently sold owner of Fancy fingers N’ Toes in Tucson, Ariz., agrees that having partners separate duties is one key to successful partnerships. Three years ago her own partnership suffered because she and her partner both tried to be responsible for all aspects of the business. “The only partnerships that I know that are doing well are ones in which the two people have different responsibilities,” says Fairchild.
Sharing duties was doubly difficult for Fairchild and her former partner because the two also did not communicate well. By the time they learned that they were both upset it was too late to approach the subject on a non-emotional level.
“You can’t resolve a problem if you don’t know you have one,” Fairchild explains. “If you keep things inside, problems happen over and over again and in time it really blows up. If we had had a separation of duties and could talk, we might have eliminated 99% of the problems. But by the time anything was verbalized, I got ‘You just want to control things’ from her, and in a way she was right.”
GET IT IN WRITING
The experts agree: Partnerships backed up by written agreements protect everyone. On an operations level, an agreement can help clarify the direction of the company, delineation of duties, how to handle business matters, and what will occur if the partnership ends. Without having it spelled out in black and white, partners risk constant disagreement. The more clearly stated everything is before the business is formed, the less likely there are to be problems down the line.
Paula Gilmore, co-owner of Tips Salon in Foster City, Calif., explains, “It is a big mistake to assume that you don’t need legal protection because your partner is your best friend.”
Cost also shouldn’t deter you from seeking legal counsel. Cost for an attorney drafting an agreement can run $200 to $600, a small price to pay to protect yourself and your business. You can keep costs low by having an attorney set up the agreement and filing the papers yourself.
One important element in a legal agreement is a non-compete clause. Gilmore and partner Stephanie Takahara have agreed that if their partnership is terminated, the person to leave the premises won’t open a salon within a 10-mile radius. “It’s like a prenuptial agreement,” says Gilmore. “You don’t want the marriage – or partnership – to end, but let’s face reality. Many do. You probably spend more time with your partner than your spouse.”
Jeff South, co-owner of Intrigue Salon in Marietta, Ga., emphasizes that a buy-sell agreement is essential to a partnership. This agreement spells out terms for when a person leaves the partnership, or if one dies. The document sets an amount that the exiting or remaining partner will be paid. If both individuals share the salon’s start-up costs, the split is likely to be 50-50. However, if the start-up costs for the partner differed, another agreement will need to be formed.
A partnership is automatically over when one of the partners dies. Even if the deceased partner leaves his or her spouse half the partnership as part of their estate, a new partnership agreement must be written up between the two new parties.
WORKING SIDE BY SIDE
Legal matters aside, working together is still a challenge. However, there are partnerships that work.
“I’m really lucky because my partner and I work together great,” says Gilmore. “We worked and went to shows together for three years before we opened our salon, so we knew each other’s work philosophies, management styles, and work habits.”
South and partner Mario Rueda worked together for about eight years before becoming partners.
“Either one of us could have opened a salon ourselves,” says South, “but it’s financially more stable with two. I’d hate to be running a business alone and have other people --- meaning the employees – take over,” he explains. “They’d argue with you, and there’s no one to back you up. Then the employee leaves, you lose her clientele, and you can’t pay the bills.
Fairchild had also known and worked with her partner for about five years. Though Fairchild knew her partner well enough to think she would be a good partner, Fairchild now knows that a lot more comes into play than just finding someone who is honest and hardworking.
“I was raised in a family that always had small businesses, and my husband has one of his own,” Fairchild explains. “So I knew how hard you have to work to make the business successful. I also knew that it takes two to five years for a business to become profitable. I’m talking about any small business, not just salons. And 95% of salons go out of business within the first five years.