Considering Forming a Partnership

Is a partnership between a cabinetmaker and an installer a good idea? Maybe, and maybe not. December 28, 2014

Question (WOODWEB Member) :
I do custom cabinet installations and finish carpentry. A cabinetmaker colleague that I have recently done some installations for floated the idea of creating a business partnership. We both work in very high-end residential, and are both small operations (one employee each.) The advantage of this situation versus a typical subcontractor agreement would be a greater level of commitment from one another for scheduling and standards. For me, it could also mean a notch higher client base. My colleague, whose business has been very good, says that he wouldn't necessarily be seeking out a partner, but we have a good affinity and mutual levels of integrity/quality in our work, and that this could, of course, increase the business's capacity. I have never partnered with anyone before, either, so I would appreciate words of wisdom or warning from others with parallel experiences.

Forum Responses
(Business and Management Forum)
From contributor M:
I've partnered with other artisans on a project basis so that we were able to take on larger jobs than either of us wanted to handle solo. I think that this kind of flexibility is really useful, but it requires trust. It seems like you're talking about throwing your whole game in with his "permanently"; not so sure I'd be able to do that. Perhaps, being a bit more creative in how you work together would be a useful first step. No one says you have to abide by a typical subcontractor agreement.

From contributor S:
It seems that the common percentage assigned to the installation portion of most work is in the 10-20% range. If this is true, then in a 50/50 partnership, you're going to be working in a realm different then what you're used to. Regardless - partnerships are notorious for failure, but also known to work really well when they work. I'd suggest as an exercise, working with your colleague on a draft of a partnership agreement. It will help you both identify areas that need clarified, and also serve as a starting point for a real agreement if you decide to move forward. For example - what happens if one of you want out? Or one of you becomes disabled and unable to work? Starting a partnership without a detailed agreement would be big time foolish.

From the original questioner:
Of course, we would look at drafting an agreement for a trial period. Though installation may only be 10-20% of the total project costs, it becomes a larger portion of actual labor costs, especially when boxes are largely outsourced to CNC. I would also be bringing in additional projects, and putting their profits into the business.

From contributor L:
Been there and wouldn't do it again. Things change. We work with other shops on jobs fairly often. It also requires a large degree of trust. I can't see any advantage in your partnership. Work together but don't get married.

From contributor C:
Business partners are just like getting married, but worse. My business partner and I lasted less than a year, and bought him back out. Found out he had not notified the state of any business ownership changes (he filed some papers to form a corporation, but didn't notify the state.) so my workmen's comp went back to the new employee rate after my six years of a perfect rating. So it cost me money and my sanity. See what I mean about the marriage similarity? It's human nature to think the other person is not doing enough to make the partnership work. You also think he is taking too much salary for what he is doing. A lot of people have tried it, it's a small percent of them that made it work. I don't recommend it.

From contributor E:
Always retain control of your own destiny and your own finances. No reason you can't work very closely with your colleague on a contract-by-contract basis. The only 50/50 partnership I was involved in started with nothing and worked for years. Then it didn't. I had to buy him out to be rid of him. The "worse than marriage" comment above nails it. There are a thousand reasons a 50/50 partnership (or any partnership) call fall apart and you will fall afoul of at least one of them if you enter a partnership with less than thousands of dollars of legal advice and the big stack of documents it generates. Keep life simple. Do what you do best on a contract-by-contract basis. If that works for ten years, you might want to consider a closer association. Then, continue to reject the entire idea.

From contributor D:
You can split the ownership 50/50, but there should always be someone in charge, say a president/CEO, and the other person would report to them in an appropriate capacity, with each pulling an appropriate salary. If you look at Fortune 1000 companies, I think all are run by one (with a couple of creative exceptions), and most are not majority owned by that same person. Do either of you have what it takes to take the lead and run with it?