Thursday, September 4, 2008

BizCoach: Start with partnership agreement

My best friends and I want to start a business. We were classmates and now our families socialize regularly. What advice would you give us?

Go to an attorney and draw up a partnership agreement. The partnership agreement will establish the shares of profits (or losses) that each partner takes, their responsibilities, and what happens to the business if one or more partners leave, die or become incapacitated, as well as other important guidelines.

Without a partnership agreement to structure your business relationships from the very beginning, I'm afraid friendships will end and the business will probably suffer, too.

How can I get customers to pay me quickly?

Invoice customers immediately. This is the last thing on many business owners' minds, yet it is essential to maintaining a steady level of working capital. Put the terms for payment on the invoice.

If you want payment within 10 days, print on the invoice "Net Ten Days"; if you want payment within 30 days, indicate that on the invoice.

Also, I do not advocate that small-business owners extend credit to customers. Cash is the lifeblood of any business and you do not have the luxury, or cushion, to supply your lifeblood to anyone else.

Next week: Tips on how and where to cut expenses when revenues shrink.

Investor Report: When Partnerships Fail
Word-of-mouth advertising doesn’t just happen; one must work at it
Exit plan can help entrepreneur avoid seller’s remorse