Small Business Plan

My Business partner and I have had our business for approx. 3 years, she is planning on retiring within the next year. What should I be doing to help with the transition? Wahoo, NE

It really depends on what you mean by transition. If you mean that your partner wants to sell their ownership interest in the business to you, then a business valuation may be necessary. This would allow you to determine the reasonable value of the business allowing both of you to assess a fair and equitable price for the “buyout”. If you are more concerned with the transitioning of the business operationally, it really depends on the role of the retiree within the small business. Let’s assume the partner retiring has an active role within the business and the business’s past success can be somewhat attributed to this person. If that is the case, I would highly recommend comprising a specific list of duties and responsibilities of this person. You as the remaining business owner are trying to determine how “key” is the exiting partner. Identifying the skills associated with the exiting partner’s duties is essential. This will help with comprising a job description and specifically identifying traits that are required for her replacement. This can be a challenge especially when, like most partners, the person retiring is performing multiple duties within multiple different areas. You as the remaining business owner must identify the important duties and may even have to separate duties into different jobs. Essentially you want to create a system for on boarding, but first the owner needs to identify what are the job’s essential responsibilities. What we don’t want to happen is that this person leaves and the business falls apart.

What is the difference between an LLC and a Corporation? Omaha, NE

Quite simply it’s the shares of ownership. A corporation allows the business owner to separate the business into shares for purposes of valuation, equity ownership, or investors. If your business may require outside investors who in turn require an equity stake into your business, a corporation allows for this legal transaction. A limited liability company (LLC) allows for the separation of liability but, according to the State of Nebraska, does not legally allow the owner to sell shares. Both provide an avenue to creating separate entities which in turn separate your personal assets to from the assets of the business. Both can be filed through to Nebraska Secretary of State, but the determination of which classification works truly depends on the purpose and primary aim of your business. I would also recommend discussing this with an attorney since a Corporation has specific requirements concerning meetings, directors, and by-laws.

I have been selling my product to family and friends and they have recommended turning it into a business, what is my first step? Lincoln, NE

Your first step is to sign them up as investors. Seriously. A good product does not translate into a good business. I can make a better hamburger than McDonalds, but that does not mean I can create a system that turns that hamburger into a successful business. Your second step is to take pause and evaluate, family and friends are not your customers. Customers are your customers! I would highly suggest developing customers before starting any business. Right now, you are assuming since your friends and family like your product, then customers will also buy your product. That is a dangerous assumption. There is a large, gaping hole between friends and family liking you product and customers buying it and it is called customer development. Who specifically are your customers? Are they exactly like your friends and family? If not, then you are listening to the wrong people. If customers are like your friends and family, then you should to talking to similar people, but definitely not directly related to you. Would strangers say similar things about your product? If so, how many? This is all information you should be listening, recording and considering, but by all means NOT starting a business. Friends and family care about you and most likely are saying what you want to hear about your product. You should be steadfast to defunct those compliments toward your product and proving them wrong. If they are right, that is wonderful, but only after you have proven their assumptions to be correct. I know it sounds unconventional, but it is the best thing for you and possibly your future business.

 

Zack Zimmerman is the Associate Director of the Nebraska Business Development Center located at Southeast Community College’s Entrepreneurship Center in Lincoln, Nebraska. The NBDC is a State and Federally funded agency dedicated to assisting small business in Nebraska. If you have a question for Zack please contact him at [email protected].