Struggle with my partner

[ecymosis]

I purchased a 49% stake in a relocted optical. The store was quite profitable at the original location. The 51% of the business is the original owner. He is not involved in the day to day operations. In fact he doesn't even step into the store. The last 30 months have been quite a struggle financially. We recently had a setback. I want to cut salaries and curb spending. I am overpaying a disgruntled employee, that I inherited. She is a wonderful saleperson. When I struggle to get lab bills paid who needs a excelent saleperson who reads the paper most of day. My partner pays himself with two cars, a life insurance policy and a credit card that he spends about $500. per month. That comes to a total of about $2,500. I do pay myself. I informed my partner that we are on hold with a number of vendors. I also told him that I can cut payroll by decreasing hrs. I am willing to cut my salary significantly. Doing the math I can save the business $1635 per week. After six months I can save a total of $39,000. I was totally shocked when he was against the idea. He wants to put more money into the business with no cutbacks. He wants a meeting to figure how to get more people through the door. I ask you people is my idea crazy?

[gemstone]

I purchased a 49% stake in a relocted optical. The store was quite profitable at the original location. The 51% of the business is the original owner. He is not involved in the day to day operations. In fact he doesn't even step into the store. The last 30 months have been quite a struggle financially. We recently had a setback. I want to cut salaries and curb spending. I am overpaying a disgruntled employee, that I inherited. She is a wonderful saleperson. When I struggle to get lab bills paid who needs a excelent saleperson who reads the paper most of day. My partner pays himself with two cars, a life insurance policy and a credit card that he spends about $500. per month. That comes to a total of about $2,500. I do pay myself. I informed my partner that we are on hold with a number of vendors. I also told him that I can cut payroll by decreasing hrs. I am willing to cut my salary significantly. Doing the math I can save the business $1635 per week. After six months I can save a total of $39,000. I was totally shocked when he was against the idea. He wants to put more money into the business with no cutbacks. He wants a meeting to figure how to get more people through the door. I ask you people is my idea crazy?

Can the disgruntle and that will solve your problem. It's your a$$.

[optigrrl]

Hi ecymosis!

It's really hard to answer your question. If you are thinking about cutting back costs then is should be on supurfluous expenditures. No matter what you do you are still faced with the question of how to get more people through the door. Maybe you should hear your partner out if they have any ideas. But, if all they can do is ask you to figure out a strategy then I can assume that you just bought into someone else's retirement plan.

[Specs]

I hate to say but according to your contract your opinion does not matter. A 49% partner has no say. Any and every decision goes the way of the 51% guy due to voting power. When you guys are really ready to bump heads realize your 49% isn't of value to sell either. He doesn't have to buy it from you and nobody else will want it if he doesn't want them. Hate to be the grim reaper, but I just had a friend of mine go through that exactly. He actually paid in for his 49% value of the business which was huge (about 130G's), everything of course valued at a prime value. Upon corporate vote, 51% guy terminated the relationship, he offered my 49% friend $2000. for the value of 49% of the depreciated assets, and said see ya' -get out. After going to 2 different lawyers, opinions confirmed it- take your $2000. and move on, not going to win a thing in a legal fight.
Good luck and be agreeable to "your boss" if you want to stay.
Sorry.

[chip anderson]

Is some of his stock in his wife's or other family member's name? If so make friends with them.

[AngryFish]

If the only difference in the contract you signed is the agreement of who the majority share holder is and all other responsibilities and obligations are equal, you may have an option. Increase your salary, reduce your hours and refuse to sell your share in the business back to him until you get a fair offer. Meanwhile work another job. Make it worth your partners while to let you go. But ask a lawyer whatever you do.

[Specs]

Sorry Angryfish, as soon as he grants himself a raise, Mr. 51% recinds it and maybe even votes to change the bank account to signing priveleges only to be had by majority shareholder. He has no problem with the not selling of the 49% shareholder because he can increase his salary, double, triple whatever it takes to the point where your 49% of the profits of the business is nothing.

[AngryFish]

Point taken. I believe this one is a lost cause.

[snowmonster]

I don't know that I can offer you much advice. I'm fortunate that our business partner (in a 50/50 relationship) really doesn't care what we do. Our business also happens to be growing and not declining though.

If you're having a hard time paying suppliers though, there's a SERIOUS problem. I say hold a meeting with your partner and some employees who also see the problems with the suppliers and maybe that would serve as a wake-up call. He'll have a hard time retaining customers if they have to wait for an account to get off credit hold to get a warranted frame replacement/repair or something like that.

[AngryFish]

http://www.abanet.org/buslaw/newsletter/0011/materials/managingcorps.pdf

Specs, I wanted to run this one by you. Never one to give up easily, I found some interesting information that may be worth a little consideration if your not one to give up easily either. It seams that because of the special vulnerabilities of minority shareholders, some courts broadly interpret misapplication, waste and oppressive or fraudulent behavior in order to come to the aid of the minority shareholder. It is not uncommon for courts to order a minority shareholder buyout if the majority holder fails to act in fairness toward non-controlling shareholders and the court can set the buy out price.

[Specs]

If you can wait it out and spend years in court to maybe get to that point. Then if you get that judgement, tell me how do you actually make them pay and in the meanwhile the business is bled dry. Now time to go back to court to try to enforce the judgement. Legal fees will exceed the business's worth more than likely and you'll be actually laying out that cash to the lawyer. And what if you just flat out lose because you only own 49% and knew it going into it. While its a shame, its just the way it is. Plus remember you're going through this and looking for a new job and at Optician salary wages.

[AngryFish]

Agreed. Lost Cause

[chip anderson]

You could insure your partner and hire a hit man.

[Johns]

If you can wait it out and spend years in court to maybe get to that point. Then if you get that judgement, tell me how do you actually make them pay and in the meanwhile the business is bled dry.

It sounds to me like mr 51% would have more to lose than mr 49% would. He's the one that's taking all the cash out of it, therefore, why kill the golden goose? Faced with legal fees (they'd both have them, and he may have to pay the others if he loses) and the prospect of a business bled dry, he might be ripe for a buyout, or an equitable parting of the business.

Plus, it sounds like the 49% partner is the one that is making the money for mr 51%. He might want to keep him around, just to keep from having to actually do any work.

I'd fight him. If I'm going down, I'm taking the whole thing down with me!

[HarryChiling]

You could insure your partner and hire a hit man.

Chip, that's definately PM advice. :D Unfortunately 49% doesn't mean squat, if he is an absintee owner you may want to buy yourself 2% more in the company or at least 50/50 which will give you the ability to at least argue with the guy. Don't cut your salary especially if he is spending money willy nilly on cars and credit cards.

[Christosfer]

I purchased a 49% stake in a relocted optical. The store was quite profitable at the original location. The 51% of the business is the original owner. He is not involved in the day to day operations. In fact he doesn't even step into the store. The last 30 months have been quite a struggle financially. We recently had a setback. I want to cut salaries and curb spending. I am overpaying a disgruntled employee, that I inherited. She is a wonderful saleperson. When I struggle to get lab bills paid who needs a excelent saleperson who reads the paper most of day. My partner pays himself with two cars, a life insurance policy and a credit card that he spends about $500. per month. That comes to a total of about $2,500. I do pay myself. I informed my partner that we are on hold with a number of vendors. I also told him that I can cut payroll by decreasing hrs. I am willing to cut my salary significantly. Doing the math I can save the business $1635 per week. After six months I can save a total of $39,000. I was totally shocked when he was against the idea. He wants to put more money into the business with no cutbacks. He wants a meeting to figure how to get more people through the door. I ask you people is my idea crazy?

As an Optometrist I would think that you would have no trouble moon lighting at vision barn if you need to. It sounds like you are in a tough spot, you give me good reason to think twice about the idea of a partnership. My suggestion to you would be to pray if your not already. It's never to late to start.
A promotion idea that we have started that you might consider. Send out your newspaper reading cashier to the local businesses. Print up some cards that look like insurance cards that are good for a storewide discount. Managers and owners can give them to their employees like a vision benefit... Free.
Vision Source uses this, it's called the 20/20 Vision Program. I have promoted it to several businesses in our area and they are signing up. Might get you some people in the door. They pay me a spiff on every exam that comes in as a result. That might get your cashier's nose out of the paper.

[rbaker]

Now that you have received the opinions and advice of the "sea lawyers" you might just want to consult a real one. I have a suspicion that you did not have legal representation when you entered this deal. It's like locking the barn door after the horse has escaped but it really is your only hope for a legal exit strategy that might bring you some satisfaction.

[snowmonster]

It sounds to me like mr 51% would have more to lose than mr 49% would. He's the one that's taking all the cash out of it, therefore, why kill the golden goose? Faced with legal fees (they'd both have them, and he may have to pay the others if he loses) and the prospect of a business bled dry, he might be ripe for a buyout, or an equitable parting of the business.

I think Johns is kinda right on this one, but I think a lot of people are arrogant and it becomes a pride thing. So as soon as you mention stuff about legal action to the guy, people get more determined to proove themselves right, no matter how much money it costs them. I've seen it happen with some Ophthalmologists I used to work for.

It's simply amazing how people don't see the big picture.

[cocoisland58]

Now that you have received the opinions and advice of the "sea lawyers" you might just want to consult a real one. I have a suspicion that you did not have legal representation when you entered this deal. It's like locking the barn door after the horse has escaped but it really is your only hope for a legal exit strategy that might bring you some satisfaction.

As I was reading down the posts I was thinking the same thing. How do you buy into such a bad situation? One would think a business attorney, an accountant, and the buyer would have gone over everything with a fine tooth comb before signing anything binding. I almost bought a very small but interesting business a few months ago. It would have been a fairly small investment as investments go but for me not so small. The owners of course wanted to move rather quickly before I lost that initial excitement about it all but I had an attorney and an accountant go over everything and anything possible. Turns out it would have been a fun but unprofitable endeavor so I passed. I would hope that in this case an attorney might find a loophole that would let this poor guy out of this mess.

[Chris Ryser]

Another solution could be making some changes in purchasing hhabit. Less expensive frames and lenses, outting you newspaper reading optician when not busy with customers into the edging lab. Do all your own lens treatments in house from timt to UV and scratch resistant. That should reduce your cost and an extra chunk of money.

[Johns]

That should reduce your cost and an extra chunk of money.

...that can then go to Mr. 51%.


I didn't even notice that Mr 49% is an OD. If he's the "face" of the practice, he might have a bit more leverage than we all realize.

Forget the attorneys, Optiboard'll get you through this. (not):hammer::D

[Specs]

I'm sure 51% would rather not let 49% go, but realize the OD is replaceable. People sell practices, deaths occur, sure the practice may take a dip as people learn the new guy. If the new guy is good, 51% is happy again, and maybe his new guy takes less than the old guy did as a partner. Just a salary. Thats actually what happened to my friend that I mentioned earlier. Replaced by a salaried guy that cost less than he did.

[tmorse]

... you give me good reason to think twice about the idea of a partnership.

Most partnership agreements have a 'shotgun clause' incorporated into the document. Should one partner want to buy the other out at a later date, and offers only "X" dollars to the other partner, the other partner automatically is given the option of declining this offer and also can buy out the first partner out for the SAME amount of dollars that was firstly offered. This effectively precludes one partner offering to buy the other out for an unrealistically lowball figure.

Shareholders on the other hand are usually governed by some sort of Corporation Act, and minority shareholder may have some recourse against majority shareholders. In a Chicago, IL case our very own Canadian Conrad Black recently used his major share position to deplete assets of the company. He was charged at minority shareholder request, and convicted.

So I would suggest a visit to an experienced Corporation lawyer for advice on how to proceed, but ONLY after exhausting all efforts at dialogue with the 51% share holder.:cheers:

[LandLord]

Fire the sleeping sales star. Getting customers in the door is by far the most difficult and important thing that can save the business. Why are sales down? What is your marketing strategy?

[Johns]

... you give me good reason to think twice about the idea of a partnership.

I often think of how fortunate I am to not have a partner. Sure, I might work a little harder, and I shoulder all of the risk, but the lack of stress of knowing I can call my own shots (good or bad) is priceless.

It seems like successful partnerships are the exception, and not the rule. 11 years ago, I had a down payment on my offices (I had two then), and the papers all drawn up to be signed by two partners that wanted to buy me out and take over my practice. They started arguing, and the partnership was dissolved before they could even work a day together. I got to keep the nice downpayment, and I never heard from them again.