Help! Go solo or join with a business partner? Jewelry Business Opportunity

[lifejoy]

Hello!

Here's the situation:

I have an education that allows me to work as a Librarian, but my passion is to work as a jeweller in jewelry sales. High end, mostly. I have a few years experience doing this, and I've done some gemmology training. I moved to a new city and didn't love my options of workplaces there... so I decided to start my own small jewelry business. I found some wholesale companies to work with, made a website, and sought out a goldsmith. When I found a local goldsmith he was VERY intrigued to learn of my venture. He has had an eye toward expansion and is interested in partnering with me.

His situation:

He's been working as a goldsmith for about 10 years, he has a thriving business and more work than he can handle. He does the goldsmithing for nearly everyone in our small city (including three other jewelry stores). His is an at-home business. He has a nice shop front set up where most people would have their garage. It's no-frills but beautiful and functional. He does VERY good work. He is interested in partnering with me and one day expanding to a new location. Seeing as how it's an at-home business, he has limitations on the number of customers he can have in the shop (10 per day). It has room to grow but eventually it would have to expand to a new location. It would be very exciting to partner with him.

The problem:

We've had a number of meetings but we're not sure how to proceed. We have similar visions for the kind of jewelry store we'd like to set up, but how to get there? It seems prudent that I would work with him at his at-home business first, but how to do this?

a) as a pure employee (but that sets up an employee/boss relationship which is not ideal if we eventually partner as equals)
b) as an independent contractor (some kind of commission set-up, or perhaps I get 50% of any profits that are over and above his monthly average, proving my value)
c) I keep doing my own business and join him when he's ready to move to a new location with a partner there

Ack! It's making my head go crazy thinking of all the options. Some days I just want to throw my hands up and say to heck with it all! I'm a bit in over my head. I could really use some guidance.

It's a very cool opportunity because I'm impressed with his goldsmithing skills and also he is VERY connected in the industry. Over the past 10 years he has figured out all of the stuff that I would have to figure out if I continue going on my own. He has very kindly said that he would be happy to help me in any way he can regardless of whether or not we partner up. One worry is that maybe he's just looking for someone to help with the capital contribution... but I don't think that's it. I'd be able to contribute sales experience, social media and web design experience, and I've got passion for the industry that you can't teach any regular Joe. I think we could be a really fierce team but it is scary to think of partnering up.

Ok the plot thickens: I have a toddler and only 2 days of childcare per week. I would DEFINITELY need to get her in daycare before we did anything crazy.
Also: my husband makes around $20-30k a month so I am extremely fortunate to be able to take some careful financial risks. In other words, if these business plans go bust I'm not totally screwed (probably).

If I go it alone, I have control over my schedule and decisions and EVERYTHING. But I lack a lot of know-how and experience and it would be the hard way to learn.
If I partner, I have more riding on it, less control, but a lot more knowledge and experience on board. I am not as experienced as the goldsmith so I think it's likely I would default into a sub-role, deferring to his experience etc. Hard to admit but I think it's true.

Whew. Sorry this is so long. There are so many aspects to this. Please let me know if you have any questions and if anyone can weigh in and give me some guidance I would really appreciate it! I feel like I can go solo any old time, but the opportunity to partner is the here and now. At the same time, if I go solo now... 10 years from now I will have figured my shit out (probably! hopefully!) and would also have maintained the ability to have decent balance in my life, focus on family, etc etc etc. I want to have another kid one day so that throws a fun wrench into things as well. Gah!

Ok mustachians. I have always been impressed with the intelligence and wisdom of the users on this forum. Please share some with me <33333 Thanks in advance!

[lifejoy]

TL;DR-

I started a jewelry business. A goldsmith with a thriving business is interested in partnering with me. What do you think?

a) go solo
b) go solo and also collaborate with goldsmith
c) plan to partner, but scrap solo business and work as an employee, get to know goldsmith and his business, help to grow it etc.
d) partner right from the get-go (no idea how this would be set up)

[CNM]

Depending on how well you know the goldsmith (is he reliable? friendly? a hard worker? someone you can trust?), a partnership doesn't sound like a bad idea.  You don't have to have a 50/50 partnership.  I'd suggest that you retain a controlling share and, of course, spell everything out in your articles of organization and operating agreement.

[Metalcat]

Be very very very very cautious entering into a business partnership like this. It's a lot like entering into a marriage, except that your relationship will revolve around money.

You will have to agree on every single little ridiculous thing, every dollar spent, every vision for the future, etc, etc.

Could he not just sell his jewelry in your store? Unless you are looking to only sell his jewelry/center your entire brand around him, I can't see the value in him owning half of your business.

If owning your own store is the goal, then focus on that and perhaps negotiate with him that you be the exclusive retailer of his jewelry in exchange for you heavily featuring and marketing him, or something like that.

If you are not set on owning a store and just want to learn more about the jewelry industry, then sure, start as a consultant with him to help him grow his jewelry business, but stay out of being a business partner. Learn a lot and then decide if you want to open a store, and at that point decide how connected you want to be with him. He might be a fucking froot loop, you may decide you want nothing to do with him.

Hell, you might both decide that an online store is a better way to go. Who knows.

What really matters is what your priority is: is it owning a store or becoming more skilled and knowledgeable in the jewelry world?

You can't make a plan until you know what your priorities are, but whatever you do, DO NOT partner with someone unless you are certain that you are compatible, and even then, think twice about it.

[lifejoy]

Depending on how well you know the goldsmith (is he reliable? friendly? a hard worker? someone you can trust?), a partnership doesn't sound like a bad idea.  You don't have to have a 50/50 partnership.  I'd suggest that you retain a controlling share and, of course, spell everything out in your articles of organization and operating agreement.

I don’t know him super well yet.

[lifejoy]

Be very very very very cautious entering into a business partnership like this. It's a lot like entering into a marriage, except that your relationship will revolve around money.

You will have to agree on every single little ridiculous thing, every dollar spent, every vision for the future, etc, etc.

Could he not just sell his jewelry in your store? Unless you are looking to only sell his jewelry/center your entire brand around him, I can't see the value in him owning half of your business.

If owning your own store is the goal, then focus on that and perhaps negotiate with him that you be the exclusive retailer of his jewelry in exchange for you heavily featuring and marketing him, or something like that.

If you are not set on owning a store and just want to learn more about the jewelry industry, then sure, start as a consultant with him to help him grow his jewelry business, but stay out of being a business partner. Learn a lot and then decide if you want to open a store, and at that point decide how connected you want to be with him. He might be a fucking froot loop, you may decide you want nothing to do with him.

Hell, you might both decide that an online store is a better way to go. Who knows.

What really matters is what your priority is: is it owning a store or becoming more skilled and knowledgeable in the jewelry world?

You can't make a plan until you know what your priorities are, but whatever you do, DO NOT partner with someone unless you are certain that you are compatible, and even then, think twice about it.

That’s a great suggestion to figure out what my priorities are. I think having work/life flexibility and also the opportunity to learn a lot from him- those are my main goals.

[Metalcat]

Depending on how well you know the goldsmith (is he reliable? friendly? a hard worker? someone you can trust?), a partnership doesn't sound like a bad idea.  You don't have to have a 50/50 partnership.  I'd suggest that you retain a controlling share and, of course, spell everything out in your articles of organization and operating agreement.

I don’t know him super well yet.

Another question: what value do you think he sees in you as a business partner? My last post focused on you, but looking from his perspective is actually more informative since you don't technically need the income and he does.

I mean sure, you have said that you can help with building the business, but this is the kind of thing that consultants and staff can do without giving up a huge proportion of all future business value.

It's actually a big red flag to me that he wants to partner with you, because it tells me that he doesn't have a lot of entrepreneurial knowledge, which is not attractive in a business partner.

He may also be after capital, as you suggested, since he may not be able to afford consultants/staff/etc.

If he doesn't have the capital and the know-how to build his own retail business, then again, that's not a very attractive business partner.

If he does have the know-how and just needs capital, then he should be approaching you as an active investor who helps build the business and then cashes out on the increase in value down the road. That makes more sense than as a partner, because again, it's crazy for him to give up equity indefinitely. Jewelry shops are not known to be tremendously profitable, so him giving up half of his profits and future sale value indefinitely is kind of nuts.

So again: from his perspective, what value do you actually have for him as an indefinite equity holding business partner? If you can't figure out a long-term scenario where it makes sense for him to perpetually surrender half of his profits, then a partnership that doesn't make sense for him also doesn't make sense for you, because if it's not rationally mutually beneficial long-term, it's almost guaranteed to breakdown and get ugly.

This isn't to say that there isn't a mutually-beneficial professional "partnership" to make between you, but an official single business partnership with split equity is hard for me to understand in this case.

[lifejoy]

@Malkynn I pm'd you with more info. Thank you so much for your perspective, I find it really valuable to have someone outside of the situation put eyes on it.

Oh, and I forgot to add, I have a friend in graphic design school who is reworking the logo for the goldsmith (for free!) so that is a random thing I'm bringing to the table. I firmly believe I could make my value be known, but it is so intangible and amorphous ("I can get stuff for us by networking a lot yep") that he does kind of seem like a crazy person or a shyster for wanting to partner with me... unless he's just such a good judge of character that he can magically tell what a good hardworking skilled person I am? ;) Yeah, right. HAHA.

Now to do some market research on how much I should get paid.

[Metalcat]

@Malkynn I pm'd you with more info. Thank you so much for your perspective, I find it really valuable to have someone outside of the situation put eyes on it.

Oh, and I forgot to add, I have a friend in graphic design school who is reworking the logo for the goldsmith (for free!) so that is a random thing I'm bringing to the table. I firmly believe I could make my value be known, but it is so intangible and amorphous ("I can get stuff for us by networking a lot yep") that he does kind of seem like a crazy person or a shyster for wanting to partner with me... unless he's just such a good judge of character that he can magically tell what a good hardworking skilled person I am? ;) Yeah, right. HAHA.

Now to do some market research on how much I should get paid.

My point wasn't that you don't bring value, my point was that you should question if the value that you bring is worth him permanently sacrificing equity in his business.

It wasn't to question your value but to question the business sense of this man. You never want to go into a formal business arrangement with someone who lacks business sense. It's a huge warning sign that you will have conflict down the road because they have already proven to have poor business judgement.

I'll reply to your pm with more detail, but I wanted that point clarified for people reading. I'm not questioning your value, I'm questioning his suitability as a financial partner if he doesn't know is how best to utilize your value in his business.

[CNM]

This situation reminds me, somewhat, of when I was setting up my home staging side hustle.  A good friend of mine and I decided to partner on it, and that was a good decision.  But a real estate agent also wanted to partner with a small % of equity.  We had meetings and so on, but what the agent brought to the table - marketing, contacts, some start up $ - just wasn't all that important for us. We had some contacts of our own and offered competitive pricing to get in the door, and we could self-finance the start up costs.  So it was not worth it for us to give up a % of the business for something we could get for ourselves.

This sort of sounds like what the goldsmith is offering you- contacts, marketing, an "in".  But if he already needs a space in your store ... there doesn't seem to be much incentive for you to provide him an equity stake.  A better arrangement may be to give him a sweetheart deal on his space rental or retail sales.

ETA: I am in 2 partnerships and I like the arrangement because, if 1 person has a scheduling conflict or whatever, the other person can come in.  We both have the same, or near same, level of skill and ability in the core business.  In your case, it sounds like the goldsmith does not have core competencies in running the business if, for example, you unexpectedly need a week off. 

[lifejoy]

This situation reminds me, somewhat, of when I was setting up my home staging side hustle.  A good friend of mine and I decided to partner on it, and that was a good decision.  But a real estate agent also wanted to partner with a small % of equity.  We had meetings and so on, but what the agent brought to the table - marketing, contacts, some start up $ - just wasn't all that important for us. We had some contacts of our own and offered competitive pricing to get in the door, and we could self-finance the start up costs.  So it was not worth it for us to give up a % of the business for something we could get for ourselves.

This sort of sounds like what the goldsmith is offering you- contacts, marketing, an "in".  But if he already needs a space in your store ... there doesn't seem to be much incentive for you to provide him an equity stake.  A better arrangement may be to give him a sweetheart deal on his space rental or retail sales.

ETA: I am in 2 partnerships and I like the arrangement because, if 1 person has a scheduling conflict or whatever, the other person can come in.  We both have the same, or near same, level of skill and ability in the core business.  In your case, it sounds like the goldsmith does not have core competencies in running the business if, for example, you unexpectedly need a week off.

Actually, my business is online and he is the one with the business space. He's very skilled and running his own business but I wouldn't be able to stand in for the goldsmithing work. Your advice still makes sense if you reverse the pronouns - there isn't really much of an incentive for him to provide me an equity stake.

[lifejoy]

@Malkynn I pm'd you with more info. Thank you so much for your perspective, I find it really valuable to have someone outside of the situation put eyes on it.

Oh, and I forgot to add, I have a friend in graphic design school who is reworking the logo for the goldsmith (for free!) so that is a random thing I'm bringing to the table. I firmly believe I could make my value be known, but it is so intangible and amorphous ("I can get stuff for us by networking a lot yep") that he does kind of seem like a crazy person or a shyster for wanting to partner with me... unless he's just such a good judge of character that he can magically tell what a good hardworking skilled person I am? ;) Yeah, right. HAHA.

Now to do some market research on how much I should get paid.

My point wasn't that you don't bring value, my point was that you should question if the value that you bring is worth him permanently sacrificing equity in his business.

It wasn't to question your value but to question the business sense of this man. You never want to go into a formal business arrangement with someone who lacks business sense. It's a huge warning sign that you will have conflict down the road because they have already proven to have poor business judgement.

I'll reply to your pm with more detail, but I wanted that point clarified for people reading. I'm not questioning your value, I'm questioning his suitability as a financial partner if he doesn't know is how best to utilize your value in his business.

I see what you're saying :)

Yes it could definitely be an issue if down the line he, say, wanted to hire someone based upon a gut feeling or other poor business decisions... blech.

[Metalcat]

@Malkynn I pm'd you with more info. Thank you so much for your perspective, I find it really valuable to have someone outside of the situation put eyes on it.

Oh, and I forgot to add, I have a friend in graphic design school who is reworking the logo for the goldsmith (for free!) so that is a random thing I'm bringing to the table. I firmly believe I could make my value be known, but it is so intangible and amorphous ("I can get stuff for us by networking a lot yep") that he does kind of seem like a crazy person or a shyster for wanting to partner with me... unless he's just such a good judge of character that he can magically tell what a good hardworking skilled person I am? ;) Yeah, right. HAHA.

Now to do some market research on how much I should get paid.

My point wasn't that you don't bring value, my point was that you should question if the value that you bring is worth him permanently sacrificing equity in his business.

It wasn't to question your value but to question the business sense of this man. You never want to go into a formal business arrangement with someone who lacks business sense. It's a huge warning sign that you will have conflict down the road because they have already proven to have poor business judgement.

I'll reply to your pm with more detail, but I wanted that point clarified for people reading. I'm not questioning your value, I'm questioning his suitability as a financial partner if he doesn't know is how best to utilize your value in his business.

I see what you're saying :)

Yes it could definitely be an issue if down the line he, say, wanted to hire someone based upon a gut feeling or other poor business decisions... blech.

...or suddenly decide to leverage the entire business and expand dramatically because they're *certain* it's the best move
...or have an affair with a future staff member
...or have a conflict with another jewelry maker that you carry in your store and alienate them despite their product being the better seller in the store
...or refuse "on principle" to let the store carry mass produced products like Pandora charms
...or commit tax fraud
...or suddenly decide to retire and you either need to sell or buy him out
...or just be a fucking dick to work with
...or they get ill/injured
...or, or, or

Literally ALL of the above are essentially scenarios that I've seen in small store partnerships.
The more assets involved, the more complicated. A store front full of jewelry is A LOT of assets.

[feelingroovy]

I agree you should be careful here, but I can easily see what he values in you as a business partner: marketing and sales ability.

For small business owners who are great technicians at whatever the business sells, marketing and sales are the hardest and most hated part. And yet they are the part that has the biggest effect on growth.

And it's hard to hire an employee to do these things as well or with as much passion as an owner.

I would just keep talking with him. Take a few months to figure some of these things out and have solid legal agreements.

[lifejoy]

I’ve taken about a month to think this through.

What I want to do is have flexibility and be able to afford to do what I love. It’s not important to me to have a big store. It’s important for me to meet with people and sell meaningful jewelry. So that’s what I’m going to do! :D Solo, small scale. Affordable. In total control.

And it’s means I can fathom having a second child.

[Dicey]

I love the way you think things through! Awesome to see so much great feedback, too.

[Metalcat]

Well done!

I'm so happy you thought everything through and followed what *you* wanted.

[Linea_Norway]

Just a sidenode. If you intend to have a jewelry store at your home, make sure you have it really well protected and insured. I see it at jewelry stores in the city. They often keep the door locked during daytime and let the customers in one by one after they call at the door. Those stores are very prone to robbing, more than any other type of store.

It sounds to me like you might want a loose, but close cooperation with this man, working tightly together and doing each favours, but without binding finances. Based on that you are not equals and don't know his full motives and finances.

[lifejoy]

Just a sidenode. If you intend to have a jewelry store at your home, make sure you have it really well protected and insured. I see it at jewelry stores in the city. They often keep the door locked during daytime and let the customers in one by one after they call at the door. Those stores are very prone to robbing, more than any other type of store.

It sounds to me like you might want a loose, but close cooperation with this man, working tightly together and doing each favours, but without binding finances. Based on that you are not equals and don't know his full motives and finances.

Yes - that's exactly what I'd like to go forward with! Helping each other. Symbiotic. But perhaps not financially married ;)

And you're right. I definitely will amp up security wherever I am storing the goods.

[SwordGuy]

You've gotten some good advice.    I'm working on transitioning to a full time jewelry and enamel artist.

Have you been to any conferences for this trade?    For example. SNAG (Society of North American Goldsmiths) or The Enameling Society.   There are others, of course, and bound to be some regional ones in your area.   I ask because if he's really well connected, people in the relevant trade groups should know who he is and respect his work, him personally, and his business acumen.   Is he published in books or magazines?  Either as a how-to author or his work?  Is his work in museums or art collections?    These are all ways to judge his connections in the industry.

I noticed you're in Canada.   If you PM me I can ask a few folks in the trade that I've met at various conferences that I know if they have any info they are willing to share.