Making a Partnership Work

Making a partnership work can be difficult. Key factors include having a shared vision for the company, sharing equally in the work of the company, and having compatible skills among the company owners. All of this requires that the partners be honest and transparent with one another. Most important, the partners must have clear responsibilities within the company. Partners must be accountable to one another for their responsibilities. We saw the breakdown of a partnership in a recent episode of The Profit.

Partnerships can be created from scratch by both partners pooling their moneys to purchase needed equipment and working capital. But often, partnerships are formed by investing a combination of cash and assets. Placing a value on each partners investment requires calculating each partners net worth. Net worth is simply calculated by adding up assets and cash and subtracting liabilities or debts.

Exercises: Create a Google Docs file and make the following calculations.

1. Calculate your own net worth by listing your total assets and total liabilities. At this stage in your life, this should be simple. You have a few assets such as clothes and sporting goods. You may even own a car.

• Simply list your total assets, place a value on each of them and add up the total.
• Next, add up your debts or what you owe. You may not have any debts or you may have a car note. 
• Finally, subtract your debts from your assets to get a total net worth.

2. Now lets fast forward 15 years. You've accumulated some assets as well as liabilities.

Assets:
Home $85,000
Car $15,000
Personal possessions: $10,000
Retirement Account: $10,000
Cash: $5000
Total- $125,000

Liabilities:
Home Mortgage: $60,000
Car Note: $5000
Student Loans: $30,000
Total: $95,000

• Calculate your net worth given the assets and liabilities above.
• Calculate the amount of equity in your home.

3.  Your friend Robert, an experienced web designer, approaches you about starting up a web site design business. He knows that you have many contacts in the business community and you could open many opportunities for a new company. Robert has the computer equipment valued at $10,000. You find an office space that would be perfect for the business at $500 per month or you could use the bonus room above your garage. You figure you'll need about $30,000 of start-up money to renovate the office space and have some working capital. It will take about a year to get this business going to the point where you and Robert could draw a salary.

• Describe how you would structure the partnership and who would be responsible for what.

Here are your calculations of what it will take to run your business for the first year.

Office space rent - $500/ mo. $6000
Computer equipment - $10,000
Working capital and start-up expenses - $30,000
Total - $46,000

• What would each partner contribute in terms of cash and assets?

4. After running the business for a year, you've made some money and bought some additional equipment. You're still working out of the space above your garage. Your balance sheet looks like this:

Assets:
Cash - $15,000
Accounts Receivable - $5000
Equipment - $15,000

Liabilities:
Accounts Payable - $ 2000
Bank Loan  $10,000

• Calculate the net worth of the business. 
• How much capital do you and Robert have individually in the business?

5. With the addition of new clients, you have outgrown your bonus room. With the growth of the business, you also need help managing your current accounts To grow, you need additional capital to grow. You could also use some management expertise. You both know Keisha, an experienced business manager and you think she might make a good partner. How much capital would she have to pay in to become a 33% partner in the business?

• First, you have to look at how know how much capital both you and Robert have in the business, then you can calculate the amount Keisha would have to pay in to become a partner.
• Draw up a list of responsibilities for each of the three partners. 

6. One of the key parts of a partnership is the partnership agreement.

While Keisha, and Robert are trustworthy partners, you fear that one of the partners could withdraw from the partnership and go into competition with the other two.

• Write something into the partnership agreement that will discourage this from happening.Use the following as an example:

1. Leaving partner must offer shares at  book value of the equity to the remaining partners.
2. Leaving partner cannot compete for 2 years after leaving the business.
3. Leaving partner cannot call on customers within a 500 mile radius.
4. If partner breaks the agreement, the leaving partner will owe the remaining partners 2x book value. 

Notice that the above agreement had a time clause, a distance clause, and a remedy if the agreemtn is broken. A non compete agreement. would also outline what knowlege the leaving partner would have of the business that could be used against them.

Prepare for the test!

• List the advantages and disadvantages of partnerships. Make sure you know these for the upcoming test.
• Study the additional terms in Quizlet. http://quizlet.com/_zxbiy
• Download the Quizlet app from the Android or iTunes store so you can study on the go.

So what is an entrepreneur?

Are all independent business owners entrepreneurs? If not, what's the difference? Here's an interesting article that might shed some light on the issue.

So What Is an Entrepreneur, Anyway?

 

Now, read this article about iCracked. Would you classify AJ Forsythe as an entrepreneur, opportunist, or just a business owner? 

http://www.forbes.com/sites/andrewcave/2014/11/30/how-to-compete-with-apple-in-the-iphone-and-ipad-market/

Assignment: After reading both articles write a one page paper describing your definition of an entrepreneur. Is there a difference between an entrepreneur and a small business owner? Would AJ Forsythe qualify as an entrepreneur by your definiton? Using John Abraham's BOSI method of classifying entrepreneurs, how would you classify Forsythe? Builder? Opportunist? Specialist? Innovator? Explain your answer.

 Make sure and format your paper in 12 point Times New Roman, double-spaced text. Make sure you use complete sentences in writing your paper.

Rubric:
Formatting 0-3 points
Grammar, usage and puctuation 0-3 points
Quality and completeness of your answer 0-4 points

Quizlet for Chapter 5

You'll need to start getting familiar with important terms used in chapter 5. You can start learning them by using Quizlet. I have created a set to assist you here:

http://quizlet.com/_zxbiy

Entrepreneurial DNA

Today's lesson deals with entrepreneurship. Essentially, what does it take to start your own business? Does it take a certain type of person or can anyone be an entrepreneur in their own style?

So what's it like to actually be an entrepreneur? Are there characteristics common to all of them? Red the section Characteristics of Entrepreneurs on page 112 in your text book. Watch this video and make a list of common characteristics.

Next, check out this video from Joe Abraham. Joe has a different take on what it takes to be an entrepreneur. Be prepared to discuss the BOSI method of categorizing "entrepreneurial DNA." Write down the definition of each of the BOSI categories.

So do all entrepreneurs share common characteristics or are they different as Joe Abraham proposes with his BOSI classification?

Assignment 1: Team up with a classmate. Write a short business plan on the following business opportunity.

You just learned that a local garage has a place available that would be perfect to start a weekend car washing business. Write down your answers to the following questions to create a basic business plan. Be ready to present your plan to the class. Your time is limited so work quickly.

1. Nature of the Business

How many employees should the business have?
What expertise will you need that you don't already have?

2. Goals and Objectives

What are your short and long term sales goals?
What is your anticipated revenue?
How many cars will you wash per month?

3. Marketing Plan

Who is your ideal customer?
What will you charge for various services?
How will you promote your business?
Who are your competitors and how will they respond to your entry into the market?

4. Financial Plan

How much money will you need to start the business?
What are your projected income, expenses and profit?

5. Organizational Plan

Who will work in your business and how will the jobs be organized?
What is your organizational plan?
What physical building or vehicles will you need?

Present your answers to the class.

Think... In the process of developing a business plan, did you discover differences between you and your partner or were you in total agreement?
How were you and your partner alike?
How were you different?



Assignment 2:

This time, write out your own business plan using the scenario above. You may use ideas generated with your partner but this will be your business plan. You may type it out or write it down by hand.

When you are finished. Compare notes with your partner. Answer the following questions at the end of your business plan:

• How are your business plans alike and how are they different?
• If you were to put yourself in one of the BOSI categories, which would it be? 
• If you were to put your partner in one of the categories, which would it be? 
• Do you think you would be better off having a business partner in this venture or work independently? Explain your answer. 

Write your answers on your business plan and turn it in at the end of class.

• Your assignment can be typed or hand written. If you type it, use Times New Roman, 12 point, double-spaced text.
• Make sure you use complete sentences.

Rubric:

Completeness 0-7 points
Grammar, usage and punctuation 0-3 points

Portfolio Review

It's Thanksgiving week. So now is a good time to look back on the choices we made earlier this year and give thanks for our good (or soon to be good) fortune. Earlier this year we selected 5 stocks for our portfolio. I've created spreadsheets for each class showing the stock selections for each student. For these who did not turn in portfolios, I have listed some stocks for you. Here are the spreadsheets for you to reference.

Management Class A1

Management Class A2

Assignment:

Your assignment for this class is to review the performance of each stock in your portfolio. Follow these steps carefully.

1. Create a new folder on your Google Drive called Portfolio Review. Share it with me.

2. Create a new Google Sheets file in your Portfolio Review folder. Name the file Portfolio.

3. On your Google Sheets file, list each stock ticker in your portfolio in column A. If you can't find it in your CNNMoney portfolio, you can find it listed in one of the two files above.

4. Look up the starting price of each stock using the Yahoo Finance page. Look up the price on September 2 and at the close of business day last Friday. To do this, simply click on the 3m below the stock chart and slide your cursor on the chart to September 2 and record the opening price for that date.

5. Record the starting prices in Column B and last Friday's closing prices in Column C of the Google Sheets file you've created.

6. Using a calculator or formula, calculate the increase or decrease percentage of each stock price. To do this, divide the ending stock price by the beginning. Here's an example using ConocoPhillips (COP).

73.54/81.06 =  90.7%

In this case, the stock decreased by 9.3%. Make the calculation for each stock in your portfolio. and put the number in the last column, D.

7. Next, you'll need to analyze your portfolio. Create a Google Docs file in the same folder. Name the file Analysis. Format the file with Times New Roman, 12 point, double spaced text. Analyze your portfolio by answering the following questions:

a. Which of your stock picks was the best performer, based on the spreadsheet?
b. Which was the worst performer?
c. Research your options. If you could sell any one stock and buy any one stock, which would it be? Why do you think your new pick would outperform the old? Keep in mind that past performance is no guarantee of future performance. Also, what stock might have been a poor performer may turn ut to be an outstanding performer in the future.

When you are finished, you'll have a shared folder named Portfolio Review. Inside that portfolio, you'll have the following files:

1. Google Sheets file named Portfolio with beginning, ending, and calculated increase or decrease in price.

2. Google Docs file named Analysis with your portfolio analysis. Format your paper in 12 point Times New Roman, double-spaced text.


This assignment is worth 20 points. All of your work is due at the end of the class so you'll need to stay focused in order to get this work completed.

Rubric:

Portfolio spreadsheet - 10 points
Stocks listed - 3 points
Beginning stock prices - 2 points
Ending stock prices - 2 points
Growth percentage calculations 3 points

Stock Analysis Document - 10 points
Question 1 answered - 2 points
Question 2 answered - 2 points
Question 3 answered 2 points
Grammar, usage and punctuation - 4 points
Make sure you use complete, well structured sentences.

Total points available - 20 points

Europe and the debt crisis

You thought you understood Europe as a trading bloc? You were wrong. Here's a quick overview. Make a note of the definitions of the EU, Eurozone, Shengen and EEA.

Now that you understand a little about Europe as a trading block, you're ready to understand the European debt crisis. Here's a quick explanation.

Discussion questions:

1. What is the difference between monetary and fiscal policy?

2. What caused the European debt crisis?

3. Why must Europe either seek to unify politically or get rid of the euro and go back to separate currencies?

World Trade Regulation

International trade is regulated by several organizations. Let's look at a few key organizations.

World Trade Organization - The WTO is an organization created to regulate trade and set trading rules between countries. Organized in 1996, the WTO is a forum where countries can negotiate and enforce trading rules and tariffs. You can learn more at their web site.

International Monetary Fund - The IMF was established to help countries import food and other necessary goods by providing low interest loans. Read more about the IMF here.

The World Bank - The World Bank is an institution established in 1944 under the auspices of the United Nations. It's purpose is to reduce poverty in poor nations. You can learn more about it's organization here.

Assignment: Create a study sheet with definitions of these three organizations. Make sure you know how each organization differs from the others.