If you and a friend, spouse, adult child, or parent decide to open your own small motor carrier, will both your relationship and the company survive? Following are some points to consider before you sign those partnership papers.
A partnership is one of the hardest entities from which to create success. It can be as challenging (and rewarding) a relationship as a marriage, so it is important to work out all the details from the very beginning. What will be the responsibilities of each partner, and what level of authority will each partner have? This includes everything from who’s authorized to purchase goods and services, what’s required to remove funds from the company accounts (one signature or two on checks), and who’s responsible for ensuring bills and invoices are paid on time.
And those decisions will (or should) depend on the aptitude and experience of the partners.
Do each of you have the business skills to be successful? Is the prospective partner good with numbers? Who has the administrative and management skills to handle sales, dispatch, safety, and the piles of recordkeeping and regulatory compliance documents required to keep the company going while keeping the government off your back?
Who’s going to drive the trucks—one or both partners? If both, will the company hire someone to be the office administrator, or are you planning to handle that job from the cab of your trucks?
It’s also imperative to create a right of survivorship agreement. Right of survivorship is a common means through which property can be passed between family members and business partners after death. This would go into effect if one partner dies.
How is the company ownership set up? Are you prepared to run the company in which your partner’s spouse or children now have ownership and have the same level of input as your partner did? Or will you want to buy out the partner’s heirs at a predetermined price? If so, then you need to have all of your legal ducks in place, and it is highly recommended that you consult an attorney.
Anyone considering starting a trucking company or taking on a partner knows that working together every day can put a huge strain on a relationship. You need to be able to handle the stresses and emergencies of dispatch, operations, safety, pickups and deliveries, mechanical problems, invoicing, and collections.
What will you do if this partnership shows signs of splitting? Do you have a plan for solving the problems? Again, it’s best to resolve and agree on solutions before tempers flare. Set into place an agreement on how things are going to be resolved or if not able to be resolved, how the partnership may be dissolved so you can each go your separate ways with little to zero animosity toward the other.
You need to have a proactive set of procedures and solutions in place for financial security and bill payment. What about the outside demands of the business? And how will the workload be shared?
How many hours can you devote to getting the motor carrier on a firm footing and then tending to it carefully to make it grow? Does one partner have small kids at home while the other’s kids are away at college? Or maybe one of you is divorced while the other has only been married a few months. Be honest with one another as to what your personal life will require and whether you can dedicate the time and sacrifices to make the business flourish.
What about the salaries of the partners? Sit down, crunch the numbers, and determine what each partner will receive as a salary for efforts in managing and running the company. The most important expense any business has is the salary of the owners. And if you don’t take a salary, then will you and your partner be willing to continue putting in long days and sleepless nights?
Don’t rely on profits to support you and your family. Profits are used to sustain and grow the company. Using profits for paychecks will lead to either a stagnant or failing company. On top of that, if one or both of you become a nonworking partner, you’ll need to hire a person to perform the job of the partner who has stopped working. If you haven’t been paying that partner, you’ll find it very difficult to pay the replacement. On a broader business level, not paying the partners presents a false sense of profit and loss.
As in any partnership, you need to be able to communicate honestly and calmly with each other. Can each of you take criticism from the other without feeling attacked? Do either of you have a winner/loser attitude towards a discussion that may escalate into an argument? Being able to handle any type of disagreement is key to keeping your relationship in good order. Plan on having regularly scheduled meetings to talk about the business and your plans for the business going forward.
The best time to figure out these business strategies is before the lease is signed and the first trucks are ready to roll. After all, you both deserve a trucking business that not only grows but becomes a profit-producing, smoothly aligned company—one that you can be proud of and that your community and peers can look at with admiration.
Remember to have a business plan in place. Have an attorney write the partnership agreement and have him review all documents as well. You’ll also need a trucking industry-knowledgeable accountant and tax person.