I had been asked to give my opinion on going into the business of photography with other people. They’re starting off as friends and pooling their resources together in order to set up a studio, a venture that they find expensive, if each were to go solo.
First of all, I would like to say that success in business could come to anyone – to those who are doing it solo, or to those who have business partners. Since the question is about going into partnership with friends (emphasis on friends), I will limit myself to the topic of friends partnering for business.
My own view is life is like a coin – there are always two sides (would you believe, sometimes more two?). Advantages come with corresponding disadvantages. Benefits and costs are said in the same breath, because in everything – there are trade offs.
Some advantages – lowered cost of initial investment, sharing of expenses, complementariness of skills, synergy, etc. – are obvious but allow me to present their corresponding, albeit less obvious, disadvantages, and what friends can do to prevent their friendship from ruining the business, and vice versa.
Let’s tackle some advantages, and look at their flipsides:
1. The individual investment is lowered because you are putting your money, equipment, furniture and other resources together.
What challenges does this arrangement entail?
You need to find a fair way of assessing all non-monetary contributions. It may be tedious to do this, but this is the only way to arrive at how much each is contributing to the company.
Decide if these resources become company property, or if individual partners retain ownership. If they become company property, then shares of stock can be issued for the amount of contribution (cash and non-cash) made by each partner. If individual partners continue to own resources used by the company, you should be able to compute how much rental is owed the partner whose equipment or furniture etc. are being used. Decide whether you will be paying rent on per use basis (how much per use – per day? Per hour?) or, on the basis of certain frequencies – monthly, for example.
Make a detailed inventory of all things “borrowed†from the partners, including comments on the condition of these items. Take pictures and keep them in your inventory file.
Assigning values and deciding payment schemes may be tedious, but it will make life easier for everyone concerned. Some things – like equipment that are not used day to day – such as cameras, lights and lenses – are better “rented†whenever used, but furniture may have to be rented on a monthly basis. But for how long? Like any business, you would have to decide on the “life†of such resources. Worn out sofa, desks, outdated equipment, whatever – would have to be replaced with new ones. Or, maybe you need to rent only while the business is new, and as soon as able, your company can buy its own equipment/furniture.
2. Expenses in maintaining a studio can be shared. I was told that photographers, when they have jobs, intend to give a share to contribute to the upkeep of the studio.
While this may sound good, in practice it may not work. Running a studio incurs fixed as well as variable expenses. If photographers contributed only when they have jobs, who will take care of the studio’s fixed expenses? What are those fixed expenses? Telephone, electricity, Internet, salaries of staff etc.
3. Different people could bring into the organization different skills, and they can complement each other. Perhaps, one photographer is good in photographing products, while another is good in photographing people. Or maybe one works as sales/marketing.
There is synergy (1+1=3) here – as a company of several photographers could potentially earn more than combined incomes of the individual photographers.
What downside do you need to watch out for? It is possible for one to be busier, or doing more for the company, than the others.
Therefore, you must find a way to keep an accurate record of work done by each. While more tedious (again!), a performance-based compensation system would be fairer, as the photographer with more work will receive greater compensation. Sometimes, it’s not just getting more jobs; it could also mean getting more high-value jobs. We find that paying commissions to photographers and account executives, for example, follow the ups and downs of their productivity. Make sure you pay commissions only on paid jobs (clients have paid).
Not all jobs are easily quantifiable (basis for commissions), and one or two members of your group may be spending time, talent and knowledge to manage the business. A managing partner, even though he may be a photographer as well, may be losing some shoot opportunities because he is busy managing, so your company must be aware of this situation, and find a way to compensate him for his lost opportunities. Sometimes, a salary and/or overriding commissions can take care of this.
4. While “two heads are better than one,†you may find yourselves disagreeing on how to decide certain business matters – buying equipment, pricing assignments, sales and marketing, rent or buy, expand or maintain status quo, etc.
Make sure you prescribe a way to reach certain decisions. Define which decisions are for the sole discretion of the manager or the individual partners, and which decisions require the participation of all the partners. When partners vote to decide, should the decision be unanimous or a simple majority will do? When you are in disagreement, how do you break an impasse?
5. It’s fun to work with friends. That definitely is an advantage, but is there a downside to this?
Even though you are friends and you like and trust each other, a formal organization would still be needed to ensure that your business would run smoothly. Being in business together is not all fun, it’s also work. You would need to incorporate, define systems and procedures, establish policies and guidelines, design forms and require that they be used properly, and require, read and review reports.
Just because you are friends, it does not mean you can’t be businesslike in the business. To insure that your friendship will survive the rigors of your business, you would have to be transparent in all your dealings. At some point, you would even need to hire independent auditors. If you have schedules for audits, you don’t have to feel guilty about auditing anyone. It should be part of the business game, and not done only when you start to become suspicious. Don’t be shy about scrutinizing business reports (bank statements, financial reports, accounts receivables, collections, contact reports etc.). You are not doing a disservice to your friends or to your company if you took a more businesslike approach to your business.
By doing your homework and laying the ground rules now, and running your business like a business, you will be avoiding pitfalls that could ruin not only the business but the friendship as well. When friends get into a business together, that business should serve to enhance the friendship, for if not for that, why go into business together at all?
