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Business advice please... I've had a proposition

post #1 of 22
1/20/12 at 10:14am
Thread Starter 
I'll start by saying I have absolutely no business knowledge or experience so I really am like a fish out of water.

I've had a proposition from a work colleague, I'll list the facts below. My gut instinct is negative but I just want some business advice before I turn it down completely.

The main idea:

The main idea is that I start up a business with my work colleague as a "silent partner". He will provide the financial backing while I work at the shop. I mentioned to him that a coffee and cupcake shop which commissions wedding cakes would be best but he is swaying towards a cake shop which also sells equipment. His business knowledge is coming from a friend of his and he has just started up a physiotherapy business.

My status:

I currently work for the government, which means my job is safe for the time being. There aren't any redundancies or pay cuts in my job. I earn about £1100 a month and have expenditures of £700 per month in direct debits etc + living costs eg groceries. I currently live at home and do cakes as a hobby. It takes me 10 minutes to get to work each day.

The location:

The location he has in mind is Bourton-on-the-Water - http://en.wikipedia.org/wiki/Bourton-on-the-Water. It is village about an hour away from my home. It has a population of 3297 people. My colleague says there were approx 1 Million tourists who visited there last year though I can't find any information which supports this. This is predominantly a tourist village and so it is seasonal. The shop would be located on the main high street in the village where rent would be between £1000 and £1500 per month.

The risks:

I would have to leave my job. I have no business knowledge. I don't know what his motivation is to risk so much money. I don't know how the "profit" if there is any... would be split. I don't know how "silent" he will be. He has said that once he has made back his initial outlay plus say £100,000 profit then he is happy to value the business and sell his half to me.

My gut instinct is to say no, but I wouldn't want to miss out on an opportunity at doing something I love.
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post #2 of 22
1/20/12 at 10:30am
You'll want to put together an airtight business plan, chances are you probably won't make a profit or draw a living wage for at least the first year or two. That's not necessarily a showstopper if your partner can provide the funds to cover you.

If neither you or your partner has business knowledge that's a red flag unless your partner's friend is available to run the business side, help put together the plan, and write up the legal contracts if you decide to move forward.
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post #3 of 22
1/20/12 at 10:37am
Thread Starter 
The problem is that he hasn't told me how much cash he to put into the business, it's all well and good if he has 50k to put in but he earns about £35,000 a year + whatever his side business is bringing in but that is a new venture too.

He has said that his friend who has the business knowledge knows what she knows because she had her own business running a beauty salon. I have never met this woman.

I have a new car and loans to pay for so there is no way I can not have a wage each month.
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post #4 of 22
1/20/12 at 10:39am
IN MY OPINION you should run the other way. There is too much unverifiable information. What kind of business experience does your colleague's friend have? How is his new business doing? How much say would the friend have in running your business? Yes, it would be wonderful to have someone else foot the bill for a new enterprise, but I would have a problem being the one to do all the work and it sounds like your collegue doesn't intend to do any.

Jason gives wonderful advice so listen to him, and then go with your instincts. Whenever I have a big decision to make, if I don't know which way to go, I wait. The answer will usually work itself out.

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post #5 of 22
1/20/12 at 10:41am
as I was reading your post, I sensed your hesitation. I also had a negative reaction/ bad vibe about it. That doesn't mean it won't work out. I agree with previous posts. You need to put together a business plan to see how doable it is. Good luck!
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post #6 of 22
1/20/12 at 10:46am
Quote:
Originally Posted by LisaPeps

The problem is that he hasn't told me how much cash he to put into the business, it's all well and good if he has 50k to put in but he earns about �35,000 a year + whatever his side business is bringing in but that is a new venture too.

He has said that his friend who has the business knowledge knows what she knows because she had her own business running a beauty salon. I have never met this woman.


Sounds like the three of you need to have a preliminary meeting where everyone outlines what their contributions to the enterprise will be. You should be able to tell pretty quickly if the business resource is trustworthy and knowledgeable or not.
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post #7 of 22
1/20/12 at 10:50am
Thread Starter 
Is a business in a small village which is seasonal sustainable? The average wedding cake in the UK is around £300. Would my idea for coffee and cupcakes be better for a tourist town even though at the moment I don't know anything about coffee shops?
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post #8 of 22
1/20/12 at 10:57am
I really think you have a better business sense than you realize. My dh and I owned a restaurant in a tourist/seasonal area and the off season wasn't difficult, but it was boring. You're right - - your smaller items are going to keep you going, so I think the cupcake/coffee shop is a better idea. However, the first thing you need to do is question, question, question. Don't proceed until you have ALL the information you want and you're confident that it will work. Make sure you have a viable business plan before you take even the first step.
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post #9 of 22
1/20/12 at 10:59am
Quote:
Originally Posted by LisaPeps

Is a business in a small village which is seasonal sustainable? The average wedding cake in the UK is around £300. Would my idea for coffee and cupcakes be better for a tourist town even though at the moment I don't know anything about coffee shops?


A business in a small village with seasonal traffic can definitely be sustainable if the price points, product assortment, and marketing strategies are sound.

Given that much of your intended audience will be relatively transient you probably won't want to focus too much on cake decorating equipment, margins on equipment are much smaller and you will have a lot of competition on that front. Then again, offering decorating classes with limited sales of supplies would be an interesting way to differentiate yourself.

You will really need to research the demographics of the area and do a competitive analysis to determine which path (if any) would be the most profitable. This may involve putting together multiple business plans for each potential type of store.
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post #10 of 22
1/20/12 at 11:08am
Thread Starter 
As far as I'm aware, there are no other cake shops in the area. I definitely need to actually visit the village first.

I like the idea of teaching and maybe holding decorating parties.

How do you go about starting a business plan? What has to be in it to make it airtight?
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post #11 of 22
1/20/12 at 11:26am
Here is a good place to start:
http://articles.bplans.com/writing-a-business-plan
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post #12 of 22
1/20/12 at 11:32am
Thread Starter 
Thanks for your help everyone, it's going to be the biggest decision of my life but hopefully I'll ask the right questions and get the best outcome for me.
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post #13 of 22
1/20/12 at 12:21pm
Thread Starter 
Thanks for your help everyone, it's going to be the biggest decision of my life but hopefully I'll ask the right questions and get the best outcome for me.
https://www.facebook.com/TheCutestLittleCakeCompany
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post #14 of 22
1/20/12 at 12:34pm
It sounds like you have a lot to think about and figure out but it's still an exciting proposition. The third person you mention, the friend of the 'silent' partner. Please figure out how involved she will be and most importantly, sit down and meet her! Personality conflicts from day one can't be fixed by the best laid business plans! The numbers need to be right and you need to feel comfortable with those you are going into business with! Good luck!
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post #15 of 22
1/20/12 at 6:24pm
Just wondering how much 'business sense' it takes to think that tourist would want to buy equipment on their holiday. icon_lol.gificon_rolleyes.gif
You'd have at least 1000 people that want a cuppie and some coffee before one of us hardcore cakers would find your store.
mommachris.

wife to David for 25 years
mom to 13 blessings
Nine who are still living at home that range from 22 to 4 years old.
Holly, Amy, Aaron, Evelyn, Zebedee, Melody, William, Melissa and little Tobin
and four more sweet babies in heaven.

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wife to David for 25 years
mom to 13 blessings
Nine who are still living at home that range from 22 to 4 years old.
Holly, Amy, Aaron, Evelyn, Zebedee, Melody, William, Melissa and little Tobin
and four more sweet babies in heaven.

Reply
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