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When the partnership structure doesnt work well for a start-up
26th July 2008
A great case study in the Telegraph recently would be a useful support resource for explaining how chosing a partnership structure for a start-up often isn’t the best option…
The Animation Art Gallery has been established for 12 years now, but it is still a relatively small business. The Starting out article in the Telegraph suggests that turnover is about £500,000.
The Gallery has a clear market niche - the sale of art products drawn from the world of animation. The current owner Russell Singler was one of the original founders of the business, which started life as a partnership.
A key part in the article is where Russell describes the problems that were created because of the choice of a partnership structure for the new business.
The gallery started with three partners, including Russell. However, the partnership found it difficult to handle the rapidly changing competitive environment for a specialist retailer. Russell wanted to invest in technology (infrastructure & systems, e-commerce etc), but the other partners were not prepared to invest.
So the answer was for Russell to buy-out his other partners (paying them for their share of the business - not an easy thing to calculate or negotiate) and then he could have the freedom to run the business as he wished.
A good example to use for AQA Unit 1 amd Edexcel Unit 1.
The article is also useful for courses covering retailing
To find out more about Russell’s business, visit his website
