3 businesses combined into 1

[juliet]

I'm asking this for a friend. Hope anyone who has their own business can advise.

If there are three diff companies:

-Co A does video
-Co B also does video, but different genre/ type.
-Co C does photography but also capable of producing videos

The three companies are thinking of opening one new company that pool their resources together and share profits.

Is it even a good idea to open a new company to begin with, considering they each still want to keep their own biz? I'm just trying to figure out how this thing would work: if it's a good idea, profit sharing, directors' fees???

[generalsales]

will it conflict of interest ?

[enivre]

Originally Posted by juliet considering they each still want to keep their own biz?

Erm.. why fuse if they want to keep their own business? Better just to outsource to one another.

If you ask me, if they want to combine then they better sort all the fundementals out right from the start. Meaning to say, who pays what, who pays how much, who does the work, who gets how much money.

Things like that need to be clarified at the start, trust me, will save u a lot of headaches later when things get nasty over money.

Just my 2 cents...

[ckuang]

It could work if owners of A, B and C are very mature and understanding, and all three companies already adhere to strict accounting standards and clearly defined operating procedures.

Generally the problem starts to arise when one of the three starts doing better than the rest (this is unavoidable), and the one doing better starts feeling the other 2 are sapping resources while the other 2 feel that the one doing well is undermining their business. Seen it happen quite a few time in all industries.

[godzilla60]

If the purpose of a single company is to pool resources, just register another company or LLP or partnership which the companies A,B and C can be partners and sell common equipments to this new company then lease the equipments back from the new company.

However, if the owners of the companies A,B and C are the same, then the owners can just use of the company (e.g. A) and buy out the shares of B and C. The individual businesses can be kept separate by different branding and positioning. Think Toyota with Lexus and Toyota....

Hope this helps

[Winsonapm]

There are a lot more problems than what were listed so far.
“Chemistry” is probably one and “Values” is another that is/were main issues in some of the mergers.
Most shared the same mission and vision, and differed in objectives.

Start with a “courtship”, get to know each other better before jumping in a “marriage”. Separation is painful.
Create an Alliance or join an Association. With time, you may find each other unsuitable as partners.
Friendship is more important than money.

[godzilla60]

Originally Posted by Winsonapm There are a lot more problems than what were listed so far. “Chemistry” is probably one and “Values” is another that is/were main issues in some of the mergers. Most shared the same mission and vision, and differed in objectives. Start with a “courtship”, get to know each other better before jumping in a “marriage”. Separation is painful. Create an Alliance or join an Association. With time, you may find each other unsuitable as partners. Friendship is more important than money.

you know, this is true and most mergers are failures despite the time spent on due diligence....

[ellery]

Originally Posted by juliet I'm asking this for a friend. Hope anyone who has their own business can advise. If there are three diff companies: -Co A does video -Co B also does video, but different genre/ type. -Co C does photography but also capable of producing videos The three companies are thinking of opening one new company that pool their resources together and share profits. Is it even a good idea to open a new company to begin with, considering they each still want to keep their own biz? I'm just trying to figure out how this thing would work: if it's a good idea, profit sharing, directors' fees???

Like all things that need PROFESSIONAL advice - you want the best advice be prepared to find the competent person and pay for it.

Classic case of wishful thinking. There must be business opportunities that are being lost should there be no group entity. But fact that they want to keep separate units running and still have a holding entity mean there are agendas to fatten their own units at expense of holding company. Some what pointless unless to talk about director fees ect when fundamental like which biz entity has priority in booking in jobs - their current indepents or the holding ? Who allocates who does the work.

Like marraige no committments means high chance that each will go their own ways, each will seek to maximise opportunties for themseleves first.

[ortega]

sounds like a recipe for failure (IMHO)

[Zohan]

Originally Posted by ortega sounds like a recipe for failure (IMHO)

To further elaborate, in the last 20 years I haven't heard of photography/video companies staying together as a partnership. 100% of the time, they split due to various reasons. There are companies like Geoff Ang's studio where there are other photographer(s) besides Geoff Ang. But companies like that have a boss and the rest join as partners or employees. Ultimately, there is can be only 1 boss. I hope to be proven wrong as I grow older but unfortunately I haven't seen any lasting partnerships.

[enivre]

Originally Posted by ortega sounds like a recipe for failure (IMHO)

I agree.

Sharing the same or almost similar skill sets is a BIG problem IMO. If you are talking about sharing a studio space I think it's still do-able. But to merge into one entitiy and take on jobs together. That's going to need A LOT of trust and understanding from all parties.

[juliet]

Thanks guys for the feedback.

If they don't each keep their biz, would that work better then?

[Zohan]

Originally Posted by juliet Thanks guys for the feedback. If they don't each keep their biz, would that work better then?

Not really.

On the other hand, I remember there was a wedding photography group that was doing very well. They shared advertising fees for magazines, etc. But they still maintained their own individual business, brand name and profit. They had their individual styles but they were peers in their market. The group branding was great and it worked for a while until one member decided to charge a super low rate for some packages and the group broke up basically because of this issue.

[ortega]

even best of friends will become enemies because of money

[nemesis32]

Never a good idea. What they should do is to come out with a referral system, maybe 10% of the contract price will be commission.

[reanimator]

Never mix business with anything personal. Things will get nasty and ugly if it doesnt go down the right road.