Inc Query

The hazards of hiring loved ones, and other tricky situations

In the mailbox this month, questions about dealing with love lost, saying no to salespeople who drive you crazy, getting the right advice on pricing, deciding whether or not to grow, and looking bigger than you are.

Love and Business
My company has been experiencing explosive growth recently, and we've had plenty of growing pains -- tight cash flow, 13-hour workdays, difficulty finding and training people, and so on. But my toughest problem is a more personal one. Last year I hired my girlfriend, Rebecca, to coordinate our marketing and advertising. She has saved us thousands of dollars in design costs and continues, on a daily basis, to make our company better. Two months ago, however, Rebecca and I decided to end our personal relationship. You can imagine the stress both of us now feel at work. We love working with each other, and she shares my passion for the business, but our personal anguish is difficult to hide. I often think about firing her, although only for personal reasons. Her work ethic is impeccable, as is the quality of everything she does. My question is, Should I keep suffering so that she can continue to add her magic touch to my company, or should I let her go so that I can heal completely? --Kip

It's too bad, Kip, that you didn't contemplate the possibility of breaking up before you hired Rebecca. We constantly hear from experienced entrepreneurs about the hazards of bringing friends, relatives, and significant others into a business. You could be Exhibit A. Not only might you face legal problems if you fire Rebecca for strictly personal reasons, but you have a serious ethical dilemma on your hands. After all, what exactly has Rebecca done to warrant the loss of her job?

"Last year I hired my girlfriend. She has saved us thousands of dollars and continues to make our company better. Two months ago we decided to end our personal relationship. I often think about firing her, although only for personal reasons. Should I let her go?"

That said, we do know a few couples in business together who have split up and yet continued to have a good relationship at work. Betty Brennan and Joe Taylor, for example, were married when they started Taylor Studios Inc., in 1991. In 1996 they got divorced, but they remained business partners and took their company to the Inc 500 in 2000. "Joe and I had always been good friends," says Brennan, the company's president. "That was the foundation of our relationship. So we were able to move beyond the romantic issues and maintain our friendship. We also trusted each other, which was crucial."

"We were successful because we've always really liked each other as human beings," says Taylor, "and we both have very positive things to contribute to the business. But I have to admit we're different from most divorced people I know."

Over a Barrel
Six years ago one of our competitor's salespeople came to me with an offer. He said he would set up a business and sell our products if we'd pay him 5% of gross sales and give him 30% of the equity in our company when our revenues reached $5 million. I agreed, and we hit that mark two years ago. Now he wants to merge his company with mine. Under his proposal, he'd move in with us, get a salary and a percentage of sales, and be second-in-command.

I'm in a quandary. While the guy works well with customers, the same traits that make him a good salesman drive me nuts, and he's a persistent PITA both with me and with the people in the plant. So should I agree to his terms, hope for the best, and fire him if it doesn't work out? Or should I cash out his 30% stake right now and lose a key salesman who helped grow the business? --Dave

Life is short, Dave. "There is no amount of money in the world that can outweigh peace of mind," says Jack Stack, president and CEO of SRC Holdings Corp. (formerly Springfield Remanufacturing Corp.), which is employee owned, by the way. "Did Dave start a business so that he could be miserable every day? My advice is to sever the relationship right now. That may mean cashing the guy out, or Dave could sell him the company and start another one. Either way, he should do something soon. The longer he waits, the more expensive any settlement is going to be."

To Grow or Not to Grow
I've had my own mortgage business for the past five years and earned a six-figure annual income from it for the past three years. Now I'm thinking about expanding. My first step would be to invest in marketing and advertising. I have the financing I need -- a credit line of $150,000 -- but I'm hesitant about using it for that purpose. My wife and I have two small children and a big house with a mortgage. Should I stay small and continue making good money, or should I develop the business into something with more profit potential and work toward an eventual sale? --Name withheld

"This guy sounds way too comfortable to me," says Bill Samuels Jr., the president of Maker's Mark, which Samuels grew into a $50-million business. "You build a company with great execution, not great ideas, and great execution takes passion to the nth degree. I don't see the passion here. I don't see the burning desire to go out and kill somebody or conquer something. I have the feeling he's spending a lot of time in his rocking chair, and that's probably where he ought to stay."

The Consultant Question
About a year ago I moved to Florida from the Northeast, where I had owned a few one-hour-photo-processing shops. In Florida I bought a commercial-printing business. I've been putting in 80-hour weeks, learning the basics. Now I'm ready to start advertising, set up a Web site, and raise my prices, but I'm worried about making a major mistake, especially when it comes to pricing. The market is very competitive. I'm married with three kids, and I've invested all my money in this business. Should I hire a consultant to advise me? --Sam

Not if Norm Brodsky has anything to say about it. "Hiring a consultant would be the biggest mistake Sam could make," says the veteran entrepreneur and Street Smarts columnist. "Sam already has a lot of business experience. His instincts are undoubtedly better than those of any consultant he could find. Besides, he probably wouldn't follow a consultant's advice unless he agreed with it -- and he shouldn't follow it if he disagrees. So why pay somebody to give you advice that you won't listen to if it's different from what you've come up with on your own?

"Instead, Sam should research the industry. As a general rule you can charge more in a competitive market only if your quality and service are better than your competitors'. Sam should find out who his competitors are, what they're charging, what kind of quality and service they offer, and so on. Then he can make his own call."

Looking Big
I own a small trucking company with my wife. We have a contract with a big international airfreight forwarder, and we're trying to expand and diversify. We can provide the same services as our larger competitors, but we can't prove it on paper. How, on a limited budget, can we give the impression of being a major player? --David

Welcome to the world of marketing, David. What you have is essentially a branding problem, and so we passed your query along to one of the smartest branding guys we know, who also happens to be a successful entrepreneur -- Max Carey, CEO of Atlanta-based Corporate Resource Development, an Inc 500 company. "David needs to understand, first, that perceptions live only in the minds of your customers and prospects," Carey says. "You control those perceptions through the way you position your company. Who says his business has to be trucking, for example? Maybe he's in logistics or supply-chain management. There are all kinds of ways he can describe what he does.

"Beyond that, he should brand himself in terms of what his company is becoming, rather than what it is. Yes, it's small right now, but it's on its way to being the best of breed. Remember, any issue can be either positive or negative, depending on who's introducing it and when it's introduced. You can't help being defensive when a prospect interrupts your presentation to say, 'You're really small, aren't you?' But you set up a totally different dynamic if you say, 'Here's who we are, and we're still fairly small. That benefits you in the following ways.'

"I also have another neat way of disarming a prospect. You say, 'As you know, we're a small company, and this would be an incredible opportunity for us -- world-changing, in fact. Let me ask you something. Could you tell me why you'd consider us for an opportunity like this one?' In other words, you put the prospect in the position of making your case. You need courage to use that tactic, but it can really go your way."

Having Trouble Sleeping Lately?

Could you use some advice from an experienced entrepreneur who has been where you are and figured out what works and what doesn't? Send your questions to Editor-at-large Bo Burlingham, aided and abetted by Street Smarts columnist Norm Brodsky, will find the best people around to answer them. If you don't like their answers -- well, you can tell us that, too.

Hands On

Looking to take the sting out of employee road trips? Tekno Inc., a $22.5-million maker of factory components, offers its 140 employees the services of a handyman-cum-pet-sitter when they're away from home. The Cave City, Ky., company's Employee Assistance program was launched last summer, when longtime employee Bill Ferguson was due to retire but wanted to stay on with the company part-time. Stacey Hughes, Tekno's human-resources manager, set up Bill and his wife, Linda, with a pager and a cell phone. Employees who will be traveling for three days or more can reserve the handy couple to mow lawns, service and wash cars, feed pets, or water plants. The Fergusons even haul hay and feed livestock. Employees don't pay a thing. Says Trevor Clopton, Tekno's chief operating officer, "It's a way for us to give our employees more than just money."

--Peter Krass

The Whole New Business Catalog

What's Love Got to Do With It?
Site Gag
Using Your Noodle
Oprah Gets Psyched
More Strings Attached
The Messenger is the Medium

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