- Posted By Andrew Morgan
Why do investors get together to form an ownership structure such as a partnership? Why do they not just go out and do it themselves? The pooling of resources is one answer to these questions, being one of the main benefits of the partnership arrangement.
These resources referred to are not limited to the obvious financial contribution, but include the experience, personality and skills that each person brings to the table. Operating and managing a motel successfully requires a wide range of skills, not just being limited to one. Hence why it is difficult to find such a person. Bringing together people who offer good organisational skills, people management, bookkeeping, people skills, bubbly personality, and the list goes on, can be made a lot easier utilising a partnership arrangement.
Procrastination and fear are two of the biggest issues that stop anyone from moving forward or getting out of their comfort zone. However, joining forces with others can help to alleviate this procrastination and fear and allow one to progress forward when they may have stayed sitting on the sidelines. The comfort in having someone take that leap of faith with you can be just that bit of additional confidence needed. This goes for anything whether it’s buying a business, residential investment or even deciding to join a gym with a friend.
Over the years I can recall many current and previous motel operations that have been operated under a partnership arrangement. Each has had different methods and formulas of operation and each has had its own issues and benefits. In the greater majority they have worked well for the purpose of the owners and allowed each owner various benefits that they may not have been able to enjoy as a single operator.
A partnership operation in any business is not everyone’s cup of tea. Many do not want to work with others and many simply cannot work with others. Two couples for example who know each other and are comfortable with each other from a trust, friendship or dare I say it, family position are in the main those utilising this type of operation. That is not to say experienced moteliers are not interested, they are, and are often the instigators of getting non experienced moteliers into the industry. The confidence in the accommodation industry that they project provides that confidence for others to get involved.
Some believe that the motel industry is ideally suited to a joint management arrangement. Many operators of motels can fall into the trap of burning themselves out rapidly by trying to do everything. In a business such as a motel, burnout can occur rapidly unless more workable methods of operation are initiated to avoid this situation.
An alternative to putting on extra staff to alleviate everyday time constraints and pressures is the partnership arrangement. An example is each couple work a month on and month off or longer depending on what suits both couples. This leads us to the main concern some have of entering a partnership, and that is how well both couples can get on together and make joint decisions that both will be happy with, and will be in the best interests of their business.
Trust and communication will make or break a partnership in any business. Also not working together on site at the same time would seem like common sense. It would be assumed that if two couples know and trust each other then they are probably going to be like-minded people, and this would be a big key to the success of the partnership, similar values, beliefs and work ethics.
There are many benefits to those with a partnership arrangement. Some of these include:
- Alleviating possible early burnout – owners working longer hours without getting away for a break can be avoided with for example a month on month off type operation
- The residence provides accommodation for both couples as they move in and out for their shift
- Only working half of the year – more time to travel and enjoy life with flexibility
- Doubling the level of finance that is available allows the purchase of a larger motel business and higher standard of property to be acquired
- Experience – having another party or couple to enjoy the experience with, spread the risk and to share the highs and lows
One must also consider where these types of arrangements could go wrong, thereby helping make an informed decision before diving in:
- The more people involved increases the risk for arguments which is a potential problem in any business
- Different methods/standards of operation - one couple finish their month on and then leave the business in a poor state, financially or cleanliness wise
- Working too closely together – partners working together at the property can create friction
Having a structured partnership agreement in place to prepare for any future issues you may not see coming can be a good place to start.