Tuesday, March 29, 2011/
Entrepreneur Ash Hunter learned some important lessons from his first business partnership, formed in his early 20s. He was starting out at the time and it was tough.
Like all partnerships, it was created with the best of intentions. The two were going to set the world on fire. But it came unstuck when he and the partner discovered they were coming from different directions, leaving the business to stagnate.
It was a lesson that taught him well. These days, the many businesses affiliated to his media group are partnerships that work to a set framework.
Hunter is the chief executive officer of Hunter 5. His father began producing vehicle based classified magazines in the 1970s, the Just Magazines stable of titles, including Just Bikes and Just Cars.
Ash Hunter was just 22 when his father died and assumed control of the magazines. Over time, the business grew into other areas.
Hunter 5 can be divided into two main lines of business: media and manufacturing. The media side has complementary businesses in publishing, video production, online and web, music and events management.
Its manufacturing operations produce glass out of China, some 85 million units a year. The company also has some property interests.
It specialises in taking new companies that hit a ceiling. It creates partnerships with entrepreneurs and builds the business.
Hunter says that first partnership around a property business came unstuck when it ran into hard times.
They needed to raise money. His partner wanted to go to the bank and run up some debt, or use credit cards. Hunter was more cautious. There was no way he was going to take on more debt.
“My risk profile looking at a start-up business was different,’’ Hunter says. “I thought that was crazy. I would scrimp and save and put money aside. If I needed to, I would take money out of my salary or sell something. I call it cashflow funding.”
With two different approaches, the business hit a wall. “We almost cracked the shits at each other because we had different ideas,’’ he says.
That, he says, was the worst sort of partnership fallout.
“To me, the worst ones are when you get to a point where everything stops, you can’t agree on anything, you can’t change anything and you are stuck with a business that can’t do anything, it’s absolutely destined for failure.”
Looking back on it now, he would concede that the clash was inevitable. Neither party had worked through scenarios and determined where the other one was coming from. As mates, they had never actually sat down to talk it through before they went into business together.
“We both went in all excited and knowing we would have a really good crack at it and everything was going to be hunky dory. Then when we ran into some hard times, we found out we never really had those discussions about ‘what if.’”
“Every tiny little thing we wanted to change became a negotiation, instead of us having a strong set of rules in place.”
After that, Hunter talked to many other people who had experienced the good and bad side of partnerships. He put together a framework that has guided his company ever since.
Under that framework, the first rule is that Hunter has the controlling stake in the partner’s business, at least 51%.
“We have a good reputation in working with people so I let people know that us having a controlling stake means that we can change the direction of the company,” he says.
“We are not going to do that willy nilly, but they need to know. I want to be up front. I will sit down with them and say, ‘Do you realise that by me having a controlling stake I can sack you?’”
“Do you realise that by us having a controlling stake, I can change the course of what this company does without your approval?
“Normally they need to walk away for a few weeks and think about it. But no one has ever come back and said no I don’t like the idea, I don’t trust you. It’s been very liberating for those people that we don’t give them bullshit.”
The other part of the framework is having very clear shareholder agreements and a clear understanding of what people’s intentions are.
Do they intend to build the business or sell it? And if they want to sell, do they want to sell everything, or just part of it. “We go through it, question by question,’’ Hunter says.