J. Robinson (JR) is a baker who is operating informally in Shortwood in Kingston. His products are in demand but he lacks basic business-operating skills. He wants to expand, as the demand is there. In line with this desire, he is also considering taking on a partner who has skills in the area, but he is afraid of being robbed. He also urgently needs accounting help, but cannot afford a full-time accountant.

SmallBiz: Problem Centre sent an accountant to examine JR's operation in order to determine what might be some of his problems.

Among those identified were weak inventory control, the absence of accounting procedures, the making of too large a product, and the need for equipment and facilities to increase production.

The products said our accountant, was nevertheless quite tasty.

General advice on his situation is also offered by Winsome Armstrong, business-development officer with the Jamaica Business Development Corporation (JDBC)/Incubator and Resource Centre.

The fact that JR is already operating and wants to expand his business leads to the assumption that he already has a good location, is in the process of obtaining the required licensing and permits, and has determined his start-up cost, including initial inventory, says Armstrong.

Since JR is contemplating giving up his sole-proprietorship status by taking on a partner, he should know that as a sole trader, he receives all the profits, has complete control of his business, and is liable for all debts within the business.

He is also limited in the sources he can turn to for funds needed to run or expand the business.

On the other hand, were he to take on a partner, all profits and losses are shared.

In addition, there are many distinctions that can be made regarding a partnership, but the two basic options are:

i. Working partner - Where each partner may play a role in the day-to-day operation of the business;

ii. Silent partner - Where the partner contributes money to the business but does not participate in its operation.

If JR goes the partnership route, says Armstrong, they will need to establish a partnership agreement at the inception so that the responsibilities and privileges of each partner are documented. It should also state the percentage ownership of each partner, how the profits and losses will be divided, how the partnership can be dissolved, and how one partner can buy out another partner.

Partnerships are relatively easy to form, and each partner shares the profits in proportion to his or her ownership.

Working partners usually bring a range of skills to running the business, as well as make additional financing available.

A partnership does have drawbacks, however. Each partner is personally liable for the business debts, any partner can legally commit the entire business without the other partner's consent, and if one partner dies, the business ceases to exist. Interpersonal conflicts also tend to arise between partners.

Skills

Some skills that JR needs to increase business efficiency include:

a. Financial management, which takes into account a working knowledge of record keeping, budgeting and purchasing supplies, equipment and commodities

b. Personnel management, which comprises hiring, supervising and training employees.

c. Directing business operations, which includes product or service knowledge, filling orders for products, managing inventory, identifying customers' needs, obtaining necessary sales to cover cost, and break-even analysis taking into account advertising and marketing costs, and costing and pricing of products.

d. Tax knowledge and communication skills.

The JBDC offers three-days business-development training for persons like JR. The next is scheduled for May 26-28. He can also obtain free accounting software packages online.

Email Winsome: warmstrong@jbdc.net.