Q: I am interested in expanding the network and systems-support side of my business and have located two individuals, currently working full-time for someone else, who have the skills I need for this expansion. They are interested in forming their own business in the same market niche as mine but are limited by a lack of funds and customers. I am looking for some type of business relationship to offer them that would be beneficial to us all. My company is reasonably solvent, and I have the cash and infrastructure to assist them with a startup. But I would like to maintain a certain level of control over their operation -- and profit from their endeavors. Can you give me any information?
-- M.R., Colorado Springs, Colo.
 

A: First, it sounds like you need to determine whether you want to solve your own business problem or whether you want to be an angel investor for another small business.

If you are most interested in expanding your business, and you need help with systems support, the best way to do that is to hire these individuals -- or other qualified persons -- as consultants. You can retain them to complete a specific project for you, negotiating a flat fee ahead of time, or hire them as support personnel and pay them a monthly salary to be available as much as you need them.

If, on the other hand, you have a relationship with these individuals, and you would like to help them start a business, you'll want to really think it through and seek professional advice first. Investing in a startup with two people who have never owned a business before is a tricky -- and a risky -- proposition. It can also be a wonderful thing for everyone concerned. But you should make absolutely sure that their goals, business ethics, company image, and future direction are in line with yours. Even if their goals are similar to yours, be aware that these individuals -- especially if they have the entrepreneurial spirit -- may eventually want to sever ties with you and take their company on its own. There's nothing wrong with that. However, if they're in the same market niche as you are, they may take a hefty chunk of your customer base with them.

When working with these would-be entrepreneurs, you might prefer to hire them as subcontractors. That way, you can maintain direct contact with your clients, but you will also be able to expand your services by bringing them in to do some of the jobs that you're either too busy for or don't have the expertise to do. Or, you could establish a joint venture and work in partnership with them on a project-by-project basis. The nice thing about this option is that you'd bid on contracts together. But if the relationship deteriorates and you want to part company, you can do so with a minimum of hassle.

Another option: Make their company a division of your business. These two people might work in a different geographic area and help you expand your reputation and clientele to a new location. Again, make sure that the quality-control and customer-service systems that you currently use are firmly duplicated in this new branch of your company. If they are not, your reputation will be on the line. And if this new division is established in a geographical area that is remote from you, be aware that you'll need to spend some time there -- at least for the first 12 to 18 months and possibly longer.

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