Question:
In the last issue of Llama Banner you brought up the issue of partnerships in a male. We are considering a partnership on a breeding male. How well do partnerships work and what sort of things should we be concerned about in this partnership?
Answer:
Let me begin by saying that in 23 years of raising llamas, we have had one or more partners in every breeding male except our very first stud. Having said that, I should also add that we have never had a partnership in a female. Thus, this discussion will be directed toward a partnership in a stud quality male.
There are many items that need to be considered in a partnership whether it is a business partnership or co-ownership of a herd sire. I have often heard the expression, “a partnership is tougher than a marriage”. As in any business transaction, a partnership has to be a winning agreement for all the parties involved or it is not a good deal.
Why do a partnership?
Partnership in a Power Stud can be a very effective method of improving the productive quality of the herd. It is also a good way to broaden the progeny of the Power Stud assuming the partner(s) have high quality females. I am sure the number one reason to form a partnership in a new stud is money. By pooling resources one can purchase higher quality and more expensive animals for a faster and more dramatic improvement to ones herd. A partnership is also an effective method of selling part ownership in a llama or alpaca that has been raised on your own farm. In other words, if one produces a winning, highly desirable, stud quality male, one can sell a partnership, create revenue and still have the stud services of that male available.
Selecting a Partner
Selecting the correct partner(s) is very important. Needless to say, all the partners need to have a high degree of integrity. Remembering this is a business arrangement; a successful partnership is truly built on trust. It is also important to have a partner in a stud that is flexible and willing to work outside of the agreement box. Plans and situations always change as time passes and having partners that are willing to do whatever it takes to continue to make the partnership work makes the entire situation more pleasant and less stressful. Partners need to be willing to agree on operational changes as time passes and situations change so that the partnership continues to be win-win for all the parties involved. Selecting a partner(s) with this type of disposition is very important.
The partners should all be quality herdsmen with good animal husbandry practices. Remember your prize stud will be spending time on someone else’s farm.
With the thought that no matter how powerful the male, higher quality females produce better cria, it is important to select partners that have quality females that will help the stud produce champions. Remember, Power Herd Sires are measured by what they produce. Having a partner with poor quality females will lower the perceived value of your stud, due to the production of lower quality cria, while having a partner with killer females will increase the value of your stud.
Distance is another consideration in a partner. The further the distance between the partners, the more difficult and expensive transportation becomes. We have had partners within 30 miles and all the way across the country. They can both work if everyone is flexible and considerate.
Share a Questionnaire
Everyone sees the rest of the world through his or her own eyes. Your partner(s) will have different ways of doing things and thus have different expectations than you will. It is very important that the partners have similar expectations and agree on a working relationship. In other words, everyone needs to get on the same page.
An effective method of achieving this is, prior to forming a partnership, develop a questionnaire for each partner to fill out and then discuss any differences and come to an agreement. All the points of agreement established should then become a part of the written agreement or contract.
A Contract
It is very important to have a written contract or agreement between all parties. This simply sets the guidelines for everyone and tends to reduce any future disagreements.
There are many items that need to be considered and discussed prior to finalizing a partnership contract. The written questionnaire completed by each partner is an effective method of preventing these important issues from falling through the cracks.
The following is a list of items and considerations that need to be discussed and then put into the agreement. These are listed in no particular order of importance.
1. Insurance – Will the male be insured, by whom, and for how much?
2. Advertising – How much and where will we advertise? How will advertising expenses be split?
3. Show Fees & Premiums – Who will pay entry fees for shows and who will receive the premiums? Will the person showing simply take care of his own expenses or will all these costs and premiums be shared?
4. Health Costs – Who pays for routine health care and/or more expensive vet costs? It is important to discuss worming schedules, and things like should he be shorn.
5. Partnership Breedings – How many females can each partner breed each year? Are breedings going to be limited or can each partner breed as many females as he/she wants?
6. Outside Breedings – Will the partnership do outside breedings and if so, how many per year? What guarantees are offered?
7. Breeding Fees – What will the breeding fees be and how will they be split? A fair method is to split the breeding fees 60/40 with 60% going to the partner that does the actual work doing the breeding.
8. Free Breedings – Can the partners offer a free breeding to help close a sale? If so, how many per year? If half price breedings are offered will the split be the same?
9. Trading Breedings – May the partners swap breedings with other breeders and if so, how many per year?
10. Female Accommodations – Will each partner breed and board the other partner’s females while the stud is being housed at their farm?
11. Transportation – If the stud is transported between partners, who pays the transportation charges? Are they shared, or paid by the shipper or the seller?
12. Buy/Sell – There should be a buy/sell agreement giving the other partner(s) the first right of refusal at the selling price. I find the following language fair and effective.
Should one partner desire to sell his/her share of Mr. Super Stud, he/she shall offer the other partner(s) the first right of refusal at the offered price. Should a lower price be negotiated the selling partner shall each time again offer the other partner(s) the first right of refusal at the lower price.
13. Residency – A tentative schedule needs to be established outlining the time period the stud is at each partner’s farm or ranch. Things like summer and winter temperatures and different breeding seasons need to be considered.
14. Settlement – The accounting of all the partnership financial matters needs to have a periodic time frame established. This could be monthly, quarterly, or annually.
15. Legal – It is always prudent to seek the review of the final contract by an attorney to assure all legal aspects of the agreement are fulfilled. Although this may primarily be a working agreement, a contract signed by both parties is a legal document.
It is very important that one selects the correct partner. Partners with similar views that can keep the big picture in mind and not get too nit- picky about the little things will have a more successful partnership. One of the key ingredients of making a partnership successful is to develop an agreement that works for everyone and then to have all partners be willing to deviate from the agreement as needed. I have always viewed these partnership contracts more as a working agreement than as a binding legal contract. I like to say to my partners, lets develop an agreement and then do whatever it takes to make this work for all of us. As I mentioned above, we have had many partnerships on our various studs and have never had a single unpleasant experience with any of our partners.