When Flexible Systems -- a Hauppauge-based IT company started by three college friends -- was founded, the firm was helping businesses transition from typewriters to word processors. Nowadays, the company is still aiding businesses with technology, but the focus is on setting up the cloud, electronic marketing and website design.
The company celebrated its 30th birthday last month and is on the cusp of its biggest expansion, its founders say.
"It's just an ever-evolving thing, and businesses aren't aware of [new] tools. We show them how those tools could be beneficial to them," said co-founder Seth Belous, 52.
Belous met his partners Joe Saggio, 53, and Marty Schmitt, 51, when they were playing hockey for Stony Brook University in the 1980s. The friendship continued on to running Flexible Systems for three decades -- a feat of longevity some experts say is rare in small-business partnerships.
Revenue at Flexible Systems has increased about 25 percent annually the last few years, and the firm has added 35 employees in the last two years, 20 of them Stony Brook graduates, Saggio said. The company more than doubled its office space when it sold its old building and moved into a 20,000-square-foot space in Hauppauge last month.
Agreement at the start
Partnerships with friends or family are the riskiest type of small business venture to pursue due to a high failure rate, but they also can reap the highest potential reward, said Erica Chase-Gregory, the acting director of the Small Business Development Center at Farmingdale State College.
One way to avoid the mess of a potential falling-out is to create an owner or shareholder agreement at the outset, said Thomas Killeen, a partner at the Farrell Fritz law firm in Uniondale.
Although setting out the terms may be uncomfortable for some, such an agreement can help "illuminate people's expectations" so there are no surprises "and everyone knows what everyone's going to do in terms of capital commitment and business decisions," said Thomas Huszar, a law partner in the Manhattan offices of Garden City-based Moritt Hock & Hamroff.
The three at Flexible Systems attribute their stability to a strong friendship, mutual respect and a clear division of duties. Saggio oversees operations and finances, Schmitt focuses on business development and enterprise sales, and Belous is in charge of sales strategy and marketing.
When it comes to big decisions, all three must agree for the process to move forward.
Equal investment, shares
The three say they own "about equal shares" in Flexible Systems and have put roughly the same amount of money into the company. The legalese of the business was sorted out early, with their separate lawyers going over the partnership agreement in an amicable process.
Having a diverse client base spread across many industries has helped them in times of economic uncertainty, Belous said. Their willingness to take on small businesses -- which make up the backbone of Long Island's economy -- has also brought in a steady stream of business.
"A lot of our competitors were going after . . . bigger companies, but we developed a way to systematically support small clients," Saggio said. There's a "solid base there."
Even with a healthy partnership, the principals should always make sure to think a step ahead to the next stage for the company, Chase-Gregory said. At more mature closely held companies like Flexible Systems, a succession plan is a necessity, Killeen added.
"The most critical thing for them in their early 50s is to devise a solid succession plan -- who's going to lead the company and how employees will have the funds to buy them out," he said.
Saggio said they've prepared by hiring able people and putting them in positions that make it clear they are in line to succeed them. The three partners have not actively planned for succession -- all say they're in it for the long run -- but add that part of the process is just being a good example.
"It's a miracle the three of us are still friends and work together, and we realize that," Saggio said. "We've tried to teach and mentor others by showing them how we interact . . . They see us act and they do the same thing, they're emulating our style. That's the culture here."
AT A GLANCE
NAME: Flexible Systems, Hauppauge
FOUNDERS: Joe Saggio, Seth Belous, Marty Schmitt
BUSINESS: Full-service IT support