Early on in my career as an entrepreneur one of my mentors, the epitome of the lone wolf entrepreneur, told me something that has stuck with me the past 20 years – “partnerships are like a marriage…without the benefits of good sex.” I think I’ve made every partnership mistake in the book and yes, partnerships can be worse than a bad marriage. I’ve been blessed and made the error of partnering with friends, family members and people I barely knew. I’ve had successes with partners, partners die unexpectedly, had bank accounts drained and have had credit cards run up like a high school girl shopping for prom. I’ve lived it all. You may ask the question “why keep going back to the same well if it seems poisoned?” It’s not a lack of individual confidence, it’s not for fear of going it alone; no, it’s my love of people and the challenge (and successes) that keeps me partnering with others. Whether it be a website hosting company, a mastermind / networking business, a real estate investment company, a vitamin supplement company, a consulting firm – I love the hunt and I love people.
Here’s a few things I’ve learned along the way being in partnerships (some will sound rudimentary; but, how often do we as entrepreneurs forget the simple things) and how to tell when not to enter into a partnership or when the partnership has turned toxic. Hopefully, you can glean some nuggets of value from my past experiences (this list is in no particular order).
- When each of the partners no longer brings separate strengths to the partnership (both partners exude the same strengths) there’s no need for a partnership. Become independent service providers to each other.
- Partners must be reading from the same book, same chapter, same page, same sentence, same word. If you’re not on the same word, how can you arrive at the end of the journey together (hopefully a successful business sale).
- Partners must be willing to sacrifice equally. No one partner can see themselves as “above tasks.” In a partnership, you must leave your ego at home.
- Once primary character or trust is broken the partnership is doomed. Did a partner do something unscrupulous or not in line with the character of the other partner(s) or the business – the partnership is potentially on its way to failure unless intervention is made immediately.
- You partner with your partner’s spouse or significant other. It’s just like a marriage.
- Partnerships always work when things are good. It’s when the stuff hits the fan that a partnerships true value or weakness will shine through. As one of my good partners says “is your partner a “fox hole”person that will fight the battle to the end or will they cut and run?”
- Make it official. Get everything in writing.
- Have the money talk early. Percentages, where and how much money gets reinvested back into the business, expenses, sale of the business, valuation of each partner’s shares, etc.
- Set expectations early for the partnership and your partner roles. Make sure to discuss personal future goals and direction as well.
- Communicate regularly and openly. Again, like a marriage.
- A partnership is not two people putting in 50% each to make 100%; it’s two people putting in 100% each to make 200% (like a marriage).
- Know your strengths and weaknesses and your partner’s strengths and weaknesses before entering into a partnership. Discuss them openly before starting your partnership.
- Play up to each of your strengths and don’t belittle your partner’s weaknesses. Be thankful that your partner brings their strengths to the partnership and vice versa.
- Mistakes will be made, forgive quick and get back on the same page.
- You’re both human – there will be times that one (or both) of you will need a break. This is when it becomes difficult. If you have kids, you know what I mean.
- Philosophize often.
- Before creating a partnership ask yourself “is the business relationship better off as independent service providers to each other versus direct partners?” If so, don’t partner.
- Partners need to pay themselves first out of profits. If you don’t do this, personal money concerns with strain the partnership. It’s like the old investing adage “always pay yourself first.” Make sure there are guidelines in your operating agreement for payouts.
- Don’t run up debt to get a partnership venture started. Partnerships are a tough go even on the best of days let alone adding the stress of being behind the eight ball of debt. I’ve found partnerships work better when bootstrapped and hard work and sweat equity build the business. It’s a slower process of growth; but, it builds the partnerships strength.
- If your gut tells you not to go into a partnership – don’t.
- Keep the personal drama at home or better yet, resolve your personal issues before entering into a partnership.
- Know how the partnership will dissolve and make sure there is language in your operating agreement on how spouses and significant others are handled in case of a partner death – get a good operating agreement in place. Trust me, your partner’s spouse or significant other doesn’t want to be in business “or married” to you.
- Set up the partnership with individual partner capital accounts. Start out with a great bookkeeper and CPA.
- Get a mentor – for the partnership. An outsider can assist in keeping the partnership heading in the right direction and can mediate issues that might arise.
I’m sure I’ve missed some key elements of partnerships; but, these are some of the many lessons I’ve learned over the years.
I hope these insights have been of value in you determining if a partnership or the partnership you are in is right for you.