By Bryan Orr
I used to listen to the Dave Ramsey radio show regularly (before I discovered podcasts), and he would often advise against partnerships. His catchphrase is: “The only ship that doesn’t sail is a partnership.” Obviously, there are many partnerships that do work, but for each of those there are many more that either failed, or are on their way to failure.
Not only am I in a business with other owners, but all of the other owners in my business are close FAMILY MEMBERS…red flag alert! Yikes.
While we have had our fair share of conflicts over the years, the partnership has actually made us a better business in countless ways. Well, I’m sure I could count them, but it would take a while.
I think I would stick with Dave Ramsey in generally advising against partnerships, but if you think it might make sense for you…
Don’t Rush Into It
If you have ever watched the hit ABC reality show, Shark Tank, you know that the business owners pitching their ideas are often pressured into making knee-jerk partnership decisions. I really enjoy the show, but that part is all pretend. The REAL due diligence is done carefully, behind closed doors after the bright lights are off. A large portion of the deals that you see on the show never pan out in reality after all the details come under scrutiny.
Starting a business with another person, picking a partner, or acquiring a business is best done slowly and deliberately. Get lots of advice, talk to people who have made similar decisions, get to know the other person really well. If the “opportunity” requires quick action I would advise passing on the “opportunity.”
Choose Your Partners Wisely
Many partnerships happen out of convenience or perceived necessity, but a business partnership, like a marriage, is a commitment you make to another person for the long haul.
There are many great reasons to choose a partner: domain expertise, temperament, leadership skills, financial discipline and work ethic. The BEST reason is plain old compatibility. Do you like being around this person? Talking on the phone with them? Do you understand one another? Do you have similar vision for the business?
If your reason is just that you need the money and they have money to offer…. Please STOP and reconsider your choice.
Be Clear
My business coach often says, “Unfulfilled expectations lead to disappointment.” This is never more true than in a business partnership. Make sure that you are crystal clear on paper who owns what, who is in charge of what, what time commitments are required and expected, how much you all make, what you will do if things go wrong and what happens when it’s time to move on or if one of you wants out.
In addition to these basic questions you want to address issues that are often overlooked, such as: Who has the final say on spending decisions? If one of you die or are physically incapable of doing the job, how would the ownership stake be handled? What method will you use to buy one another out if the other loses interest?
Get it all out there; first in conversation and then in writing. It is a good idea to involve a coach or mentor to help work through all of the details.
Communicate
As soon as there is something that starts to come between you and your partner – WORK IT OUT. There is almost nothing worse than bitterness and back stabbing between partners. If the leadership of an organization breaks down it is nearly impossible for the business to thrive until the conflict is resolved.
When a partnership is already breaking down it is better to deal with it sooner than later. If you are going to have a meeting where you deal with serious matters relating to the partnership, it is best to agree to some ground rules beforehand:
- We will speak factually and keep our emotions under control.
- We will stay away from universal phrases like “always” and “never.”
- We will not accuse one another.
- The objective of this meeting is __________.
The best partnerships find ways to accent one another and can often take a business to levels it could never go with just one owner. Like with any relationship, good partnerships are built on mutual respect and benefit, and to quote Jimmy Stewart from Mr. Smith Goes to Washington, “A little looking out for the other guy as well.”