“Give me golf clubs, fresh air and a beautiful partner, and you can keep the clubs and the fresh air.” — Jack Benny.
A terrific life partner is a beautiful thing and that’s also true of business partnerships. The challenges are also pretty much the same — making sure you’re actually getting a great partner and then making the relationship work.
Business owners frequently tell us they would never have partners. They fear partnerships because they’ve heard — or experienced — horror stories. Things like owners who fought like cats and dogs; or a partner with undisclosed credit problems that prevented the company from getting a bank loan; or the best friend/partner that misused funds and destroyed the company, as happened to Judy’s dad. It’s true that if you’re saddled with a bad partner, it can be a disaster.
On the flip side, having the right partner can be a great experience. Good partners complement each other’s skills and provide support in many ways. At Laddie’s manufacturing company, he has two wonderful partners. All three have different skills and personalities, which creates a powerful dynamic and strong focus on common goals for the business. This allows Laddie to maintain his consulting firm while playing a significant role in the manufacturing company, and it’s only possible because of the partners.
We’ve seen many partnership situations with clients over the years and we’ve personally experienced the good, bad and ugly of partnerships with several different business ventures. Here are a few things we’ve learned about choosing the right partners and building defenses in case something goes wrong.
Know your partners well. Years ago, we had the opportunity to buy into a company owned by two people. We did exhaustive due-diligence, pored over the company’s history and financials, and thought we had done a great job of investigation. But we failed to dig deeply enough and ask about one little detail — how the current partners got along with each other. It turned out they’d had serious problems for many years. We didn’t ask and they didn’t tell, and the end results were ugly and expensive.
When you go into business with someone, it’s much like getting married. You’re often putting your entire future on the line, so don’t be afraid or embarrassed to pry into their personal lives. How’s their health? Have they had marital problems? What’s going on with their kids? If it’s an existing business, talk to current employees about what they may know.
Like it or not, people’s personal lives affect the business — how dedicated they are to the company; how focused they can stay without personal diversions; and how health issues may affect their ability to work in the future. If they’re unwilling to be completely transparent, you don’t want them as partners.
Have a buy-sell agreement. Here’s an example of why you need one. Mary is a fantastic business partner — talented, professional and ethical. You can’t stand her husband, Jack, but since he’s not involved in the business, he isn’t an issue. Everything goes swimmingly until Mary is run over by a bus. After the funeral, obnoxious Jack walks in and announces that he’s your new partner.
The moral here is to spend the money on an attorney and sign a buy-sell agreement at the beginning of your partnership. This agreement should describe how the company will deal with what we call the Five D’s: death, divorce, disability, decisions and disputes. It should also address how the value of the business will be determined when a partners leaves and how the buy-out will be funded.
Next, define your roles and responsibilities. If these are clearly defined and understood at the outset, you’re far less likely to butt heads later. Everyone has areas in which they excel and each of the partners should ideally work primarily in his or her area of expertise. Trouble occurs when partners are ill-suited for their jobs.
It’s also important to understand each other’s working styles. A “Type A” go-getter and laid-back thinker in business together can each find the working relationship terribly frustrating. However, if they recognize these differences and decide how they will work together to complement each other, the combination can be powerful.
In a successful business partnership, each partner brings something different to the table that enhances the company for everyone’s benefit. It requires planning, hard work, and a strong commitment to working together to achieve your goals despite what the world may throw at you. The end result can be amazing.
Laddie and Judy Blaskowski are partners in BusinessTruths Consulting, Inc. and several other businesses, and authored The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business. They can be reached at Judy@BusinessTruths.com.