Archive for the 'Partnerships' Category

Are partnerships really only good for two things?

When a partnership works, it’s a beautiful thing. When it doesn’t, it defines ugly.

Once, during a conversation with a mentor about partnerships, he made this declaration: “Partners are only good for two things: sex and dancing.”

My mentor’s personal experience led him to make that indictment. My experience has led me to be more thoughtful, but I still advise anyone planning a business partnership to consider his rude but worldly comment as a handy caution to purge their plans of naivete.

A business partnership should be entered into with a healthy dose of reality about the human element involved. My friend, David Gage brings sunlight to this reality in his book, The Partnership Charter, wherein he writes, “Business people are experts in what they do, but they’re not in how to be partners.” Boy, howdy, is that true!

If you’re considering a partnership structure for your business, Gage recommends asking yourself, and your potential partner, the three questions below, which are followed by my thoughts.

1. Why do I want a partner?
Having a partner means you can share the work and the risk. But it also means you have to share the decisions and the rewards.

For a partnership to work, all parties must place a higher value on the advantages of shared work and risk than on the efficiency of making unilateral decisions and keeping all the loot.

2. Are there better alternatives to taking on a partner?

Just like in a marriage or any other relationship, both parties have to bring something of value to the table. Examples could range from experience, to skills, to contacts, to capital.

The advantages of each partner to the endeavor should be identified, quantified and valued. Then each partner must determine if other alternatives to acquiring these benefits - and there are always alternatives - are more or less valuable than those of a partnership.

3. Is my prospective partner the best candidate?
If, after thoughtful and analytical evaluation, you determine that you prefer the partnership option, remember, that decision isn’t the same as who should be your partner.

When President Lincoln said at Gettysburg that “…all men are created equal,” he wasn’t talking about business partners. The person you’re considering may not be suitable for your, or any other partnership.

Now here are three of my quick partnership questions.

4. Work ethic: Are we compatible?
All small businesses have more work to be done than people to do it. Don’t take a partner unless you know he or she understands and accepts this commitment.

5. Vision: Is ours compatible?
Your views on the development, growth and ultimate dissolution of the business don’t have to be identical, but they must be compatible.

6. Values: Do ours align?
If you had to rank all the considerations for forming a partnership, most of the factors could be moved around, depending on the circumstances. But the issue of shared values is always going to be the numero uno, default, go/no-go factor. No exceptions. Immutable. Non-negotiable.

If your values are misaligned, all the money and success in the world won’t result in a successful partnership. Believe me - I’ve seen more than one misaligned-values train wreck. It’s as ugly as ugly gets.

Value factors to consider include, but are not limited to: devotion to ethical behavior; how to treat employees; is regard for customers transactional or relational; intellectual honesty and sense of fair play.

Last two points: Don’t begin your partnership without a plan - in writing - of how it will be dissolved. If you read my recent column about neurotics and character disorder, never go into a partnership with someone who has the latter. Every problem will always be your fault.

Write this on a rock … Do the same due diligence on acquiring a partner as you would a business.

The small business ownership transfer challenge

One of the primary reasons most small businesses aren’t prospects for venture capital is because of incompatible thinking regarding the exit strategy. VCs expect to get their money back within a few years (less than 10 but closer to five) while a business founder typically thinks of running the business until he or she gets tired of it and/or retires.

Regardless of exit strategy goals, all business owners must think about how they’re going to exit the business they founded: selling to a new owner, going public, handing the reins to family members, or as in way too many cases, simply going out of business. But sadly, as much of a certainty as it is that a founder will exit the business, most fail to plan for this inevitability.  And the result of this failure to plan an exit often results in an expensive and painful scenario for the owner, and in the case of health problems or death, the family.

But all of this inefficiency, pain and brain damage can be prevented with a strong resistance to floating down that river called denial, plus some forethought and planning.  If you’re having trouble making this happen, your problem can be fixed by talking to professionals who know how to hold your hand and get you on the right ownership transition track, regardless of which exit scenario is most likely to be in your future.

Once you’ve come to grips with your ultimate departure from the business, you can start to accept that the way your business is operated and structured when you show up each day - let’s say, in the middle of your ownership tenure - will be different from the way it will look on the day you convey the business to the next holder of the keys, whether an arms-length sale or a family transaction.

Recently, on my small business radio program, The Small Business Advocate Show, I talked about the process of planning for the orderly and successful transfer of ownership of a small business with a member of my Brain Trust, Dr. David Gage. David is a leader in the field of business mediation, a founder of BMC Associates and author of Partnership Charter: How to Start Out Right with Your New Business Partnership (or Fix the One You’re In).

Take a few minutes to listen to this conversation and be sure to leave your own thoughts, including any business transfer stories you might have. Listen Live! Download, Too!

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