business partnership

A Quick Guide to Forming a Productive Business Partnership

Last week, I got the great news that AMS was finally a licensing company.

The news officially went live on the net via this post on Endurance Sportswire.

We’re licensing our Viking Dash series to a company in California known as Spectrum Sports Management. They are known for doing fun and unique runs. Viking seems like a great match for them!

That said, as a board, we didn’t jump to this decision quickly. We had a list we used to make sure we found exactly who we needed to help further this brand.

Because partnering is no easy task. It needs to be treated with care in who you’re choosing – you have to be particular with whom you’re bringing on or negotiating a contract – such as a license – with.

So in today’s post, we’ll be looking at some of the things you should consider in partnering with others in a new business venture.

 

Matching Values

One of the things I’ve noticed over the years is that when people are building romantic relationships, many people do so with someone they don’t share values with. I know for me, I had a list of 100 some traits and qualities I was looking for when I met and started dating Maria.

She hit on a good number of them. In retrospect, I’m pretty happy I made that list. Thanks LTD for the giving me the idea! 😉

The same thing should be done when looking for a partner in building a business. You need to have a list of qualities that you believe are important in someone who’s essentially going to be another spouse of yours in many ways. Your business is the baby in this situation.

So just like if you were dating, you need to be asking certain questions to find out if you align. However, I wouldn’t go doing it in an office – that just has interview written all over it.

No, instead I’d opt for something informal where you’re just getting to know each other. For me and Maria, we had tons of coffee “dates” where we would just chat and find out more about each other.

Same thing can be done when starting a business.

 

Ideas for Questions:

“Date” questions for a potential co-founder should get to not only find out about their character, but also their business savvy.

Here’s a few examples that I’d ask when seeing if someone lines up with your believes:

  • What do you want out of a business?
  • What do you like about this particular idea?
  • Where you see this business going?
  • Where do you see your role in 2, 3, or 5 years?
  • How do you find good employees when you’re ready for that step?
  • What are you expectations of an employee?
  • What are you expectations of me?
  • Is there anything that I should know about your family that might cause periodic issues with your ability to help with the business?
  • How do you feel about the business contributing to nonprofit or political causes?

 

Complementary Skills and Personality

When I was searching for my wife, I knew that I wanted someone that was intelligent but I also knew that this person had to have a complementary skill set.

I know there’s just some things that I have no interest in doing or am simply not good at. I was talking to Albert about this in a recent Ascension Council meeting and mentioned that there are some things that Maria does 100x better than me – or cares about things that I don’t:

  • Making the bed everyday
  • Laundry
  • Tidying up

Albert and I both prefer organized chaos – but that’s because we’re both idea guys. Our wives seem to be more of the executor types.

In a business situation, you need to be looking for this at all different levels – but it’s especially true at the cofounder level.

As John Maxwell says, “Take advantage of your strengths, and hire for your weaknesses”. Well in this case, you’re not hiring – you’re partnering! It’s going to be even more important here.

  • So if you’re broke, you need someone that has money.
  • Are you good at creating? Then you’re going to need a marketer.
  • If you’re good at design, then perhaps your partner needs to be good at writing code.
  • Are you a strong Dominant (D) personality? Then you’re going to need someone who’s supportive. Or if you’re a the Calculative (C) type, you’ll need someone who’s Imaginary (I).

Of course there’s examples out there where having two or more founders have similar skills, it’s not often the case. The more well rounded the leadership is, the better this thing is going to have!

 

Start with the End in Mind

Earlier I wanted you to make sure you asked questions that were pertaining to the future of the business. The reason for this is that if you do end up doing well with the business, then there might come a time where you’re thinking of an Exit Strategy.

The Exit Strategy needs to be in stone at the beginning. The business you and your partner(s) are building – are you going to hold onto it as a lifestyle building business? Or are you going to build it and sell the right of the business if a bidder comes along with a ton of money?

Or, perhaps another case is that you need money to keep the thing going – you consider starting to sell stocks vs “keeping it in the family”. Are either of you the type that wants the opposite of what the other wants?

This is stuff you want to consider.

 

Background Check

When Maria and I were dating, she asked me a ton of background check questions. Did I have kids? Was I a convict? Did I have chicken pox? Well… maybe not that last one – but you get the idea!

Anyway, you want to do the same for your future business partner as well.

Find out the answers to these questions:

  • Does the candidate move from project to project without getting anything done?
  • Have they ever owned a business themselves or ever been part of a successful one?
  • Have they ever had financial issues?
  • Do other people get a bad vibe from them?

 

Just remember that no one is perfect and sometimes troubled pasts make a person that much more committed to what they’re doing now with their life. Sometimes people actually learn from their mistakes. If they have had a spotted background, see what they’ve learned from it.

 

Take Them for a Test Drive!

Well, not literally, of course. But if you’ve never worked with this person before now, you need to see what they’re like with other projects.

In the dating world, you can continue to date. I know for Maria and I we just felt like we were long lost friends. Really, the only thing we ever have quarrels about are our dogkids and whether or not they were sleeping on the bed recently or not. I imagine that in the future, when we do conflict, it’ll probably be about the kids!

In business, you want to have this trial time as well – even if it’s with friends you’ve had forever.

Start a working relationship and see how things go in smaller projects. Find out if they’re as committed as you’d like. Are they flaky about time? Do they even have the same vision as you? Maybe they’re just too naive about certain things that might drive you crazy?

These issues can mount up over time and you should know about them first before you build something on a larger scale with them!

When you believe it’s time to move to the next level, make sure you get a founders’ partnership agreement. It should include things like:

 

  • The contribution and obligations to the company of each party
  • How long a party must be with the company to vest in percentages of their promised ownership
  • Whether partners can be fired or bought out and under what conditions
  • What voting percentages are required to validate any of these actions
  • Any other issues unique to the business

 

If a partner is reluctant to put something as big as this agreement in writing, then there’s a big red flag there.

I mean, it’s like going without a prenuptial agreement in a marriage after you already have a fortune. It just doesn’t make sense!

 

A Special Note About Friends as Business Partners:

One of the original people involved in AMS was recently in a lawsuit with us. Needless to say, he’s no longer considered a friend after what he did and wasting the time of all parties involved.

The thing is – you can’t predict what’s going to happen down the line.

So here’s a few tips with this.

You need to realize that if you do decide to get in business with friends, that things can potentially go south and the friendship will more than likely go that way too.

Don’t ever go into business with family or friends just because they’re family or friends. Again, make sure you take time to test them out first. Just because you know someone as a friend, doesn’t mean you know them as a business person.

If a friend screws up bad once and promises that they’ll correct their ways, you can give them a second chance – you still like them as a friend. A great way to make sure it doesn’t happen again is to draft a secondary “social” contract with them saying what they’ll do to make up for how they screwed up. Another part of that new contract needs to mention what will happen if they do screw up again. Let them help make it so they believe it’s fair punishment as well.

 

Action Steps:

If in the future you find yourself negotiating partnerships, make sure you give it some deep thought. A business is a baby and if it has multiple parents, it needs them to work together and not fight about little things all the time or one getting the short end of the stick.

When you have great partnerships from the beginning, anything is possible. However, that said, if you have to carry dead weight – then it’s going to be twice as hard.

Have you had a partnership that worked extremely well or fell apart? Have any questions or comments about this post?

Let me know below!

 

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