Starting a Business Part 2 – Partnerships

Starting a Business Part 2

Revisiting my earlier note about Starting a Business – Cash Flow and I see that I promised a book. I have no idea how people find the time to accomplish such lofty aims, but I’m sure it has something to do with time management. Regardless, besides seeing that a book was promised, the hint that was offered was in regards to cash flow. Get those dollars in your hand right up front. It’s venture capital from your customers, so treat them right.

I have another thought for you regarding startups. This time it’s about partners.

Around age 25 I worked for a little advertising firm. It was 2 partners, a part time graphic artist and 2 commissioned sales people. I was one of them. I have suppressed most memories from that time period, but one thing stuck with me: a business partnership is like a marriage.

It didn’t mean all that much at the time because I was newly hitched and still figuring out what goes into which drawer. How bad could it be?

I entered into my first partnership a few years later. I kept that advice in the back of my head and maybe even mentioned it to my new partner. This is going to be an emotional thing. So we did what all good marriages do and we split the company 50/50.

Lesson 1 about partnerships: 50/50 doesn’t work. Someone needs to be in charge.

This probably happens in most marriages too. I get to make some calls and my lovely bride gets to make all the rest of the calls. A startup is like a marriage with a lot more lawyers and accounting going on. You’re trying to create an entity that takes raw materials and turns them into something worth more than the sum of the parts. If you do it right, there should be some profits left to split at the end.

Now, if you want to  set up the company to split profits 50/50 at the end of the year, I’m all for that. Don’t confuse that with what I’m trying to get across which is the fact that someone needs to be in charge. 51/49 works. Just put someone in charge. Have the nearly impossible discussion up front and get comfortable with it because you’ll be having that discussion at some point in the future.

Work it out. Put someone in charge. You’ll thank me.

Lesson 2 about partnerships: be willing to walk away. I’m terrible at this one because my desire to know if an idea is going to work is stronger than my desire to take care of my self interest. I hate to walk away.

Being willing to walk away doesn’t mean that you have to abandon the big idea. You just need to open to other ways to accomplish your goal. You bring certain skills, your partner brings certain skills. You bring some dollars, your partner brings some dollars. It’s perfect but trust me, be open to other arrangements to help you realize your dream. Be open to them.

Why the willingness to walk away? It helps you make better decisions. Increases your ability to come up with new solutions to your problems.

Speaking of problems. . .

Lesson 3 about partnerships: it’s all about the trust. Things are going to go wrong. You’re going to need twice as much time and three times the money you think you do. Growing a new business takes a lot of time and effort. Long hours and a million second guesses.

When the chips are on the line, you need to believe that your partner means well. You have to trust them implicitly.

Trust doesn’t come easily. On top of that, you can destroy trust with a single decision. Bam. Just like that.

So work hard to keep the trust.

3 lessons about partnerships. Put someone in charge. Be willing to walk away. Trust implicitly.

My last note about partnerships?

Don’t do it. Go it alone.

Good stuff.