How Many People Work With A Business Partner?

[actual99]

After posting my initial intro earlier in the week, I've been moving forward with the idea of an ecommerce brand and after casually mentioning it to somebody I use to work with he expressed an interest in the project and asked if I'd be interested in him coming on board. I told him to let me think about it and come back to him.

While having a partner means sharing profit, it also means I can move quicker, focus on my area of ability and have someone focus on theirs meaning we can get to where we want to be so much faster.

My gut is telling me that it's the right thing to do but I just wondered how many of you work with a business partner? Any tips for carving up areas of responsibility?

 

[Ryuzaki]

You nailed it:

• Move faster
• Gain synergy
• Share bigger profits

I'm very hesitant to bring on partners or do joint ventures because it's a treacherous path.

But it's a path you can keep safe by having clear expectations up front, written clearly in a contract, with escape clauses and "kick out my partner" clauses. This needs to include "parachute packages" which is basically paying them some fair compensation to go away, since their existing work will contribute to future success.

You'll also want to clearly define the roles for each person with a set of responsibilities. It's the filling of these responsibilities (or not) that go into the escape hatch and kick-out clauses. There should be minimal overlap and try to make the level of work and time match the equity you're giving.

Someone MUST be in charge and get the final say in decisions too. Someone needs to be the majority owner, like at 51% equity. A ship needs one captain, a captain that listens to the rest of the crew and weighs their thoughts in the final decision.

But yeah, I'm in a JV right now and we've done all of the above and it's working beautifully. My partner has certain strengths and I have mine, and we've delineated the work according to our strengths. We both make up for the other's weaknesses (or lack of time) and trust each other and don't have to worry about the other holding up their end of the bargain.

It works when you team up with the right people. That's never family, and rarely friends. Any back history and too deep of insight or casual-ness with the other person can end up with resentment and disaster, especially if someone starts trying to find a place to lay some blame. You want a problem-solver partner, not a pass-the-blame partner.

 

[actual99]

@Ryuzaki this is amazing insight and certainly a lot to think about, thank you. I've never come across the parachute package but it seems like a no-brainer. I'm going to jump on Zoom with him tomorrow to understand if he's serious and to start pushing forward.

To me it makes sense to break things up based on senior roles - CFO, CTO, CMO and based on our career histories it should be pretty straighforward - then as you say, appoint myself CEO as the one taking the lead.

 

[sunnyleon]

I wouldn't trust a JV without being sure that my partner would seriously need me and lack my skills to do everything alone. And seeing that I know a little bit of this and a little bit of that and I aint what you'd call a professional in anything.. well.. I just wouldn't be sure my partner wouldn't flee and take everything on his own. That's why I have a hard time even hiring VAs..

 

[Ryuzaki]

I wouldn't trust a JV without being sure that my partner would seriously need me and lack my skills to do everything alone. And seeing that I know a little bit of this and a little bit of that and I aint what you'd call a professional in anything.. well.. I just wouldn't be sure my partner wouldn't flee and take everything on his own. That's why I have a hard time even hiring VAs..

Where partners really become valuable is not when they lack the skills to do what you do, but that they lack the TIME to do it all at once. That's when you're fast-forwarding yourself into the future, by leveraging each others time. They shouldn't be able to do what they do AND what you do, because you guys are operating at that big level of "getting-shit-done-ness".

To circle back to the first point. You don't necessarily want a partner who has skills you don't and lacks your skills. What you're really looking for is expertise. Your partner SHOULD have a basic or intermediate knowledge of what you know, and vice versa, and could attain mastery given the chance. But why bother when the partner already has that mastery. Again, it's not about filling each others holes (tee hee), but complimenting each other's masteries.

You're not wrong in that being a "jack of all trades and master of none" isn't that valuable. It's good as a solopreneur but not as a team player. Your inherent value increases exponentially once you're the master of some aspect of what you're doing, and that's when you become desirable as a partner. Everyone can do a lot of everything, but few have the discipline and intelligence to master something. That's why you get a Ph.D in one discipline and there's no such thing as a "degree in a bunch of different stuff at an average level".

But as far as being hesitant to hire a virtual assistant... being paranoid is good, but there's two things you should know / should be doing to put an end to that worry:

• A VA is a VA because they don't want to do what you're doing or don't have what it takes or doesn't have the entrepreneurial mindset anyways. They're telling you that they just want to be a worker drone. That's 99% of people. You don't have to fear them taking your ideas, and if they do, you don't really need to fear them succeeding, let alone at a magnitude that hurts you.
• You should be compartmentalizing your work through roles so that no single VA can see the entire operation. They should have access to and understand only what is required to get their job done as a single cog in a giant "blackbox" machine that they can't comprehend.

Beyond that, you have to let go of control in favor of scaling. You have to let go of perfectionism in favor of scaling. You have to let go of paranoia in favor of scaling (and in time comes trust). You have to let go of emotional attachment in favor of scaling.

It really helps to understand why we're here and why we do what we do. When you strip away all of the onion layers about passion and contribution and creating your baby, we're here to make money. I don't mean that you shouldn't give a damn or should be okay with being a scammer. I just mean that the CORE reason you're doing this is to make money and have an abundance of it.

And if any of your excuses aren't in alignment with making more money than you are now, or getting more work done than you are now, then they should be discarded.

Day 1 of the Digital Strategy Crash Course is very clear: Business starts largely as a a game of psychology, and the battle you are waging is against your own mind. Until you get past that, you won't be getting too far in general. That goes for everything in life, really.

 

[MrMedia]

Day 1 of the Digital Strategy Crash Course is very clear: Business starts largely as a a game of psychology, and the battle you are waging is against your own mind. Until you get past that, you won't be getting too far in general. That goes for everything in life, really.

This in a nutshell.

It is genuinely tough enough to manage your own inner bitch most of the time without bringing a partner on board who in turn brings their own issues into the mix.

I have always been a lone wolf though so maybe that is just a personality type that I am super imposing on business but I find I get on just fine with me and 8-9 freelancers.

 

[bernard]

I've seen people have success founding a media company by themselves and then hiring people, but I've seen companies that were founded by partners much more often.

From what I'm seeing, the added workload of having to hire employees on your own, doesn't work well with having to be the main "make it happen" person. Which is why a business partner/co-founder makes more sense to me.

Personally, I want to find a business partner, who has experience managing people. Someone who is extroverted and good at managing people, but needs to be a worker as well.

It's going to be difficult to get talented people to join a one person, cowork space or single room office. I think it will be much easier to have like 3 interns join two founders in a larger office with a plan for their professional growth, but also for their social life. Have some office games, fussball table, game nights, going out to eat once a week and so on.

 

[Zach]

2 main benefits I receive from my partnership today:

1. someone who soaks up and excels at your weaknesses is sooo damn helpful, satisfying, and beautiful.

2. In the game of entrepreneurship, after you have the skills the game, it’s just a matter of remaining emotionally steady, patient, and positive as the roller-coaster goes up and down. Having that partner to lean on when you personally are in the dumps and vice versa is incredibly helpful.

My business would not be nearly as successful if it was solely up to me to bear the weight all day every day. Lone wolf guys so rarely win big.

 

[gschmidtus]

The benefits you can get are already stated as are some of the downsides.

I had a few businesses over the years where I had partners and others where I had none. The ones with partners always failed if expectations weren't clearly set and established from the beginning and the roles weren't super-clear. Also, figure out what your goals for the business are and what both of you define as 'Done' and 'Finished' and what is 'Success' vs 'Failure'. Not being aligned on those things will steer the partnership in my experience right into a cliff (or down a cliff).

Also, based on my experience, a partnership can only be successful if you complement each other. If you're both into design then you'll end up fighting over design but nobody takes care of implementation, marketing, sales, etc. It's not that your background has to be different, it's that you have to be clear on roles. Even if you both are designers, then only one should be responsible for the design while the other takes care of other aspects of the business.

If you can get to that point with your partner that your goals are aligned and your roles are synergetic and you both have the same final goal in mind then it can be a wonderful and successful partnership. Otherwise, you might be better off to hire/outsource the talent/roles you need when you can.

Just my 2 cents.

 

[Steve]

I think it probably depends on your own skills and personality.
For me, having someone to bounce ideas off, split the workload, and crucially keep each other motivated is priceless.

I whole heartedly believe that momentum is the most important aspect of a successful project - I preach this fact to anyone who will listen, but I know deep down, if left completely to my own devices, I would procrastinate or get stuck on minute details far too frequently.

Perhaps its some mental deficiency, perhaps I'm "just not hungry enough", whatever - I accept who I am, and have solved my problem completely, by working with partners.

 

[MrMedia]

My business would not be nearly as successful if it was solely up to me to bear the weight all day every day. Lone wolf guys so rarely win big.

I beg to differ

 

[Zach]

@MrMedia

Yes I dig the solo + managed freelancers route as I actively use that method. My partner and I manage totally different areas of our business, so I am a bit of a partial lone wolf myself. Currently I work with like 4-5 freelancers (each specialists in their own area) and I know just enough to drive strategy. Some freelancers are more autonomous than others.

I've totally given up on the TRUE lone wolf strategy of "do it all yourself" it's just dumb to be an expert in it all. Jack of all trades, master of none. In my role I like to be a master of strategy and analytics, which I believe let's me be a good judge of results + direction for each individual freelancer and the 'center console' of the whole process.

Our coming together moments are mostly about getting excited and consoling each other when we're down. Freelancers of course wouldn't be there for moments like that.

I agree - successful entrepreneurship is about mastering YOURSELF, your inner bitch is the real enemy at play.

A partner sometimes complicates winning that war. But sometimes the pros outweigh the cons or make it so you don't NEED to master your inner self as completely.

The most successful guys I know that are all worth 9+ figure guys (each!) and they ran all their businesses as a 4-way partnership for the past 20 years. Talk about trust! I think they've all benefitted from having a 'round-table' styled decision-making process where they vet ideas and keep each other focused on the right things.

 

[actual99]

So I thought I'd drop an update following on from all the helpful advice above. There was a point where I was really tempted to go it alone and push on myself as he wasn't moving fast enough. What I would says is that if I was on my own I would have been much further down the road by now but I decided to wait for him.

Here's some notes about our partnership setup that might help others in a similar situation (a lot of this is solid advice from everyone above):

• I am the majority shareholder so the final decisions are mine.
• We have clear expectations in place about roles, responsibilities and hours of works
• He currently owns 20% of the company, I own 80%
• We have a buyout clause in our agreement with the option to be either bought out in cash or earned out.
• There's a non-compete clause in the agreement.
• I am the only one to draw salary as it's a full-time thing for me (he gets salary when he is full-time)
• We are both paid a quaterly dividend bonus.

I'm lucky that this guy is an amazing product designer for the industry so our roles are really clear - his focus is on design work and organic social, mine is everything else (as it's my only job).

 

[CryptoDavid]

So I thought I'd drop an update following on from all the helpful advice above. There was a point where I was really tempted to go it alone and push on myself as he wasn't moving fast enough. What I would says is that if I was on my own I would have been much further down the road by now but I decided to wait for him.

Here's some notes about our partnership setup that might help others in a similar situation (a lot of this is solid advice from everyone above):

• I am the majority shareholder so the final decisions are mine.
• We have clear expectations in place about roles, responsibilities and hours of works
• He currently owns 20% of the company, I own 80%
• We have a buyout clause in our agreement with the option to be either bought out in cash or earned out.
• There's a non-compete clause in the agreement.
• I am the only one to draw salary as it's a full-time thing for me (he gets salary when he is full-time)
• We are both paid a quaterly dividend bonus.

I'm lucky that this guy is an amazing product designer for the industry so our roles are really clear - his focus is on design work and organic social, mine is everything else (as it's my only job).

Can you elaborate a bit on the "earned out" option?

 

[actual99]

Can you elaborate a bit on the "earned out" option?

I'll try but I admit I don't fully understand it myself and this is certainly not legal adivce...

Essentially we've been advised that in the event that one of us wishes to buy the other out of the business and control 100% of the company we need to get an independent evaluation of what the business is worth to allow us to understand the value of what each of us own. If the company was worth £100,000 and I own 80% then my share is worth £80k his is worth £20k.

In the event my partner wants to leave, I either need to pay him £20k which can be done by either cash (giving him £20k from my quarterly dividend if there's enough) or 50% of the buy out value with the other 50% to follow in the next quater.

So, in the event there's not enough in my quaterly dividend to cover the buyout (say there's only £10k) I can give him that then another £10k from the next dividend payout. The deal would be stuctured so that once he recieves the first 50% of the buyout, he steps away from the company and no longer retains any control but legally there is a contract between us that allows me to "earn" the second half of the payment over a three month period to then make the second payment.

There are some other bits in there to prevent him demanding more should the company value increase once he's stepped away from the business.

Hopefully I'll never need this as the real idea would be to sell lock-stock to a 3rd party but I always believe in planning for the worst.

 

[CryptoDavid]

I'll try but I admit I don't fully understand it myself and this is certainly not legal adivce...

Essentially we've been advised that in the event that one of us wishes to buy the other out of the business and control 100% of the company we need to get an independent evaluation of what the business is worth to allow us to understand the value of what each of us own. If the company was worth £100,000 and I own 80% then my share is worth £80k his is worth £20k.

In the event my partner wants to leave, I either need to pay him £20k which can be done by either cash (giving him £20k from my quarterly dividend if there's enough) or 50% of the buy out value with the other 50% to follow in the next quater.

So, in the event there's not enough in my quaterly dividend to cover the buyout (say there's only £10k) I can give him that then another £10k from the next dividend payout. The deal would be stuctured so that once he recieves the first 50% of the buyout, he steps away from the company and no longer retains any control but legally there is a contract between us that allows me to "earn" the second half of the payment over a three month period to then make the second payment.

There are some other bits in there to prevent him demanding more should the company value increase once he's stepped away from the business.

Hopefully I'll never need this as the real idea would be to sell lock-stock to a 3rd party but I always believe in planning for the worst.

Wow, this is super complicated.

I mean, especially the valuation part, what the hell! That can cause all sorts of issues. He may not agree.

What are you going to do? Spend money to get a third party to evaluate it so there's no argument and even then there can be an argument over the amount?

So this falls into what we were talking about, parachute packages. To me this sounds horrible, but that's me, I hate bureaucracy and things that can go wrong even after 1000 of contract and agreement pages.

@Ryuzaki and @actual99 talked about parachute packages, maybe they have better ideas.

I would prefer something along the lines of a percentage of a profit for X amount of time.

At least easier.

I also don't like the idea that your partner can't complain about the value of the company rising.

Isn't this the whole premise? His work can result in future growth for the company, so it' doesn't make sense to have him exit and then only have the right to the current value.

I see this as being counterproductive and not well aligned with people's interests.

 

[liam magu]

After posting my initial intro earlier in the week, I've been moving forward with the idea of an ecommerce brand and after casually mentioning it to somebody I use to work with he expressed an interest in the project and asked if I'd be interested in him coming on board. I told him to let me think about it and come back to him.

While having a partner means sharing profit, it also means I can move quicker, focus on my area of ability and have someone focus on theirs meaning we can get to where we want to be so much faster.

My gut is telling me that it's the right thing to do but I just wondered how many of you work with a business partner? Any tips for carving up areas of responsibility?

Hey hows it going, did your partner work out?

 

[Bucksfu]

If you have partners, be sure to form a corporation or LLC. (This is in the U.S., anyway).

Here's the ugly truth about partnerships: If you're in business and you don't form an LLC or corporation, you are a sole proprietor by default. That's bad enough by itself. You could hire a bad employee or have a business dispute or your employee could run over someone in a crosswalk while picking up a laptop from the repair shop for you, and you're personally liable. There's no separation between you and your business debts, lawsuits and judgments.

Now, suppose you have a partner. If you are in a partnership and you don't formally establish a corporation, limited partnership, or LLC, then you have a General Partnership by default.

This is very, very bad.

Now, not only are you personally liable for your business debts... you are also PERSONALLY liable for your idiot partner's PERSONAL debts.

And even if your partner's not an idiot, his or her teenage kids probably are, because all teenage kids are. Except they're idiots who drive, drink, and can do a lot of damage.

So let's say you have a partnership. Things are going great. You make some money. You have assets. You buy lots of cars and keep lots in investments and brokerage accounts. Your partner buys a house in Florida and lives in it for a while.

His 16 year old kid has a party when his parents are out of town. The kids get a little rowdy, and there's alcohol involved. One of the kids has too much to drink at the party, and drives home. In so doing, he pulls a Ted Kennedy and kills another teenager. Or a young up and coming worker supporting a family.

Guess what: Since you are both general partners, you are both JOINTLY AND SEVERALLY LIABLE for each other's business and personal debts.

The accident victim's family sues, and gets a judgment. With punitive damages. Your partner has money, yes?

Well, kind of. But it's all in a homestead in Florida. It's protected against creditors. (There's a reason O.J. Simpson bought a big house in Florida - he was shielding his assets against the Goldman family's imminent wrongful death suit).

So the plaintiff's lawyers are going to look around to see where the money is.

That's you.

Without an LLC or corporation insulating you from your partner's debts, you're on the hook.

And not for just half of it. Not for just the percentage of it that you own in the general partnership.

You're on the hook for the whole kit and caboodle.

OOF.

Same thing can happen if your partner causes a wreck. Or his alcoholic wife (that you didn't know was an alcoholic). All these things expose you as a general partner.

Oh, it's not a big deal because neither of you have any money? WRONG. If the plaintiffs get a judgment, they can get a charging order. They can levy bank accounts down the road, when you DO have money. They can potentially garnish your partner's wages... and YOURS.

So if you don't have money now, they'll work hard to keep you in the hole so it's a long time before you ever do have money.

I'm not a lawyer. But I think any U.S. lawyer will tell you I'm right... staying in a general partnership is nuts.

Don't take on risks you can't afford to lose.

Pay the fee, and create an LLC.

 

[geobak]

Before joining forces with my business partner we were both running as solo affiliates for years making good money individually.

We realised that if we wanted to scale and build a real business it would be better to do it with a joint venture since we bring different skills to the table and we complement each other.

My partner is one of the best I know with media buying and paid advertising and I am good with business development, identifying opportunities and finding the next trends.

 

[Shaunhi]

I've tried in the past and it didn't work out. I think our personality types were different. We ended up wanting to go different directions, and the workload was split unevenly (our fault). Not sure I'd try it again. I'd rather give someone equity to help me scale further, but it's my business.