11 Essential Lessons From Going Into Business With People
Over the past four years, I have started 7 different businesses with fellow entrepreneurs.
All these businesses and ‘partnerships’ brought me new lessons and today’s post reflects on the Big Lessons these business journeys have provided.
But first some distinctions:
Partnership: A business owned and run by two or more partners.
Joint venture: It is temporary in nature and is terminated as soon as the venture is completed.
Shareholders: An owner of shares in a company – usually a limited company and shareholdings need not be equal.
Selecting a Business Partner Wisely
Business Partnerships are not unlike marriages – the separation (the divorce) can be very painful. So just like choosing a life partner, choose your business partners carefully.
I am regularly amazed at just how casually people end up in business together.
Most people would not marry someone without some serious getting to know them time. Yet, I find people who have barely met going into business with each other – especially in today’s digital marketplace.
Is your potential partner a positive happy person? How do they react under pressure? Are they the kind of person who is vengeful and vindictive? Beware of anyone who boasts about getting ‘one over’ in a previous business dealing – because chances are one day it will be you that they will want to get ‘one over’.
OK they may have a skill or money that the business needs but if you can’t get on or respect each other it is going to be challenging for both of you.
Before reading this list I should say this is not Legal Advice – it is some key lessons from a personal perspective – hire and pay a professional for advice.
Additionally one thing I see a lot of is individuals referring to each other as partners – when no legal partnership agreement exists. Beware of this term – in some parts of the world if a true partnership exists you could be responsible for the debts of your partner.
OK, on to the main points:
1) 50% of something big, is better than 100% of nothing
You could argue that none of the businesses I created with partners would have ever happened, if I didn’t give up some ownership share and control.
2) It’s less stressful when you share responsibility.
This is especially good if say one of you is the writer / creative type and the other is say more technical.
3) Most people will choose what they want to do, not what is best.
This is a BIG one – all growing businesses have challenges – the road to the top is not a straight up arrow and there will be things that don’t go as planned. It is in those times that people often retreat into their comfort zone and do the things they like doing rather than the things that need doing. They fail to prioritize and if you don’t watch out the business will fail.
As Drew Houston (the founder of Dropbox) says:
“It’s OK to have growing pains, as long as you’re prioritizing correctly and working to address them. Every company looks messy from the inside,”
4) Greed at some point usually takes over.
Strangely the more successful the business is the more reluctant some partners can be to share. This is why it is essential everyone knows their roles / responsibilities. For example in some ‘deals’ one individual may have the idea and put up the cash and thereafter have very little ‘work’ involvement while the other partner would on the surface appear to be working harder and sooner or later may forget it was the other partner who put up the cash / had the idea. As I say. it is essential to have an agreement on different roles clear and out in the open from the start.
5) Sometimes you have to admit defeat.
Give it your best shot – know in your heart you did your best but if for whatever reason it is not working out sometimes it best to cut your loses and move on.
6) Don’t rush to make any decisions.
But on the other hand don’t take days and weeks over something – but in my experience ‘sleeping on it’ (taking 24hrs) over a major decision can often be the wisest choice. Whatever you do – don’t make big decisions when feeling angry.
7. Everything needs to be in writing
All the important stuff needs to be in writing – make it a habit to record all major discussions and outcomes of discussions. Should there be a misunderstanding later – you can always refer back.
8) Open communication is paramount.
I can’t help my business partners solve problems if they don’t tell me about them. I can forgive people messing up, what is not acceptable, is hiding from it. Tell your business partner everything.
As Marcus Lemonis, – the “business turnaround king” and star of CNBC’s prime time reality series The Profit is quoted:
“If you guys can’t communicate as business partners, you can’t be in business together. If you can’t tell him what’s wrong, then you shouldn’t be in business together”
9) Take responsibility
I am responsible. Sure… other people may cause problems, but I was the one who put myself in that situation.
10) Communicate on the phone and in person.
I hardly ever get anything achieved over email. You often end up playing email tag, resolving things slowly, waiting for replies. (But of course once something has been decided – confirm in writing / email)
One person I use to be in business with, would often ‘forget’ what he agreed to. Every time he ended up owing me money, he would make it a point that I had to prove that we ever had an agreement. Everything we ever did was done on a handshake, which admittedly was a silly thing to do, but I get excited about my ideas and just want to push forward with them quickly. Hopefully I’m done making this mistake.
What amused me about this example is, everything was in my name, the domain, hosting, merchant and so on. He only ever had a problem with our verbal agreements when he had any control over what we were doing. See number 4.
I never had a problem with anyone when business is conducted face to face. It’s when you allow them to hide away, they see the opportunity to be dishonest.
11. Crazy people can be hard to spot.
People will tell you what they think you want to hear. They will paint the picture that they are happy, smart, sane and willing to work there ass off. Never go into business with mean people. Never go into business with people who must always be right!
In conclusion – it is important to be realistic in all business relationships. Of course with good due diligence you minimize the chances of failure – but sometimes it just doesn’t work out.
Our ability to handle failure and move on / start again is ultimately one of the most important success traits for an Entrepreneur.
I should also say Thank You to all my business partnerships – even the ones that didn’t work out. We are always learning..
And finally a great quote from John D. Rockefeller:
A friendship founded on business is a good deal better than a business founded on friendship.