Scantlings

Anyone have any experience being in a business partnership?

Looking to put together a team of 4-5 people.

Make sure you're in charge.

I was in a partnership with one other person. My advice is make sure your partner is not permanently or temporarily insane. If people look at you when you announce your partnership and say "How the hell do you manage to work with her(him)?", consider that a warning sign.

Wife is in a 10 person clinical practice partnership with another 20 or so employees. The partnership is all women, has very few rules, makes decisions by consensus and pheromones, and scares the hell out of the lawyers.

that's funny. I did have a 'partnership' like that. Not so much insane as not really in touch with reality.

It's easy to be in charge. I learned by living with 4 women.

if you get my drift.

Orestes Munn wrote:Wife is in a 10 person clinical practice partnership with another 20 or so employees. The partnership is all women, has very few rules, makes decisions by consensus and pheromones, and scares the hell out of the lawyers.

nice

Bull City wrote:Make sure you're in charge.

What Bull said! Armies and Companies are organized the way they are for a really good reason, someone has to have ultimate authority and control.

Investment partnerships are often leaderless and suffer for it. I spent many years in a large investment partnership. Our first act each year was to reaffirm that the guy running the firm was the guy running the firm and that he could fire any one of he wanted to whenever he wanted to. As a result, the firm is 50 years old and still both growing and profitable. Almost all the competing firms died when the top guy died or got too old to run it.

If you can't fire someone who isn't working out - you're not running the firm.

Once, the two of us built a very large practice and nearly killed each other competing to not let the other down.

We were young, and had both been rugby forwards.

Since then, I have been the principal and everyone else was an associate.

Means more work for me, but it should also mean more profit, and much less hassle than a partnership for everyone.

Based on what I have seen be very cautious about involving family members in partnerships.

JoeP wrote:Based on what I have seen be very cautious about involving family members in partnerships.

Boy do I agree with Joe on this!!!

Well.....I have been in two very successful partnerships.

One with a guy who I hardly knew when we started (but he had a sterling reputation) and it lasted 21 years until I retired in Dec (Commercial General Contractor.)

The other with one of my brothers which is on going but we have a professional management company (California Real Estate).

Both VERY good and no problems. But I think we were just very lucky. Both of my partners were/are sailors.

Kim, you're missing (ignoring?) a key common factor in your partnerships - the "Kim Factor". You're a special sort of guy, which we all appreciate. The rest of us have to be more careful unless we're doing a partnership with you! (any time buddy)

B

I founded my company 25 years ago, my brother came in as partner a couple of years later. I'm occasionally frustrated with him, but he does a lot of crap for which I have no patience, and I can trust him. We are the only two who can sign checks, and I know he won't steal. That lets me go sailing for weeks at a time with some measure of confidence that the wheels won't come off completely while I'm gone.

Remember, there is no such thing as a good deal with bad people. If you don't completely trust the other people, don't do it. I don't care what a contract or partnership agreement looks like.

Contracts are meant to govern dealings among and between honorable parties, mainly to avoid confusion as to the rights and obligations of each party and to put in writing as clearly as possible both parties' understanding of the deal to avoid future conflict or misunderstandings. If the other party is dishonorable, there is no contract on earth that will protect you.

The character of the people you partner with is more important than their skill sets, and there is a huge difference between having character and being a character.

Kim mentions that he went into a partnership with someone he hardly knew, but who had a sterling reputation. In the long term, people pretty much inevitably get the reputation they deserve, for better or for worse.

Working in a world where only aggressive entrepreneurs succeed, but strategic collaboration is essential, I echo everything Rob says. Bad people will advance your interests for their own reasons, but sooner or later you get robbed or slimed.

I've been in several and made a lot of money representing disgruntled partners.
Two biggest issues - money and power.
Be sure you have common values, vision, financial expectations and goals. No one reads the agreement after it is signed until the sh*t hits the fan.

Agree that the 'Kim Factor' probably played into those situations

I'm especially interested in the "I hardly knew' part. How did you find that partner? I'm hesitant to do any kind of 'recruiting'.

Soñadora wrote:Agree that the 'Kim Factor' probably played into those situations

I'm especially interested in the "I hardly knew' part. How did you find that partner? I'm hesitant to do any kind of 'recruiting'.

I can't speak for Kim, but at my old financial services company we would actively hunt down folks with really good reputations in addition to great financial results. Frankly, the firm found me I didn't go looking for them. When I asked why they wanted an unproven operations type from the tech sector they replied: "We can teach you the investment side of our business, your parents taught you integrity." I was quite flattered, although my folks do deserve the credit.

What Kim and Rob said about trust is a very basic truth in all business dealings. If you don't trust the other person, don't think that a piece of paper will protect you. If you do enter into a partnership with someone you trust, and you're not going to be "in charge" then make it a 50-50 deal. Then if you don't agree on something, it won't happen and the two of you can decide to part ways.

Soñadora wrote:Agree that the 'Kim Factor' probably played into those situations

I'm especially interested in the "I hardly knew' part. How did you find that partner? I'm hesitant to do any kind of 'recruiting'.

I was recruited to be his partner by the founders of the company that he and I purchased together. We never had to re-read the agreement we signed after we signed it. (We were 50/50 partners.)

We never disagreed that we ALWAYS did what was best for the company as a whole (meaning best for all stakeholders, employees, customers, subcontractors, vendors, the community, etc.)

We took care of the company, and in the end the company took care of us.

It is not hard to judge someone's character from meeting them and then observing their style. I have seen Beau face to face three times. Then I followed his adventures here in Scantlings in buying and fixing up Mayan. I would go into a partnership with him without hesitation.

Fascinating topic. My only real experience is my boat partnership, for which the first clause is essentially "If owning this boat together doesn't make us better friends, we will sell it", followed by how any partner can force the sale of the boat:-) One co-owner is one of my oldest friends, one was less of a friend but becoming more so. At the end of a cruise I will ask him- is this working, are we better friends? So far the answer is yes. This is an unequal partnership- I own 50% (main hull) and they each own 25% (float).

+1 on integrity and the fact that you can't write a good agreement for bad people.

OK, Rick. I thought you and the family were selling everything and going sailing. Now what's the deal?

Tucky wrote:Fascinating topic. My only real experience is my boat partnership, for which the first clause is essentially "If owning this boat together doesn't make us better friends, we will sell it", followed by how any partner can force the sale of the boat:-) One co-owner is one of my oldest friends, one was less of a friend but becoming more so. At the end of a cruise I will ask him- is this working, are we better friends? So far the answer is yes. This is an unequal partnership- I own 50% (main hull) and they each own 25% (float).

+1 on integrity and the fact that you can't write a good agreement for bad people.

Hey Tucky,

Why don't you let the group know how you guys schedule the use of the boat. When we were visiting you I was struck by how unique it was and how effective it seemed to me. If I try to repeat it, I'll mess it up.

Sorry to put you on the spot, but I think you've got a brilliant solution.

Beau

Bull

There are a few on here who have followed my antics over the years. I have what could be referred to as 'Selective Quantification Identity and Rationality Levels Syndrome' or SQIRLS for short.

It drives some (most) people crazy with all my wild hairs. While I typically do follow through, it's a test of patience.

In this case, I have always wanted to be self employed. Don't get me wrong, I also appreciate the benefits and culture of a large company (see my rant earlier about employment). There's just something about having my own business that has always intrigued me. I've tried (and failed) several times. Each time I failed, I told myself 'never again'. But after the wounds heal, the desire returns. Only now, hopefully, I've learned from my mistakes. I know what my strengths and weaknesses are. I am looking for a partnership that would compliment those things.

This time around I have an idea that I think is the most solid idea for a business I've ever had. The market seems right for it.

But I would not be able to go into this alone. There's one very important person I need to represent this idea to and I better have most of it figured out before I even make any hints at the idea.

Soñadora wrote:Bull

There are a few on here who have followed my antics over the years. I have what could be referred to as 'Selective Quantification Identity and Rationality Levels Syndrome' or SQIRLS for short.

It drives some (most) people crazy with all my wild hairs. While I typically do follow through, it's a test of patience.

In this case, I have always wanted to be self employed. Don't get me wrong, I also appreciate the benefits and culture of a large company (see my rant earlier about employment). There's just something about having my own business that has always intrigued me. I've tried (and failed) several times. Each time I failed, I told myself 'never again'. But after the wounds heal, the desire returns. Only now, hopefully, I've learned from my mistakes. I know what my strengths and weaknesses are. I am looking for a partnership that would compliment those things.

This time around I have an idea that I think is the most solid idea for a business I've ever had. The market seems right for it.

But I would not be able to go into this alone. There's one very important person I need to represent this idea to and I better have most of it figured out before I even make any hints at the idea.

And that person would be a rather attractive Finn?

kimbottles wrote:

Soñadora wrote:Bull

There are a few on here who have followed my antics over the years. I have what could be referred to as 'Selective Quantification Identity and Rationality Levels Syndrome' or SQIRLS for short.

It drives some (most) people crazy with all my wild hairs. While I typically do follow through, it's a test of patience.

In this case, I have always wanted to be self employed. Don't get me wrong, I also appreciate the benefits and culture of a large company (see my rant earlier about employment). There's just something about having my own business that has always intrigued me. I've tried (and failed) several times. Each time I failed, I told myself 'never again'. But after the wounds heal, the desire returns. Only now, hopefully, I've learned from my mistakes. I know what my strengths and weaknesses are. I am looking for a partnership that would compliment those things.

This time around I have an idea that I think is the most solid idea for a business I've ever had. The market seems right for it.

But I would not be able to go into this alone. There's one very important person I need to represent this idea to and I better have most of it figured out before I even make any hints at the idea.

And that person would be a rather attractive Finn?

Though never in a business partnership my self I do work on a fair number of joint ventures and partnerships.

I would get the framework for an exit of a partner into the formation agreement. Sometimes life happens and there should be at least a basic understanding what an exit would look like.

I also like to think of companies in three buckets. Bucket one - it is failing (running out of cash and has no chance of turning around) so shut it down and move on. Second It is doing OK but not really really making a return on investment (exceeding opportunity cost), it has cashflow to keep running but all would be better off with a change, shut it down, sell it, recapitalize/ restructure and/or move on. Third, it works - then it should have plenty of funds to pay out funds to cover opportunity cost and thus keep the partners happy or at least buy one out.

I think people get way to tied up worrying about about how they missed say $50k of value in the first two rather than focusing on how they could go do something in the future with their time and energy (and gained experience) that will make $75k... I recommend having a philosophical conversation about these three and hear what a partner thinks should happen in each. I think that will tell you if you are dealing with a pragmatic realist or a "I need to get all that is rightfully mine type".

Soñadora wrote:Bull

There are a few on here who have followed my antics over the years. I have what could be referred to as 'Selective Quantification Identity and Rationality Levels Syndrome' or SQIRLS for short.

It drives some (most) people crazy with all my wild hairs. While I typically do follow through, it's a test of patience.

In this case, I have always wanted to be self employed. Don't get me wrong, I also appreciate the benefits and culture of a large company (see my rant earlier about employment). There's just something about having my own business that has always intrigued me. I've tried (and failed) several times. Each time I failed, I told myself 'never again'. But after the wounds heal, the desire returns. Only now, hopefully, I've learned from my mistakes. I know what my strengths and weaknesses are. I am looking for a partnership that would compliment those things.

This time around I have an idea that I think is the most solid idea for a business I've ever had. The market seems right for it.

But I would not be able to go into this alone. There's one very important person I need to represent this idea to and I better have most of it figured out before I even make any hints at the idea.

OK. Just checking.

BeauV wrote:

Tucky wrote:Fascinating topic. My only real experience is my boat partnership, for which the first clause is essentially "If owning this boat together doesn't make us better friends, we will sell it", followed by how any partner can force the sale of the boat:-) One co-owner is one of my oldest friends, one was less of a friend but becoming more so. At the end of a cruise I will ask him- is this working, are we better friends? So far the answer is yes. This is an unequal partnership- I own 50% (main hull) and they each own 25% (float).

+1 on integrity and the fact that you can't write a good agreement for bad people.

Hey Tucky,

Why don't you let the group know how you guys schedule the use of the boat. When we were visiting you I was struck by how unique it was and how effective it seemed to me. If I try to repeat it, I'll mess it up.

Sorry to put you on the spot, but I think you've got a brilliant solution.

Beau

FWIW, we don't schedule- that seems to be the soul destroyer of using a boat- having it on a schedule. We do plan cruises, races- anytime when the boat will be used for a period of time, and by their nature we actually hope everyone can do them, meaning my partners are my first choice of crew. For daysailing any partner just uses the boat- it took five years in my first partnership (with one of the two current partners) for both of us to sneak off work early on a Friday and try and go sailing at the same time. I got there second and he was gone. Actually he was just coming in so we hot swapped without dropping sails as we were laughing. We may call around to see if anyone can go or let everyone know we are taking family and the boat is full, but most of the time one of us just uses it.

Interesting reading in the WSJ yesterday about Zappos- the boss is trying to drive a new "holistic" style of management with worker circles and the like. 10% of employees have left. It reads like classic "re-education" to me with all the "oppression in the name of freedom" that implies, but I know WL Gore of Gore-tex fame has operated a very successful company for years with a very flat different management style.

Humans are pack animals with this heavy layer of intellect on top- dogs just sniff butts and one lays a heads over another's back and they are good to go. Lobsters, a little lower on the intelligence scale, also understand dominance, but they have no long term memory so they fight over and over. Probably a partnership lesson in there somewhere.

I like your approach, Derek

I have been pitching this idea to some of my closest friends. I suppose it would help if I had more than 2 or 3 friends.

That's not going to work. What are some ways I can 'recruit' someone with the means and interest to participate?