Thinking of finding a business partner? Maybe you and a good friend have an idea for a new business? Or maybe you had a business partner in the past, but the company went south.
Today, I’ll be sharing my take on partnerships. You'll have a chance to hear not only my personal experience, but the stark statistics on these dynamic duos and trios.
I have started 7 businesses producing $25 million in revenue. Six of them have been partnerships. And of those six, all of them ended in ways that were not what I expected.
There was pain, loss, confusion, unmet expectations, frustrations, hurt, and even legal issues. It makes me think of Dave Ramsey’s quote on the topic:
"The only ship that won’t sail is a partnership."
Statistically speaking, partnerships don’t work in the long run. Forbes says that over 80% of partnerships fail within 3 years. That's even worse than our country's divorce rate!
But as you listen to today's lesson, you'll realize it's time to stop fooling ourselves that partnerships make running a business easier. That’s a lie. Partnerships can once in a while make a business stronger. But never easier. A partnership is work. And to be honest, if you get into a partnership, you'll likely spend 25-40% of your time managing the partnership instead of building the business.
At the core of my argument, listeners will likely realize: Successful partnerships require a level of maturity, patience, and time most entrepreneur-minded folks don’t have.
Show Notes: The 5 Common Excuses People Use To Justify Partnerships
1. Self Ignorance
You think you are partner material. You think you work well with others. But you don't. Deep inside, you’re a lone wolf leader. Or more commonly known as an A-type. And A-types need to be allowed to be a-types. Because if they don’t, two things will happen: First, they hurt people with their intense spirit. Second, their speed and intuition will be hindered ultimately slowing the overall success of the business.
2. Professional Impatience
We often take on partners to speed up the launch process. We think, "They can help. They can split the cost. They can make the right introductions. We can get twice as much done." That’s great in the beginning. But I bet more often than not, if you just slowed down, saved more money, worked harder, and flexed your patience muscle you could do everything all on your own. Instead, hire some help. Ask for favors. Bring in an intern. All worthy solutions for speeding up without giving up the pie.
3. Flawed Generosity
I often hear business owners talking about employee stock option pools or giving stock to high performers or bringing in a qualified leader for "X" percent. Stop it. Don’t let the world make you feel guilty about it either. Remember, this is coming from the guy who wrote a book called People Over Profit. You don’t give up stock. This is your business. Giving up stock only happens in an emergency. If you want to offer incentives give people bonuses, commissions, profit share agreements, more vacation days, take them to dinner, buy them a company car. But don’t give up stock.
4. Lack of Business or Finance Knowledge
People think, “I don’t know enough to start a business so I’ll have to partner with someone who does.” While this might be partially true, the solution is wrong. This is the entire reason I launched StartupCamp. College is no longer a viable solution. Reading random books is tough. Finding a business mentor is even harder. But the good news is entrepreneurship is a learnable skill. For example, our 12 month curriculum will walk any aspiring entrepreneur step-by-step to launch your own business within 5 months. Then, we will spend 7 months making it fail proof. Don't get a partner and give up a portion of your company when you can learn everything you need to know for $99 per month.
5. Low Self Confidence (Most Common)
I can’t do this by myself. I need help. I’m not smart enough. Skilled enough. Brave enough. I’m here to tell you that all this is a learned mentality. Starting your own business (key word "own") will be a great exercise in self confidence. By taking on the journey solo, you'll quickly realize you're far more capable than you give yourself credit for. Trust me, I’ve seen everyone from moms and college students to part time electricians and full time teachers start their own business. Low confidence is a hurdle but not a stopper. And definitely not a valid excuse to bring in a partner.
So the lesson is this: There are many ways to motivate, engage, and work with people without partnering. You could form a joint venture agreement, A revenue share agreement, A profit pool, a commission program, a performance bonus or any other imaginative working model.
What are your thoughts on partnerships? Have you been able to hold a partnership for longer than 5 years? Let me know about it in the comments below.