This podcast is required listening for anyone either in a business partnership or considering getting into one.
If you go into business with the wrong partner, or don’t build the right relationship with them, it can destroy your business. If you get the right partner and do things right and you can reach heights that you may never have been able to do alone.
Listen to Jack’s 8 tips on finding the right partner and building a great relationship
On today’s episode we cover…
- Do you actually need a partner?
- Do your due diligence
- “Don’t do business with friends”
- Set expectations early
- Get a legally binding agreement
- Rule from a place of logic, not emotion
- Communicate regularly (or get a therapist!)
- Surround yourself with people that support (not unconditionally agree with) you
Today’s topic is one that just keeps cropping up, whether it’s through friends, acquaintances or stories that I’m hearing and that topic is when partnerships go wrong.
It is just so so common for issues to arise in a partnerships and often great businesses are torn apart by disagreements between partners or co-founders. In the worse cases, people would rather see the business go down the drain than find a resolution that gives anything to the other party in a situation that is the epitome of ‘cutting your nose off to spite your face’.
I think these stories are really sad – I hate to see any business failing as every business was someone’s dream and baby and it’s just such a tough thing to have to deal with, mentally and often financially, when a business fails. When it happens for very avoidable reasons it’s even more sad
So today I want to talk about my top 5 points on how to find the right business partner and how to cultivate a strong working relationship with them.
Before we kick off I just want to highlight a few common situations that often crop up, that today’s podcast will help you avoid:
- Two friends start a business together and don’t worry about discussing the finer details of the arrangement or getting a proper MOU or shareholders agreement done. Later down the line issues arise when there are differences in opinion
- As the business gains value there’s a grab for extra shares, fueled by greed
- Resentment grows over the split of work or sales and whether it’s fair
- Roles are not clearly defined and people are stepping on each other’s toes
- Over time one person starts to get power hungry
- After going into business with someone you find out their background
Based on the many stories I’ve heard about partnerships going rotten, and also my experiences working with numerous different partners, here are my top five points.
OK, tip number 1:
Do you actually need a partner? Can you borrow money or get a loan? Can you start smaller and build up? Think carefully about what a partner brings to the table and
View your new relationship as you would a marriage. A business relationship is similar in so many ways: you may be spending more time with your business partner than your actual life partner, you will be raising a baby together (that baby being your business of course, not an actual baby) and you will need to understand each other well for it to work. Expectations will have to be set at the offset and if it doesn’t work out there could be a messy divorce that will require your assets to be split up, or custody of the baby being given to one parent.
You wouldn’t enter a marriage without being pretty sure that this was the right partner for you so approach a business partner with a similar level of caution and consideration.
Number 2: Do your due diligence on their background. If you don’t know them well, try to get references, see what google brings up on them or consider having a company do a full due diligence and background check on them.
This may seem a bit excessive but I’ve heard stories of one partner having a shady background after a business has been set up. You want to be sure that the funds of your partners are legitimate and there won’t be issues down the line. It’s good to understand the backgrounds of anyone you get into bed with and a few checks and searches you can know what you’re getting yourself into.
Number 3: Friends may not be a bad move. You may have heard ‘never do business with friends’, but I really disagree. I think a more accurate statement would be ‘do business with friends in the right way’. The big advantage to doing business with friends is that you’ll hopefully already have a big part of the due diligence done – you know their strengths, their weaknesses and the traits of their character that might cause problems down the line. These can then be addressed early in a way that you may not be able to do with someone you don’t know well.
I have friends who I think would make great business partners and I have some that I don’t think I would work well with at all. Doesn’t make them any less of a friend if we wouldn’t connect well in a business partnership.
Now, if you jump into a business partnership with a friend just because your mates and you get on really well, or you go out every weekend and have a great time together that’s when things can go south pretty quickly. Don’t skip any of the difficult conversations because you’re friends and you think you’ll be able to work things out down the line. I’ve seen great friendships and even family relationships ruined because a few basic conversations weren’t had at the offset, often just out of awkwardness or blind faith.
Bottom line – if you value your friendship or relationship then you will set up the partnership in the right way and have all the right conversations at the beginning.
Number 4: And that leads nicely onto number 4 which is set all expectations early.
Whether it’s a friend or not, talk in great depth about what your expectations are for the business, each other and yourself. What will happen if one of you wants to sell? How much salary, if any, will you both take? If someone gets more involved in the business how will that affect salary, stake or anything else?
This should be the case for any relationship you enter into. As BASE has grown as a company of 50 people I’ve started to get a much deeper insight into how relationships start, grow and develop and the one thing you should always do is set expectations at the start of any relationship.
This is the easiest time to do it and if expectations aren’t aligned then you can either work through it before you start or if you can’t reach agreement on key things then maybe it’s just not a good fit.
Two very reasonable people with all the best intentions can enter into a business partnership but when something happens a year down the line you may have very different opinions on how to deal with it. Both parties then have a big fall out and label the other person as unreasonable – but really, all it was was a difference in opinion that could’ve been addressed before day 1.
An example would be if someone wants to sell their shares to an outside party. You should both decide on if this can be done, if other shareholders get first refusal on the shares, if shareholders need to approve new shareholders. If this isn’t talked about then it’s not hard to see how issues could arise down the line
In the tech world you probably don’t need to say this so much as proper contracts are usually issued and these discussions are pretty much always had at the start, but in the fitness world it seems a lot more common to just skip all of this and hope for the best. Again, don’t be that person.
That leads us onto number 5 which is get a shareholders agreement written up. This is basically an extension of setting expectations but in a legally binding way.
Now hopefully you never have to even look at the shareholders agreement. The day you have lawyers combing through the contract is the day you’re probably in serious trouble but getting a proper shareholders agreement written up with the help of a professional forces you to address most outcomes, talk them through and if, god forbid, it does get messy at least you have some legal recourse.
I have heard my fair share of stories of gyms or studios not working and when I’ve asked if there was a sharholders agreement they’ve often said no. This is just suicide, so please do your homework on this and get it done properly.
I think it’s worth repeating here that I think the main reason for not doing all this from what I can see is simply avoiding awkward conversations with people. Your success as a business owner or manager of people is pretty much dictated by how many difficult conversations you’re prepared to have and how well you navigate them, so if you’re skipping the very first difficult conversation you need to have in business then think long and hard about whether business ownership is a path you want to walk down.
Number 6, manage the partnership from a place of logic, not emotion.
We’re not robots, we’re human beings, and part of that deal is that we get emotional about things. That’s fine and can of course be a good thing to help you connect with and inspire people, but the key difference is – are you being ruled by your emotions and making key decisions out of a place of emotion or a place of logic.
I’ve said my fair share of things from a place of emotion and it often doesn’t go well. In my poorer days now I still do it – send a message when I’m feeling stressed or annoyed about something and I usually regret it shortly afterwards.
If you’re just managing the whole company on emotion day in, day out then your relationships will slowly deteriorate and it’s no different with your business partner.
In the worse cases, when a partnership has really gone sour, I’ve seen people become completely out of control, willing to see the whole business go down the drain rather than find a compromise with the other person. This kind of suicide mission fueled by emotion is a dangerous place to be in – if this happens to you try and think ‘how can I manage this situation in the best way for my business’, rather ‘how can I win this battle or disagreement with my partner’. Think of everything you’ve built, the mission of the company and all of your employees – that should always trump the falling out you’ve had with your partner.
Sadly, some people are so angry, bitter or hell bent on revenge that they’d rather see the whole business get dragged through the courts or go down the drain than have a heart to heart with their partner to right the wrongs.
Now I know sometimes things happen that are difficult to remedy – but if everyone goes to the table with the right attitude then I believe almost anything can be worked out.
And for me – this is something I would look for in a potential partner – if things really went downhill and were in a bad place, would we be able to sit down and have a man to man or a man to woman talk, from a calm place not fueled by emotion or anger, and come to some kind of compromise? If I don’t think I could do that with someone in dark times, I would never consider going into business with them.
Number 7 and I think this kind of links nicely – sit down often and talk with your business partner. Ask each other if there’s anything else you can do for the other person, how they’re feeling about the business, if there’s anything they’re unhappy about, what they’re happy about.
When relationships fail it’s usually because of a lack of communication and regular get togethers can help with this. Make a pact at the beginning that if anyone is not happy about something they’ll raise it, and also that you’ll be happy to receive this feedback. Again, if you don’t think you can have that conversation with someone because they won’t respond well to criticism or it would feel too awkward, I would advise you strongly consider whether this is someone you want to start a business with.
I’ve heard of co-founders getting therapy together – which is quite an American idea – but I like it. And often as a pre-emptive strike – you don’t need to wait until you hate each other to do this, get some help early on to help understand each other better, how you work, how you respond to different types of feedback and the like. I haven’t heard of any business therapists in Asia but if anyone knows of one please let me know and I’ll link it in a future episode. Maybe I’ll even try and get them on the podcast!
So yeah, in summary, sit down with your business partner, break bread with them, have a drink whatever you need to do and have open and honest discussions about how you’re both getting on.
That leads us to my final piece of advice number 8 which is surround yourself with people who can give you some good objective advice on things. This applies to everything in business and life, but nothing more than business partnerships.
One of the common themes I’ve noticed amongst partnerships that have gone rotten is that one or both partners have someone yapping in their ear, feeding them poisonous toxins that are just feeding the monster.
If you’re surrounded by weak people they’ll fuel the drama or sometimes they might be well intentioned but they will tell you what you want to hear – which is often that the other party is wrong, needs to be taught a lesson etc.
If you’re surrounded by strong, informed people they will ask some probing questions to try and get to the bottom of what’s going on, they will try to see the other side and play devil’s advocate, they will not just blindly supporting anything you say, but trying to help you find a solution for your business that can allow everyone to move forwards.
Look closely at your friends, the ones you ask for advice – are they willing to tell you something you don’t want to hear, if it’s the best thing for you and your business? Are they willing to call you out if you’re being unreasonable?
If you’re surrounded by yes-men or yes-women and people pleasers who will feed your ego and the drama rather than be straight with you and try and find a solution then these people can really drag you and your business into the ground, especially in times of need.
So find good people who both know what they’re talking about when it comes to business and can look you in the eye and tell you you’re wrong or you’re being unreasonable. Be honest with yourself, look around you and if there’s no one who fits the bill then get a good mentor who’s going to give it to you straight.
OK, so to recap the 8 points.
That wraps up our podcast on partnerships. This is a topic I’m very passionate about as I’ve seen so many businesses and relationships go bad and I think most of the time it’s avoidable.
Please do get in touch and let me know your thoughts – did I say anything you don’t agree with? Did I miss anything out? Do you have any stories of great partnerships or ones that didn’t work out? I’d love to hear all about it so please do reach out – all my details are in the shownotes of this episode.
That’s it for today – If you haven’t already, please do follow us on Instagram at fitnessbusinessasia and you can also catch me their by dropping me a direct message.
Thank you for listening as always – don’t forget to share this episode with anyone that’s having a tough time with a partnership or – better still – someone who’s about to enter into one.
Have a great week, wherever you are, and I’ll catch you next time.