unless you are both completely okay with one partner being a little more dominant, or doing the more “glamorous” work, beware. This leads us to the second problem …
One Partner Is Simply Better Than the Other
I’ll be blunt: I wouldn’t make the greatest business partner for most people in a small business. (However, international corporations wanting to explore seven-figure marketing deals, please feel free to call.) In a nutshell, I’d have a pretty bad attitude, because I would expect my partner to be just as focused as I am. If you aren’t, and you’re my partner, there will be friction. And I’m pretty well focused on business these days.
This happens all the time in partnerships. One partner is usually more “into it” than the other. This breeds resentment, and it’s the beginning of the end. Both partners have to have the same mindset regarding skill, work ethic, motivation, drive, etc.
Another example of an unequal partnership is one formed with a “hanger-on.” A hanger-on is a friend/family member/acquaintance who wants in on your business when you tell him or her about your plans. Such people know that by hitching their wagon to you, they have a shot at doing something they could not do on their own. They want to be a part of your success, and don’t want to be left behind.
Beware of this. Such partners are anchors waiting to drag you down. I’ll be honest: If neither of you can run a business on your own, it’s probably not a good idea to partner up. So cut loose the hanger-on.
Friends and Family Members in Business
Another reason partnerships fail is because being in business with friends or family members is a very difficult thing for most people to pull off. Many partnerships are formed by two (or more) friends who decide to go into some sort of business together. The “not going it alone/feel good” motivation is strong here, and because the people are friends, they assume they will be able to resolve just about any issue. Well, that never happens. Here’s why: Money and work change everything.
They say, “Don’t loan money to friends.” They also say, “Don’t hire friends.” There are good reasons for these sayings: money, work, and friendships do not mix. It’s easy to plot out your partnership when you are broke and in the planning stages. When there’s nothing at stake, everything is easy. But what happens when the business starts to grow? Once decent sums of money (or debt) are involved, opinions will always differ, and being friends makes it harder to lay everything out on the table.
I had bosses that were not shy at all about telling me what they thought of me (it was never good). It was simple for them — they were my bosses, not my friends (thank God). But try telling your friends they aren’t pulling their weight. Or their brochure design is lousy. Or they blew a big sale because of their personal problems. Or a million other little things. It’s not so easy. And problems that fester will start to eat away at any business. This happened in my first business — I felt like I did all the work. I’ll bet Jim felt that way too.
Partnerships That Can Work
Okay, now that I’ve basically doomed 90 percent of all partnerships, here are a few situations where they can work.
One partner has money, and will mostly remain silent
If one partner provides funding and understands this is an investment and not a guarantee, a partnership of this nature might work. This is more of a business relationship than “friends in business together” (which almost never works). The “money” partner can be involved in big decisions, but leaves the day-to-day running of the business to the other partner.
There is a true division of clearly defined skills
A computer programmer who gets together with an artist and a writer to create a video game is a good example of a meeting of the minds where everyone brings different, vital skills to the table. An accountant/business manager teaming up with a skilled mechanic to open an auto repair business is another. But for this to work, everyone has to have true skills, not the vague “I’m more creative, so I’ll do the marketing.”
Two professionals passionate about their work get together
When I say professionals, I mean people truly passionate about what they do. I mean two computer programmers working nights developing a new program, not only because they want to be in business, but because they love programming. I’m talking Bill Gates and Paul Allen, for example. I am not talking about an assistant manager of a greeting card store and a laid-off welder who say they are passionate about fixing cars. If they are so passionate about it, why weren’t they doing it before? I’ll bet 99 times out of 100 that last example is doomed to fail.
Husband and wife
For some couples, a business partnership can work rather nicely. If the marriage is strong, it’s already a partnership. If you can make money together as well, all the better. In my business, I am the primary worker and my wife handles all the administrative work. While we’re not officially a partnership (we’re a corporation now), it works very well for us.
* * *
So to repeat, my advice is to forget about forming a partnership unless it fits into one of the four preceding categories. However, I realize the “not going it alone” motivation is very strong, so if you must have a partnership, do yourself a favor and go to a lawyer and have him or her help you draft an agreement. Spell out duties, expenses, division of assets, etc. You’ll be better off in the long run.
5
Forget The Business Plan … But Plan For Your Business
If you start a business, invariably the topic of the business plan will come up. Be it a relative, a business consultant, a banker … at some point, somebody will ask you, “Can I see your business plan?” They ask this in the same accusing tone that a 1980s border guard would use when asking for your identification papers as you tried to leave East Germany. It’s enough to make you literally squirm with discomfort.
For the record, a business plan is a fairly detailed and complicated document of significant length that states what your business is, what it will do, who it will sell to, who needs your product/service, etc.
A business plan serves three functions:
1. It’s used in order to get financed by a bank or venture capitalist. (However, as I will point out in Chapter 22, you aren’t getting any outside money for your home-based business.)
2. It makes you think about your business. Wise old men will nod their heads and say this part is vital. I don’t need to tell you that. Instead, I’ll assume that you’ve already given this some thought. More on this in a second …
3. It serves as a huge roadblock to actually doing anything. How big of a roadblock is it? Well, remember that nine-page research report you had to do for midterm? Remember how you put it off, and instead went down to “the lake” with “the gang“ and got caught by “the school attendance lady?” The reason you put it off is because research reports, especially the nine-page variety, are HORRIBLY PAINFUL AND UNPLEASANT TO WRITE.
My point is, a business plan is ten times as unpleasant to write, and you do not have the looming presence of a rather sneaky attendance person prodding you on. So in reality, you can put off doing a business plan forever. Which is what happens to most people.
So I say don’t worry about a business plan at the outset — you don’t need one. Not now, anyway.
Not