Articles

B2B with Adam Lieberman

April 29, 2021

Partnership Woes

Adam Lieberman with Dina Steinberg

I cleared my desk and straightened my chair, waiting for my 10-minutes-late-when-will-he-show 2:00 p.m. consultation meeting.

Kevin kind of bounced into my office. There was something refreshingly childlike about him, a sense of wonder and discovery and energy vibrating off him. His disheveled hair and poorly made tie gave him a distinct mad-genius impression.

Twitching with obvious excitement and pride, he described his invention. Kevin tenderly pulled out drawings and diagrams from the bursting file folder cradled in his hands. The man was clearly on fire as he explained the way his revolutionary program would change education as we know it.

“I call it HomeTeach. My team and I spent years compiling curricula from hundreds of schools to put together this software. It can literally homeschool a child. HomeTeach can teach lessons, check for understanding, give assignments, and even answer questions in math, science, history, English, and foreign languages. It can be adjusted to teach on any level and has a whole plethora of games to help students review the material.”

“The software sounds wonderful. How is the business working out?”

Kevin’s expression changed. He seemed to wilt a bit.

“So, I’ll tell you the truth. About five months ago, I was put in contact with a man named Sean Davis by a mutual acquaintance. Mr. Davis is well-off and semi-retired. Although he is no longer officially employed, he takes an interest in new companies with potential for growth. Investing in and guiding these young businesses is a passion and a hobby for Mr. Davis.

“I was kind of flattered when he called to set up a meeting with me. Honestly, few people had expressed interest in investing in my product, and I was beginning to lose hope.

“I had decided to take out loans to get my business off the ground. With no other source of income, the thought of going into debt terrified me. What if the business failed? What if I made no money and couldn’t repay the bank? I was struggling and afraid, totally lost and way out of my depth in the brand-new world of business. Mr. Davis’s offer seemed like a dream. It ended the sleepless nights and the restless, chain-smoking, coffee-soaked days. Sean was willing to invest two hundred thousand and his business knowledge. In exchange, he wanted fifty percent partnership in the company.

“I know now that taking Mr. Davis on as a partner was not a very sound business choice,” Kevin continued.

“My business has grown beyond my wildest dreams. I also have a slew of new ideas for software, and I’m researching and working on new things all the time.

“Mr. Davis insists on being included in each discussion and having a say in every decision. His vision and business approach doesn’t mesh well with my style, and I’m finding it increasingly difficult to make the partnership work. I’m angry at Sean and I’m angrier at myself. What was I thinking? I wish I’d taken out a loan or a mortgage or anything else. Why should Sean Davis’s one-time investment leave me with half the profits and no independence?”

Kevin’s story is a common one. Many an eager and desperate new businessman has made a partnership decision they ultimately regretted.

After hearing him out, I came up with a plan to help Kevin’s business perform at its best. Kevin was going to buy out his partner and start focusing more on developing his software ideas. It was a difficult and expensive thing to do, but Kevin saw a bright future for his company, and he wanted it to fly unfettered, to reach its potential with its wings unclipped.

Mr. Davis was not easily persuaded. It took numerous meetings and circular negotiations. But eventually, with quite a bit of money and a few ruffled feathers, the deed was done. Kevin Brown was finally the sole proprietor of Brown Software.

Do’s and Don’ts

At its best, a business partnership can be a prosperous arrangement, with each side benefiting from and contributing to the company. On the flip side, it can be difficult and laden with problems. Bad partnerships can hurt a business, tear apart its leadership, and even end in the company’s destruction.

  • Don’t take on a partner before you’ve determined that he is crucial to your company’s success

Before taking on a partner, ask yourself, “What will this person contribute to my company? Can my business survive without this partner?” Remember that taking on a partner is a big step. Be sure they bring concrete value to the table.

Partnerships flourish when each side brings their own unique value. Some examples of successful teams include investor and inventor, businessman and salesman, and the brains and the brawn.

  • Don’t have responsibilities that overlap with those of your partner

A tale is told of a woman who wakes up one cold winter morning and decides to cook a soup. She chops carrots and celery and pours in some water. Her friend comes by and, noticing the pot on the stove, adds an onion and a clove of garlic. A second friend visits and decides to spice the broth. Another stirs in a few potatoes and a chicken bone. After a while, the women all sample the soup and are dismayed to find that it tastes awful. As the famous adage goes, “Too many cooks spoil the broth.”

This concept applies to business as well. If too many people work on a project, it is bound to fail. Each person must have their own duties, and partners should not meddle in each other’s work.

If, for example, both partners deal with invoices, the arrangement can lead to mistakes and misunderstandings. Avoid this by clearly delineating the responsibilities of each partner, preferably in writing.

  • Do write a clear and detailed contract

Two people with the best intentions form a partnership. Each associate is kindhearted, well-meaning, and hardworking. They discuss their goals, their priorities, and their intentions. They map out systems and plan for every eventuality. Unfortunately, this is not enough to ensure that they will work together productively.

Before a business is operational, it’s easy to plan and prepare.

Like soon-to-be parents planning their parenting methods and style, business owners have no true idea of the realities until the business is born. Having a road map, a game plan, a black-on-white manual to follow is critical to a company.

Contracts are not written out of mistrust in the partnership or lack of confidence in the business. Contracts are written to guide the company leaders. Contracts ensure that partners are always reading from the same playbook as the logic of the planning stage wears off and the emotion of reality sets in.

Consult your contract when making decisions like whether to scale back, expand, or sell. When dealing with bills and customers and marketing choices, the contract will guide you.

  • Do include your partner in big-picture decisions

Although it’s important to work independently and avoid micromanaging each other, big decisions should be made by all partners. Involving both associates in the master plan and critical moves ensures that all parties share the company vision and goals and are essentially on the same page.