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March 10, 2020

Five Tips for Partnerships

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“I don’t want to mess up my friendship.” Sounds like a sitcom line between a guy and a girl who are thinking about dating. But it’s also the line I hear in nearly every partnership conversation I have.

I heard a version of it recently during lunch with a friend. He and his best friend were planning a partnership. They were leaving their jobs, had an investor ready to give seven figures toward their business idea, and they were all in.

But he was nervous. Not so much about the success of the business, but about the risks of going into business with his best friend. Will we ruin our friendship? Will we bring past conflicts and annoyances into every business decision? Will we be able to leave work at work? Will it feel like one of us is working for the other?

He’s asking the right questions. Partnerships are risky. And yet I’m convinced there’s huge potential in a partnership.

I’m probably passionate about this topic because I had a two-decade business partnership with a great friend, and I’ve had no better partnership. We had a partnership that was both commercial and spiritual, and though we had disagreements and moments of tension, it worked. It was good for me personally and it made the business stronger. The whole was greater than the sum of the parts.

So when I sit over a sandwich and talk to an anxious would-be partner, I’m speaking from personal experience. I rattled off five tips for my friend to consider.

First, My Disclaimers

The nature of a blog is that I’ve got to be short (or at least, pretty short), which means there’s a ton I don’t talk about.

When it comes to partnerships, here are three things I’m not saying:

  • I’m not saying partnerships are the best form of business. The sole proprietor business is alive and well. Partnerships have their advantages, but they’re not for everyone or everything.
  • I’m not saying partnerships should always be equity partnerships. In my line of work, I’ve got equity partnerships, project partnerships, revenue-shared partnerships, and more. In this blog, though, I’m talking about equity partnerships.
  • I’m not saying partnerships work best when you have a long history with the person on the other side of the signature line. Partners you just met aren’t bad; they’re just a different kind of animal with different advantages and challenges. If you’re considering this kind of partnership, read on, as much of what I say below applies (but also read elsewhere).

OK, now that my disclaimers are out of the way…

The Five Tips for Partnerships

As I sat there with my friend over lunch, I kept coming back to things I’d learned during my years working with or advising different business and ministry partners. Here are a few tips to get you rolling or to help measure how things are going.

  1. Establish role clarity. Who’s doing what? In the early days of a new company, there may be some overlap in role, but you still need to at least have big buckets to throw tasks in. Partnerships don’t just work because people work hard; they work because partners work hard at the right things. Is it the classic CEO/COO split? Or is it splitting up geographic territory or certain tasks, or something else all together? In my early days with one partner, we looked at tasks and identified the 1 and the 2, the driver and the passenger.
  2. Keep the owner/operator roles distinct. Don’t let someone play the owner trump card in operations. In other words, stay away from partnerships where someone is an owner who disappears for weeks or months or years at a time and then swoops in to weigh in on operating decisions. This one gets sticky but the owner / operator role split is crucial.
  3. Define the relational formula. There’s no one-size-fits-all partnership, but it’s important to talk about relational expectations. Are we going to be best friends? Are our wives or families going to be best friends? Will we talk about deep life things at the office? It’s a little bit of a clumsy, awkward conversation, but you need to have it. Be willing to adapt as things will change when it comes to personal chemistry, but start somewhere.
  4. Have an annual partner retreat. Take spouses if you’re married, and talk about the business and about the partnership. Review the financials, yes, but also ask “how’s the partnership doing?” Partnerships unravel not because they have no alignment but because of how we live out and express operating values two, three, four levels deep. You have to keep talking about those unwritten expectations.
  5. Build in some exits. Life happens. Partners have different variables in life, and they’re always shifting. So make sure there’s always a way for one partner to buy the other out. Maybe one partner is 34 and wants to take risks, and the other partner is 64 and has one eye on retirement. That matters. Maybe one partner adopts two kids and decides they need to cut back hours dramatically. That changes things.

Above all, talk about your partnership before you start and all along the way. What do you want out of the business—a big profit, a family legacy business, community impact, redemptive heritage, long-term financial security? What happens if you feel that you are carrying too much of the load? When will you call it quits—when you want to or when you both want to (and if both, then what will bring you to that point)?

Start by talking, and keep on talking.

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