Is a partnership good or bad for business?

Is a partnership good or bad for business?


Running the RDLC, GG and I work with lots of different business structures; ranging from standard individual and team ownerships, investor or PE backed, to a few subsidiary deals with call options and reverse vesting. The most common in recruitment is the single founder or a friendship come partnership.

Some partnerships have three, four or more members of a team that have got together to set up a business to do things their ‘own way’.

However, we have also helped over 20 businesses in the last 7 years to unpack their partnerships when doing it their ‘own way’ was no longer the way everyone wanted to go!

Good friends soon become ‘frenemies’ when shares and money are involved.

Yet overall, I am a big fan of partnerships and I think they are generally great for business. I speak from personal experience of owning companies on my own, with partners and with Private Equity, the most fun was when I operated in a partnership.

Not to say you won’t cross swords from time to time, grate on each other or need a longer-than-normal holiday each year to catch a big breath, but that’s life.

If you want to build good character and a strong business, but also have a really simple, easy life, I am here to tell you, that you can't have both. Good things come from challenging times.

A few months ago, I hosted an RDLC lunch with 30 CEOs and this topic formed a lively discussion for the last hour of the day.

So, I thought I would recap my discussion for those not in attendance.

The one thing 99% of partnerships fail to really understand, is that it can never be completely equal in effort, execution, knowledge, experience, public notoriety or indeed its outcomes, but… the sum of the parts is (most of the time) greater than the whole!

When you and your partner(s) are the catalysts to each other's performance, you get multiplicity.

Suddenly 2 + 2 = 10!

Here’s an example of a few partnerships, old and new that are well known, but you’ll notice that one is always more famous than the other. That doesn’t mean they were better, just different.

? William Procter & James Gamble (P&G)

? Bill Hewlett & Dave Packard - HP.

? Bill Gates & Paul Allen - Microsoft.

? Steve Jobs & Steve Wozniak - Apple.

? Rick Rubin & Russell Simmons - Def Jam.

? Ben Cohen & Jerry Greenfield - Ben & Jerry's.

? Charles Dunstone & David Ross- Carphone Warehouse

? Sinclair Beecham & Julian Metcalfe - Pret a Manger

? Brian Acton & Jan Koum - What’s App

? Larry Page & Sergey Brin | Google

? Julia Hartz & Kevin Hartz | Eventbrite



So why do some fail when others blossom??

Well, it’s like taking a poor requirement, if you don’t qualify, qualify, qualify, then something will break the process that could have been dealt with at the outset.

You don’t have to be great to start, but you need to start to be great!

5 points to starting a great partnership:

1. Have you split roles to determine who will do what?

Quite often the partnerships aren’t split out to do separate roles, they just crack on to see how things pan out. If they are lucky one ends up pushing sales as a sales director would, and then the other gravitates to more of an operations director role. After a while, one shows more leadership skills and assumes the role of a managing director or CEO. Great, but it’s far better to have this conversation on day one. As more often than not it’s a bun fight of egos or/and misplaced perceptions of ability over who should lead that starts to crack the bond.

It’s fine to change over time but start with an understanding and openness that roles will change for the business to succeed for everyone involved.


2. Put it in a contract!!!

It’s so frustrating when we see intelligent people, start a great little business without doing a shareholder’s agreement and a service agreement.

Drawing wisdom from a Gwyneth Paltrow perspective of an amicable ‘uncoupling’. It remains open and friendly if done properly!

Your service agreements will keep you both honest in your roles and the shareholders' agreement, along with your memorandum and articles of association, should set out a process for a partner or equity holder leaving.

It may feel like overkill on day one, but it must be done, or you will no doubt regret not doing it in the future.

The same will apply if you have an investor. When I invest in a business, I ensure we all know what we bring to the table and that we understand the legal documents. It stops pointless friction in the future as everyone enters with their eyes open.


3. Make sure you have complementary skills.

Two people too similar will eventually wrestle for roles. Being good friends with a recruitment background can help, but it can also mean you don’t stress test the roles and relationship. Discuss each other from an internal and external perspective. Does the mix of your skills offer a far more attractive proposition to clients, candidates, and consultants than just one of you?


4. Make sure you share values.

Values matter in a business and even though you don’t have to have the exact same personal values, there needs to be an appreciation of each other, to be able to set both business values and culture.


5. Communicate.

When running a business, you need to be challenged constantly to improve yourself as a leader and the processes within your agency.

It’s difficult for staff to really challenge you because you’re the boss, it’s hard for family members as they only hear your side of events and so having a business partner (if not then an advisor) who can hold you accountable and vice versa, is definitely a godsend!

Set a time once a week or every two weeks where you each bring 1 thing that you’d like to address to the table, good or bad, and leave egos at the door. No one likes criticism, but a positive critique is empowering and motivating once the pill has been swallowed.

Again, I’ve seen several partnerships implode because the communication and accountability weren’t there.


Conclusion.

What I really wanted to get across is that partnerships can be the best thing ever, but only if they are done correctly!

Start as you mean to go on, as the right partner can bring out the best in you and you will do the same for them, but only if you open your eyes before jumping in!

If you’re starting a business on your own, then join a networking group like RDLC (I’m biased), appoint a good NED or an advisor, pick a senior leadership team that will hold you to account, share your values and want the best for the business.

Growing a business is hard, it’s a lot of heavy lifting, ups, and downs, and a few round & rounds, but it is also super rewarding and brings great enjoyment.

So don’t make it harder than it needs to be!


Michael Ferrara

?????Trusted IT Solutions Consultant | Technology | Science | Life | Author, Tech Topics | Goal: Give, Teach & Share | Featured Analyst on InformationWorth | TechBullion | CIO Grid | Small Biz Digest | GoDaddy

8 个月

Dean, thanks for putting this out there!

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