When Jayme and I decided to start Decipher, 100% of the counsel we received predicted grave outcomes of our partnership. Absolutely no one told us it was a good idea.
2017 with a crazy ass background 🙂
Partnerships can have many issues that may be boiled down (at least in part) into these two themes:
- Conflict management
By some miracle we had the forethought to address and document both areas at the onset of our business relationship.
Key #1: Get in front of contentious issues
I believe this is the Super Glue of any long-lasting partnership. These are some of the items you’ll want to flush out:
Clearly divide your futuristic fortunes. A way to do this is to create a cap table and run a few waterfall scenarios so that everyone can clearly see how much each person gets.How will debt be distributed? If necessary, who will assume personal guarantees? If things crash around you, who is left holding what accounts payable?Once you are cashflow positive, will you have salaries? If so, how much for each of you?Once you are really cashflow positive, will you do distributions to owners? If so, what proportion will stay in the business?Set a time horizon on your endeavor. If you are willing to give it a try for 2 years and then reassess, make it known and follow through on your commitment.
Just focus on the first point above. Say you have 60% of the shares and your partner has 40%. If you sell the company for $1 million, the $200k difference between you might seem fair. But, what if it is $10 million? That is a $2 million-dollar difference. Is that equitable?
Because you have conversations like the above ahead of time where you are both splitting your hard-earned future treasure, it will be much easier to split the spoils when the time comes and you can mostly avoid the emotional inputs vs outputs.
Key #2: Cultivate self-awareness
Say this out loud 3 times, “It is ok to admit when I am wrong. People will still respect me.” Hopefully you have chosen a partner who has complementary strengths and weaknesses. The more different your partner is from yourself, the more likely you are to have different views. However, the greater your relative differences are, the faster things can get cantankerous. These differences are woven into the fabric of founders who usually have strong personalities, are highly intelligent, and competitive…you can see how your partnership has the ingredients for a major explosion.
To combat this, Jayme and I both start w/the premise that we know we are likely right but the other person has a valid opinion, and we must attempt to incorporate them into the issues, idea, solution, etc. While difficult (see my previous blog post on, Is My Baby Ugly) because we all think our ideas are perfect straight out of the box, the net impact always yields a more comprehensive and positive outcome.
Key #3: Be piggish, not hoggish
This was a key that was given to us by our accountant and has stuck with us through thick and thin. The initial context of “Be piggish, but not hoggish,” was in regard to our tax deductions. Once we started making money we started feeling the sting of taxes. I know, I know…great problem to have. But it still hurt and when it came time to look at our deductions, we were both a bit overzealous. Fortunately, we had a good tax person who kept us on the straight and narrow.
Since those early days we have used this axiom in many of our negotiations including those with venders, staff, clients, and each other. If we start with the premise that everyone needs to make money for a business to be long term successful, then our self-interest takes into consideration other people. This is vital as it has a halo effect across your organization which fosters a culture of trust, transparency and loyalty among employees and customers alike.
By applying the 3 keys above you’ll be equipped to successfully navigate the difficult times in your business partnership. Below is a list of disciplines which will naturally fall out if the above is applied:
- Communicate regularly
- Know each other’s values
- on’t let feelings fester
- Identify your strengths and weaknesses
- Pick up the phone <- This is IMPORTANT. Never have an argument over email.
- Take full responsibility for your actions and their outcomes
- Support one another
- Discuss your long-term goals
- Define your roles explicitly
- Remember that no one likes surprises:
- Respect one another
- Put things in writing
In conclusion, partnerships are powerful mechanisms that I have found improve your startup’s opportunity for success. Working w/someone else is fun. Even treading through fields of manure can be fun if you are both focused on the same thing…
“ACK! This stinks! Let’s get out of here…NOW!”
Have a great day! 🙂