CEO’s Agenda

Step 3 of Becoming Partners is evaluating your values and how you handle conflict. Ask yourself these questions before you sign the lease and the partnership agreement! (Not in this order, please…)

How similar are your values?
Yes, yes, we know. You bring different things to the table, and what you are good at, your partner is not. Yes, I know you both work hard and respect people. But what about the ‘rest of the values’ that are core to who you each are? Before you jump into the partnership, can you accurately evaluate where you and your partners are the same and where you are different? Do those areas ‘matter’?

• Can you happily tie one leg to them and risk your pride, your money and your ‘ideas’ for an extended period of your life?
• Are you willing to possibly risk your family, your future, and your lost opportunity of not being able to pursue something else because you have created this partnership?
• Do you really work better with others than you work with yourself?
• Are you a high achiever?
• Are your partners all high achievers?
• Are you going to ‘get sick and tired’ of some of the partners after the thrill of launching a new business wears off.
• Will you be able to function in this partnership and blossom as a Better, Stronger person while achieving your goals? Or, will you lose yourself in an attempt to compromise or overcompensate to make the partnership work?

Now that you have evaluated your similarities in values, how will you resolve conflict with your partners in the areas you don’t always agree?
Conflict in a business will be inevitable. It’s just like life. The most significant times handling conflict becomes important is when it has to do with the direction of the company, how to handle a sensitive issue, or a decision regarding money, clients, employees or priorities. Fear is a funny thing, and when emotions are high, usually fear is involved and it makes even the most rational individuals, irrational.

Evaluate how you currently handle conflict on a daily basis. Will your way work well for you and your partners? If you do not handle conflict well in your everyday life, how will you do a better job in the partnership?  Here are seven great questions to evaluate how you handle conflict now and some indicators of how you might handle conflict with a business partner.

1. Can you learn a new way to handle conflict?
2. Can you disagree without being disagreeable?
3. Can you speak up for yourself and what’s important to you?
4. Do you have good boundaries?
5. Do you have passive aggressive tendencies?
6. Are you ok with Conflict and Disagreement?
7. Are your partner(s) very verbal or not? Are you?

Ask yourself, Can I spend a lot of time with these people? (Or this person?) Do I like, know and really trust this person (or persons).  Do you know these people well enough that you could predict how they probably would decide given certain choices?

Before you become partners is the time to really evaluate how you handle conflict honestly, not when one of your partners has found someone to sell the company to, or wants to bring in his brother in-law to work for you. 

If you are already partners, how can you use these talking points to build communication around handling conflict before you need it?

The bottom line is you and these partners have to run a three legged race.

No one wants to talk about it when things are rosy and you just want to move forward and sign the lease, but ‘stop, drop and roll’. As one of my clients lamented after things turned negative in her partnership ‘what did I think? We were all going to just stand around, holding hands and sing kum-ba-ya when things got tough? Why didn’t I ask more questions?’

All of us know someone who has started into a business partnership with lots of good ideas and good intentions. Most of us know one or two where it turned out ok and some of us even know partnerships that still exist and are going strong. However, the statistics are clear:  most partnerships do not work because ultimately, the relationship between the partners was not the most important piece of the business.

Handling conflict with grace and tact requires a high degree of emotional intelligence, clarity, and commitment both to what values you hold and to yourself. But, ultimately, for partnerships to work, compromise has to be at the heart of it. That means egos have to be checked at the door and the relationship must come first.  It’s a lot of work, but we know people who have done it.  Do you?

Ok, good, you’ve made it this far and could answer the questions in Part 1 (Do you need a Business Partner?) and decided “Yes” I want to be a partner. Now we get to the good stuff… “The Rest of the Story”.

We suggest that each of the potential partners answer these questions in writing.

Why in writing, you ask? Any of us can do hand-waiving and make it sound good, and even convince ourselves. However, hand-waiving will not put food on the table or keep you out of court.

If you ‘Just want a Partner’, do you have a reason? What is your ‘why’?

1. Do you and your potential partners have similar values?
2. Are you in similar stages in life?
3. Are you in complementary stages in life?
4. If one of you is single, and one of you is married and has teenagers, you both will not be working to midnight each night to ‘get a project done’. Does that matter to you?
5. Will it matter to you if you are the one doing “all the work” for the next 4 years? For some this is ok. For others, it is not.

Are you ‘really partners’?

In what way? What does that mean to each of the potential members of the partnership?

1. Will you both be able to contribute the same ‘amount’ of money, time, intellectual property, sweat equity?
2. If not the same amount, will you be able to contribute the same proportion of value? Will one of you contribute all the cash and the other all the sweat equity?
3. How will you measure this?
4. How will you quantify it when you want to do a comparison? How will you determine if one of the partners has done ‘more work’ this year and should get a bigger ‘bonus’? Will you vote on this? What if you only have two partners? Who will cast the deciding vote (see the last point.)?
5. Will one of you be expected to cover work each time there is an emergency because of personalities or home requirements? Will you rotate?

Generally, there is always someone who tends to do a little ‘more’ work and someone who tends to ‘do’ a little less than others. Is this ok? Will the shares of ownership reflect this? Will you do an LLC or an LLP that can change the percentages each year to better reflect contribution or will you set up a fixed partnership of a Subchapter S Corp or C corp.? (talk to your attorney)

• What if you are doing a 30/70 split?
• How will you decide this ratio?

It is not typically decided on using the ‘work load’ model, it is typically decided on by ‘what value’ that person brought to the partnership (i.e. money, contacts, experience, etc.) P.S. Money always trumps everything else.

If you are the larger shareholder (i.e. you decide to have the 51% or the 70% ownership), you will typically be a 70% shareholder and receive the bulk of the profits. However, the law also says that you have a fiduciary responsibility to the smaller partners financially. This means that you will have a special legal relation of trust, confidence, or responsibility in certain obligations to others.

This is serious and if there are conflicts, the laws tend to protect the little ‘guy’. (If you go into a partnership, make sure your lawyer has explained this part of the agreement clearly to you and make sure you understand what is at risk. This is above our pay grade at BCI, but we have excellent lawyers to refer you to if you need them.)

Have you ever decided to have a partner and later regretted that decision? What about those of you who have partners and are better for it? Let us know about your experience…

Check in later and we’ll talk about the question of : How will you Resolve conflict as partners?

Do you need a Business Partner?

3 Basic Questions to ask Before Incorporating

Everyone wants a partner in business. Why? It seems like it could be more fun, easier, and that partners could fill the gap in skills that you don’t have. These are valid reasons. However, in the last 12 years of working with Entrepreneurs, we find most who want partners can’t articulate why. Here are three basic questions to ask yourself, and your potential partners, before spending money on a lawyer to incorporate your business together.

1. Who will Do What?
Companies do not need two people at the top who do the same thing. They don’t need two who are both good at sales, both good at operations, or both good technologists. Companies need all facets of the business covered and each founding member needs to be able pull their ‘weight’ in their area of expertise. Does everyone who is being considered to be a partner have a unique ‘offering’?

Potential partners must be able to articulate what ‘job’ in the partnership they intend on performing, and what values or skills he/she brings to the partnership. Conversely, each potential partner should be able to clearly explain what his ‘partners’ will be doing in the company and how each of those roles is unique.

2. What is the Distribution of Work?
Generally, there are four pillars of business: Marketing, Sales, Operations and Administration. Inside these pillars are four processes that make up the business of the business and include New Product Development, Sales, Delivery, and Customer Service or Post Sales. So, which of the partners will:

To be successful, these duties and percentages must be defined.

3. Can the Business Hire this expertise?

a. If the business is predominately one person’s idea, ask yourself, do you really need a partner? Could you hire these skills through contractors, interns and, in the future, loyal employees?

b. Could you make the business work if you formed this partnership and your partner suddenly leaves you (dies, moves, quits)? Would the company fold without your partner?

Do you ‘just want’ a partner? Some people love the idea of having a partner, so even though their answers indicate they don’t need one, some just want to be part of a ‘partnership’. This is ok, but must be recognized for what it is. We’ll be talking next about Partner Questions to ensure success if you do partner up!

If you can answer all these questions, and still feel excited about creating a business partnership, go see a good business attorney. A good attorney will have a many other questions to help you prepare to be successful! If you need a referral, call or email us at info@business-concepts.biz and we can refer you a list of the ones we have used and liked.