Partnerships, how do I structure one when I’m doing all the work…
The following is a question that was posed to me on the Quora site. So I am asked several questions a day and I chose those I am knowledgeable about based on my actual first-hand experience.
This partnership question touched a chord so I jump on it with abandon. I have strongly held opinions on this subject. Most of which are not good. Therefore you can expect this blog to tell the downside ina cautionary tale.
So on the other hand there are wonderful partnerships that worked well for both. Some of them famous like Steve Wozniak and Steve Jobs, the Apple Computer cofounders. There are other famous partnerships too like Hewlett and Packard, Abbot and Costell and Lewis and Martin, etc.
Enjoy this post and please let me know what you think?
How do I structure a partnership with someone who brought a deal to the table but I’m doing all the leg work?
Great question and to the point.
Someone who brings a deal to the table gets a finders fee depending on if the deal is real and materializes any results. I look at hundreds of deals a year but end up doing less than 1%. So why should I pay anything for a deal that will never monetize?
There are two kinds of partnerships and I’ve had a few over the years.
- Working partner.
- Non-working partner.
Sounds like you may be in the non-working partner category since you are doing all the legwork. I’ve been in this situation before and always end up getting rid of the partner. So this is why I have no partners except my wife who does most of the work and gets 100% of the income.
Save yourself grief and aggravation and ask the “potential” partner what he plans on doing to help this partnership or is he only a silent partner? If you don’t clarify upfront then you’ll be doing all the work and end up paying him for bringing in a deal that produces no income.
The Deal: Partnership
If the deal bought to the table is income-producing now, my guess is it is not, then don’t make him a partner. So tell him I’m doing all the work here, let’s see how it goes first?
I would walk away from this deal he brought you if you don’t get 100% of what you want. My guess is he doesn’t have any place to go and will probably go along with something that looks like free money for little to no work.
If he says I’m leaving my current $100K a year plus job and working with you full time and will also put up real cash to enhance the deal then he’s a real partner worth being in business with.
Tough Decisions: Partnership
Tough decisions made today will make it better for you down the road. Most good deals never really monetize out so don’t be too hasty in making a binding partnership. Get a good lawyer that drafts a solid clear exit strategy for you and the would-be partner. Make sure the partnership agreement is clear as to who is doing what and how the money is split.
Most partnerships are dependant on the cash you pony up not the idea. Most good ideas never materialize by the idea or deal guys. Think Facebook and Zuckerberg. Also, Bill Gates didn’t create the operating system that made him a billionaire. Neither did Zuck. These deals were brought to them and they made the ideas/deal work, not the actual inventor.
Good Luck and try to go it alone. My experience tells me partners are not worth it. I believe it was billionaire/deal maker extraordinaire Carl Ichan who said I have no partners. The dollar is my partner. That sums it up for me.
Mike Addis Mega Shop – Maddiscash
I am not a big fan of partnerships. Law firms have partnerships. I’m not sure how they work exactly since partners bring in different fee amounts. My guess is they kick in to cover overhead and then split the profits based on this income they produce for the partnership.
My position on partnerships is based on past experiences, none of which materialized in my favor. Therefore I was either putting in all the effort and or all the money. My partners either took the money they shouldn’t have taken. Or put in little not no effort. Either way, it never worked out for me because I’m a full-time guy who has money.
My conclusion is there must be some synergy that makes partnerships work like Wozniak and Jobs. Or Hewlett and Packard. Woz had the tech knowledge to create the product (Apple II), Jobs had the vision and marketing skills to expand the sales and finance the future. My guess is they got along pretty well too.
Once again my position is the same as Carl Ichan, I’d rather have the dollar as my partner.
Your comments are always appreciated. It helps me to write better.
Mike Addis, Carlsbad, California