The Energy of Partnerships

September 28th, 2015

Are you exploring the possibility of a business partnership?

Startup Genome did a study on 50,000 startups and found the companies that grew fastest and were most successful had not one founder, not three founders, but two co-founders.

There is a special synergy that can happen through partnership that can unlock more creativity, more accountability, more go-juice, and bigger visioning than simply working alone.

Business partnershipsMy partnership with Bryan Franklin has had me growing and stretching in ways professionally (not to mention personally) than I ever would have alone. There’s a way that the added ecosystem of partnership can help you to live out your dreams in bigger and bolder ways as you each reinforce and positively enable each other.

Whatever I could have or would have done alone I am totally clear that I did 1000% more having a partner. No doubt. I feel that way with all the partnerships I’ve had (save one that didn’t go well). It’s more pronounced with Bryan but it’s something that I highly value.

The relational aspects that get tricky and complex are around contribution and alignment. When things go off the rails, there’s often one person building resentment that they are doing more than the other one is doing which, at first, seems fine and natural, but later can turn into a hornet’s nest of upset that needs to be well navigated.

Realize partnerships aren’t about being equal or fair where each person is contributing evenly. That’s just not what it’s about and if you try to chase that, one or both of you will be disappointed.

Healthy partnerships are about creating synergy where new capabilities and abilities are unlocked by you coming together that were not there with you before.

If that’s happening, then you don’t need to be upset if you worked 10x more hours than he or she did because that’s not the point.

I see this coming up a lot with partners who are upset at each other over someone not contributing enough while the other feels like they are contributing exactly what is needed and is wondering why there are expectations that he or she doesn’t know about or agree with.

So, just be aware of this one going in.

Spell out expectations super clearly, spell out division of labor super clearly then if you end up doing more, do it joyfully because you want to not because you are subtly wanting to get them to do more.

Another tricky thing to be aware of is discovering how to get in, stay in, and return to being aligned with each other about the direction you are going about your work aesthetic about your roles about how you spend your time about which areas you are growing and which areas you are back burnering.

Alignment is easy when it’s you alone. You can decide to change directions at a moments notice. You can switch gears. You can stop projects or start new ones.

If your partnership is going to involve collaboration on decision making then you have to decide very clearly how you will decide and decide who decides in each area of your business.

If this is a 50/50 style partnership, or what Bryan and I ALWAYS recommend if the partnership is designed to be fairly equal which is a 51/49 partnership, then you’ll be collaborating a lot on your decisions.

If you don’t have a way of handling when you disagree things can degrade quickly. We never recommend 50/50 partnerships because you end up deadlocked.

Someone needs to be the decider when that happens which is why 51/49 works so much better.

It’s why we don’t have 2 presidents of the United States as it could get complicated if they disagree over whether to go to war or fund the bailout. What happens then?

Now, if this is a less equal partnership where it’s someone coming in for a specific role and you are basically the decision maker, then you’ll need to make it clear what relationship you have to their feedback and what if anything is there’s for them to own and have autonomy over. This can get sticky if it’s not super clear.

STRUCTURES OF PARTNERSHIPS

Now there’s a lot more to say on the relational pieces, but let’s move into some really smart structural pieces that are the foundation of every one of the partnerships that Bryan and I have.

If you divide up a business into five major areas of activity it would look basically like this:

1) Marketing
2) Sales
3) Fulfillment
4) Overhead
5) Profit

For every dollar of revenue your business is making, you need to allocate that revenue into the major activities of your business.

How much of every dollar by percentage is allocated to Marketing? Sales? Fulfillment? Overhead? and Profit?
Now it’s critically important to understand how your particular industry allocates revenue and it’s different for different industries.

A Car Company looks like this:
M 1-2%, S 1-2%, F 90%, O/P 5%

A coaching business often looks like this:
M 15%, S 15%, F 50%, O/P 20%

The point is if you know how you value each dollar coming in based on a basic industry standard for your type of business, then if a partner comes in and wants to handle marketing you know that for you, if you are a coach, let’s say, that is worth 15%.

So if you have a $500,000 a year company, that’s $75,000 allocated to handle marketing.

If that same partnership handled your sales as well, it would be worth $150,000.

If you needed to outsource any one of these activities to someone else you know exactly how much that is worth to your business and have the numbers all add up.

Too many times we’ve seen people allocate more money than they actually have and then end up with an unprofitable business where they were left with little to none of the pie.

If you as partners agree on the percentages that make sense to you and you agree which areas each of you are covering, then the financial agreement is simple and is fair and creates a workable model.

Getting crystal clear on the roles each of you are playing and the percentages of revenue allocated for the value those roles bring is a highly recommended exercise. We’ve done this with lots of people asking us to help them negotiate their partnerships and they were so thankful.

No Comments
Share