Have you ever heard the term that you should not go into business with family or friends? Well, that might not always be the case, but you should understand how partnerships work so you choose the right partners. It is important to differentiate when people are working with you showing you deals. “Partner” is loosely defined. It is important to have an Operating Agreement. You can consider the Agreement similar to a pre-nup. Let’s consider what should be included:
- Married or Life Partner (Domestic-Sense): Share a bed and/or checking account.
- Business Partner: Share a checking account.
- Partners in your business: Who stands to benefit from this partnership? Which benefits does the other person bring to the table? Is this really outsourcing administration type work? If not, hire an intern!
Partners are only good to have if all parties bring a unique skill set or immediate value to the table. You should only consider partnering with a person if they can bring in a lot of revenue and quickly. Everything else should be managed by an intern. Bad partnerships occur everywhere in business, so make sure you create a great partnership.
There are five steps to creating a great partnership.
- Allocate each partner’s ownership rights according to “shared expectations and commitments.”
- Partner compensation and incentives are based on partner contribution.
- Put one person in charge. The Navy doesn’t have co-captains on their ships and neither should you!
- Get a partnership in writing in the form of an operating agreement.
- Trust is the bedrock for a great partnership.
Remember This: Would you trust this person with your wallet? Only yes or no will suffice!
When forming the partnership, it is important to ask the hard questions. Let’s review the key questions below:
- How are they currently earning a living now and paying their bills?
- How will they add value? Have them explain in detail.
- What professional or work experience do they have?
- You are not the first or last guy to knock on the door, so why you?
You should also consider how a partner can add value in your business by considering the following:
- Proficient in legal matters relating to real estate transactions. Example: An experienced real estate/development attorney.
- Has real, established rolodex of contacts for making capital introductions and access to “first look,” unique deal flow.
- Has established a verifiable track record of development. (Remember: 20 years of experience vs. 1 year, 20 times)
- Has money
Of course, you will likely find some “bad partners.” Here is what they “look” like:
- People that have the same skill set as yourself. Partners must have strengths where your business has voids to fill.
- People who lack verifiable experience or skills. Trust, but verify.
- People out of work or need a check really soon. Their cash flow problems are not your problem.
- People who are not 100% focused on your business. These are not employees. They should be dedicated and committed.
In this course, there were various discussions on how to choose the right partner for your deals. Read through this material again and after doing so, create a 10 point checklist of who you would consider a good partner.
In this final assignment, consider all of the key concepts that you have learned in this course. Based on this information, what are the top five concepts that you feel are most important and explain why?
Are you ready?
Congratulations, you have now finished the final lesson of this course. Now we recommend you review your assignments and notes before you take the exam. If you are ready, then click the button below and begin your final exam.