I came across this article today from Sean Flammer, a litigation attorney in Texas with a perspective of one who mediates and/or dissolves business partnerships. “Choosing a Business Partner: Lessons from the Dark Side”.

A long-term client recently developed an opportunity to form a business partnership that will help take their product into a brand new vertical. It’s very exciting and that excitement was infusing life and energy into their overall business outlook. The economy had really taken a toll on them the past three years.

I convinced everyone involved to complete my workbook, “Creating Great Business Partnerships. A Workbook For Success”. They were in the process of doing so when two things happened.

The first was a conversation with my client after she and her potential partner had returned from a sales meeting with a prospective client. She was very upset as she explained that she wasn’t given an opportunity to say anything in the meeting; her prospective partner completely dominated the meeting. On top of that, his reading of the meeting, the prospect’s interest and the next steps were completely different than hers. When I asked her if she held a debriefing meeting with him to express her concerns and perspective (and to get his), she said she was too intimidated to do so.

The second thing happened just one week later in our regularly scheduled call. My client advised me that she had to quickly form a LLC with the new partner so they could respond to the RFP’s coming in from the new vertical. And no…she had not yet addressed any of the issues or had any of the difficult conversations with her prospective partner.

Needless to say I was almost speechless…almost. The call turned quickly into a heated discussion while I bombarded her with questions. Why the rush? Couldn’t they submit the RFP’s as a Contractor/Sub-Contractor, or as a strategic alliance with a written agreement for those specific projects? Why did they need to form a legal entity? Did she really want a business partner who intimidated her? What would happen if the relationship didn’t work out? I could hear the fear and desperation in her voice…“if I don’t do this now, I’ll lose the opportunity to enter this market”.

I’m glad to report that everyone finally agreed to “test drive” the relationship and partnership by working on a few projects together. They have executed an Agreement for that purpose and specific to the projects they have landed. They have a mutual understanding that the relationship will be reviewed after a period of time to decide whether to take the next step…form a LLC.

Because they didn’t rush into a more permanent arrangement and everyone involved understands that this is test period, they are having more honest conversations about the best way to successfully work together. I don’t know how this will turn out, but I can almost guarantee that had they swept all the concerns under the rug and rushed into the partnership, it would have imploded within a short amount of time.

So I ask again…what’s the rush? Are you allowing your fear to lead the way?

What is it about the human psyche that when our beliefs or desire to believe are so strong, we can turn a blind eye to that which may ultimately harm us? Even when facts to the contrary are staring us in the face!

I see this so often when observing the behavior and attitudes of individuals who are contemplating entering into a business partnership. They believe that this person is the right partner for them or they want it to happen so badly, they refuse to invest the time upfront to do basic due diligence.

Last week I conducted a workshop on how to create a successful and sustainable business partnership, based on my workbook, “Creating GreatBusiness Partnerships. A Workbook For Success”.

I was thrilled that several potential partners attended, eager to learn and participate. By the end of the workshop however, I observed a few glazed eyes and sensed that for some, an internal battle was taking place. I could just hear the conversations occurring inside their heads. “Great information, but we don’t need to go through all of that. We already know we get along”.  And, “We’re family for goodness sake! What could go wrong?” And, “I really need the investment money so I don’t have a choice. I will just have to risk it.”

I left knowing that I had given them great information and the tools to increase their chances for success. I also understood that very few would actually use the information or heed the advice.  To some I said jokingly (and seriously), “I’ll see you in a couple of years when you need my partner intervention services”. You see, that’s when they will be in pain and pain is a strong motivator for taking action…we all want the pain to stop!

The financial and emotional cost of waiting until there’s pain can be enormous. Often, it’s too late to save the partnership, the relationship and the business.

For me, it’s a frustrating dilemma. While I truly believe in the value of collaborations and business partnerships, I also know how high the failure rate is. Based on my work, I’ve concluded that many of the problems and failures could have been prevented had the partners taken some time in the beginning to explore compatibility and ask a lot of “what ifs”.

Will you see only what you believe or want to believe?

http://www.newbusinesspartnership.com/

How do you convince people to take preventative measures when they have no pain in the moment and the pain is only a possibility sometime in the future?

That is the million-dollar question!

All too often I get calls from business partners that truly frustrate me. It usually goes something like this: “My business partner and I are having problems and we were hoping you could help us”.  So far so good. Once I start probing however, it becomes apparent to me that first, this could have been avoided and second, it’s probably too late.

The most common reasons business partnerships fail are:

Infatuation Syndrome

This is when partners get caught up in the idea of the business partnership.  While I’m a big proponent of dreaming and visioning your ideal future, if you truly want to live it you have to give your dreams a realistic chance to succeed. In order to do that, potential business partners should invest the time up front to:

• Ensure you share core values, vision and expectations for the business
• Agree on your roles, responsibilities, authority limits and decision-making process
• Get clarity on individual contributions and equity percentages. Make sure you “assume success” and picture this arrangement 3 to 5 years out.  Will it still seem fair to you?
• Understand your partner’s financial situation, credit rating and willingness to invest additional money if needed.
• Make it legal.  Talk to your attorney and tax accountant to make sure you create the best legal structure for your situation and that you record your agreements.

Taking Your Relationship For Granted

We often take for granted those people who are closest to us. We convince ourselves that they should understand what you meant or they should know that you appreciate them. Investing your time and energy up front is no guarantee your business partnership will succeed if you don’t continue to invest in the relationship.

• Spend time on the relationship, not just the business
• Hold regular partner meetings
• Be honest and forthright with your feelings of inequity and appreciation

Head In The Sand Syndrome

News flash! If you ignore problems or feelings of resentment they really don’t go away. In fact, resentment and distrust builds until it is often too late to restore the relationship.  I’ve seen business partnerships go from infatuation to partnerhsip dissolution in less than two years, not because the business failed, but because the relationship was past saving.

For a step-by-step guide to selecting the right partner and keeping the partnership on track, check out my workbook, “Creating Great Business Partnerships.  A Workbook For Success”.

http://www.newbusinesspartnership.com/

You can’t choose your family, but you can choose whether to go into business with them.

In continuing our discussion on “Business Partnerships — Are They All Made The Same?” I’d like to turn the focus to the family business. Family businesses can simultaneously be richly rewarding and extremely challenging. A family business faces the same business issues as any company and family members deal with the same partnership pitfalls as any business partnership. Add to that, all of the different family dynamics of sibling rivalry, parent/child perspectives and husband/wife relationships, and….well, you get the picture.

To enhance the probability of success, family shareholders should invest significant time in defining and agreeing on the same components I recommend for all business partners in my workbook, “Creating Great Business Partnerships. A Workbook For Success”:

• Vision & direction for the business
• Values
• Roles & responsibilities
• Decision making
• Resolving disagreements
• Equity stakes
• Compensation
• Communications
• Exit & succession

Now add to that, discussions around preexisting family roles, relationships and personal dynamics. Is there a sibling who is treated as the “baby” of the family or an oldest adult child who is used to calling the shots? What is the parent/child dynamic in the family? Is there a “black sheep” in the family that mom and dad insist have equal shares and say-so in the business? Will there be spousal or in-law influence? If your business partner is your spouse, where will you draw the boundaries between business and marriage?

Even if you do the work upfront and agree on all of the important issues, keeping it going requires additional effort. I recommend all business partnerships hold regularly scheduled partner meetings and the same holds true for family businesses. These are usually called Family Council meetings and they are most effective if facilitated by an outside family business consultant.

Having an outside Board of Directors or Advisory Board is another effective tool for minimizing conflict in a family business. The objective, third party perspective is often all it takes to calm the waters and get agreement on a contentious issue.

Any breakup of a business partnership is painful and costly. The consequences for conflict in a family business is magnified a hundred fold. It’s one thing to lose your business partner. It’s another to lose your relationship with your family.

http://www.newbusinesspartnership.com/

A couple of weeks ago I asked the question, “Are all business partnerships made the same?”

In this blog, I’d like to discuss joint ventures and strategic alliances, two commonly used business partnership structures. First a reminder of how I’m defining the two:

Strategic Alliance – a formalized relationship between two parties to pursue a specific endeavor or set of objectives while remaining separate entities.

Joint Venture – a strategic alliance where the two businesses create a separate legal entity for this endeavor.

Strategic alliances are quite simply business collaborations and can be formed for a variety of reasons, including joint sales or marketing, R&D, and other resource or intellectual property sharing. Strategic alliances take place between sole proprietors, small and large companies alike.   For example, in my consulting business I have strategic alliances with other consultants who specialize in areas I do not, such as human resources or social media.  These alliances benefit my business because they allow me to create added value for my clients. They benefit my client because I have saved them the time of finding and prequalifying additional service providers. And they benefit my alliance partners because they reduce their cost of sale and bringing them business they otherwise may never have received.

Strategic Alliances are not a “legal structure” per se, but for purpose of clarity, I do recommend a written agreement between the parties outlining how the alliance will work, who has what responsibility, and any financial consideration.

Joint ventures on the other hand, are those strategic alliances that have been formalized to the point of the creation of a separate legal entity in which the two parties each own a stake. This is method is more commonly used by large corporations, sometimes even competitors (e.g. automobile, entertainment and energy industries,), often in real estate for large development projects, or by companies for the purpose of entering foreign markets.

What these two types of partnerships have in common is the need to carefully select your alliance or joint venture partner and to ensure there is alignment on all of the important issues, including those considered “soft”, such as vision, culture and values.

For more information on strategic alliances and joint ventures check out:

• July 2010 issue of INC magazine article: http://www.inc.com/magazine/20100601/how-to-build-business-alliances.html
• “What’s the Difference Between a Joint Venture and a General Partnership? By Kimber Leo: http://www.brighthub.com/office/entrepreneurs/articles/86301.aspx#ixzz0zARVF2pj
• “Joint Venturing 101” by Scott Allen: http://entrepreneurs.about.com/od/beyondstartup/a/jointventures.htm

My recently published workbook, “Creating Great Business Partnerships. A Workbook For Success” contains all of the tools you will need to move through the due diligence of picking the right alliance or joint venture partner and making sure you are on the same page to ensure success.

http://www.newbusinesspartnership.com/

I am half-way through his book and I’m pleased to say that much of what my workbook, “Creating Great Business Partnerships. A Workbook For Success” covers in terms of what it takes to develop that successful and sustainable partnership is illustrated beautifully in Eisner’s book.

Just a few of my takeaways that support the principals I talk about in my blogs and workbook are:

• It’s so important that business partners share the same “moral code” and vision
• Having an unshakeable belief in and trust for your partner is key
• Communication needs to be candid, honest and continuous
• Don’t keep score and don’t let egos get in the way

One unique area Eisner talks about that is common in many of the partnerships he highlights is the need for one partner to be comfortable “behind the scenes” while the other takes the spotlight.

I like to think that this book describes the “what” of successful business partnerships and my workbook takes you through “how” to create them.

The link below takes you to the article in the San Bernardino Sun recapping Eisner’s talk to college students at Claremont McKenna College on the power of partnerships.

http://www.sbsun.com/business/ci_16106751

I think these two works on business partnerships have such great synergy, visit my website to take advantage of my Special Offer:  http://www.newbusinesspartnership.com/

Over the years I’ve become very attuned to these words and have discovered that, depending on the circumstances and who is speaking, the definitions can be drastically different. The meaning however, is very similar.

Employers sometimes call their employees “partners”, businesses talk about having a “partnership” with their suppliers or how they “partner” with their clients. Business owners’ talk about “partnering up” with other business owners to achieve something greater than they can achieve on their own, but even that can take different forms and definitions.

The meaning most people are attempting to convey when they use the words partner and partnership is one of cooperation, collaboration, and working together toward a common goal. It’s the concept of synergy where as Aristotle so aptly stated, “The whole is more than the sum of its parts”. (Just note however, that the actual definition of the word or phrase used, can have legal meaning that is not necessarily intended by the speaker, yet can be inferred by the listener.)

Over the next couple of blogs, I’d like to have a conversation about the different kinds of partnerships in business and what makes them unique. To get the conversation started, let me list a few of the different kinds of business partnerships and pose some questions. There are:

• Family businesses – husband/wife, siblings, multi-generational or any combination where different family members have an ownership stake in the company.
• Strategic Alliance – a formalized relationship between two parties to pursue a specific endeavor or set of objectives while remaining separate entities.
• Joint Venture – a strategic alliance where the two businesses create a separate legal entity for a specific venture.
• Investor – someone who contributes capital to the company for an equity stake. The investor can be active whereby they take a role in management, or a silent partner – with no active role in the company
• Professional Service firms – Law firms, CPA firms, etc.
• General partnership – two or more people who agree to go into business together as co-owners. These are often start-ups but could also apply to existing business deciding to merge into one entity

Are the challenges the same for each of these types of partnerships? How about the drivers for success – are the elements the same for creating a great business partnership? Should you conduct the same level of due diligence before entering a family business versus a general partnership, for example? Are the consequences the same for success or failure of the different kinds of partnerships? Are the criteria for making partner in a law firm the same used by a business looking for an investor, or a strategic partner?

While it’s not my intent to make this a conversation about the legal and tax implications or the various legal structures; I do invite attorneys and accountants to weigh in!

http://www.newbusinesspartnership.com/

I am always “on the hunt” for what others have to say about business partnerships and intrigued by different perspectives.

Of course, there is a lot of, “don’t do it!” advice out there and sometimes that is the right advice.

Yet there are so many good reasons to partner-up in today’s business environment, my focus is on how to minimize the risks and maximize the chances of creating truly great business partnerships. The more I read about business partnerships, the more I speak to other experts and the more I work with business partners, I become more affirmed in the wisdom of taking the time to get to know each other before cementing the deal.

In my research, I recently ran across an article by Karen Klein in Bloomberg Businessweek that I wanted to share with you. In the article, Ms. Klein interviews Philadelphia attorney John Gerber on the stumbling blocks to creating successful business partnerships.  While the advice Mr. Gerber provides to prospective business partners, mirrors my 7 Steps to Creating Great Business Partnerships, he approaches the topic from a legal perspective, thus enhancing the argument of taking it slow in the beginning.

Enjoy the article and let me know what you think:  http://www.businessweek.com/smallbiz/content/sep2010/sb20100910_593885.htm

http://www.newbusinesspartnership.com/

You can probably name at least one couple in which the partners are so connected, they not only know how many sneezes to wait, they finish each other’s sentences and anticipate the other’s needs.

How does that happen? Is it just a function of the amount of time people spend together or is there something else at play? My guess is that it is a little bit of both.

But I didn’t want to just guess, so I called two friends who epitomize this kind of business partnership. Rachel Owens and Bill Sornstein are Principals in Succession Strategies, Inc. and have been business partners for ten years. When I think of the business partners who are extraordinarily connected, I think of Rachel and Bill so I asked them why they think they are so deeply connected. Interestingly, these successful business partners responded with many of the things I cover in my new workbook, “Creating Great Business Partnerships. A Workbook For Success”.

• They respect each other’s differences and leverage them as strengths in their business
• They share the same world view, are generally optimistic and have exactly the same values
• Their approach to challenges and opportunities is entirely different, yet they usually arrive at the same place
• They create a safe environment for each other to say whatever is on their mind
• They spent a considerable amount of time working together on projects before finalizing the partnership

I shared with Rachel and Bill that I know a lot of business partnerships that could say the same things, yet they don’t have the same deep level of connectedness. The words that come to my mind when I think of the partnership and relationship they have created are — awareness, sense of humor and other-focused.

• By being aware, these business partners notice even the small things about each other and perceive the connections and patterns between behaviors, moods and events.
• By having a sense of humor, they don’t’ take themselves too seriously and they can laugh at their own idiosyncrasies.
• By being other-focused, they look at situations through their business partner’s eyes before reacting out of their own “automatic response” habit. They also make sure that their egos don’t get in the way of the relationship.

I’d like to know what you think makes for extraordinarily connected business partners. Do you know how many sneezes to wait for before saying “Bless You”?

Tip #5: Tune into your partner with awareness, don’t take yourself so seriously and put yourself in the other’s shoes before reacting.

http://www.newbusinesspartnership.com/