Funny how sometimes when you think you are seeing one thing, your mind carries you off into something very different. Is it just me, or does that happen to you also? Just curious. Because it seems to happen to me all the time.
Here’s a recent example where this very thing happened.
This past weekend we were returning home form church on Sunday just past noon. As we turned into our neighborhood, we came upon some neighborhood boys who had decided that it was a great day to start their own business. They had a well constructed and well positioned lemonade stand.
As any savvy business owner would do, they secured the prime location in the neighborhood – a “hard corner” as they say on the busiest street in the neighborhood. They had their marketing materials in hand (a large sign with their products and prices), and they had plenty of products ready for sale.
It was too hard to resist. Funny how when you know you’re going to see these same kids playing in the neighborhood later in the day, you don’t want to be the ONE car that did not stop and make a purchase. No need to risk having your neighborhood kids hate you! The guilt trip was on and it was a powerful motivator.
Three cups of lemonade and $3 later, we were on our way. But my mind was racing over what I just observed. Here these three boys had come up with a plan, started a business, entered into a partnership of sorts, and had launched perhaps their first venture. I wondered…so how long would this go well?
I started to think about some of the real life business owners I work with, particularly those who are “partners” in their business. What might I tell these three young boys about partnerships that might help them avoid some of the pitfalls that are sure to come their way? So I found myself thinking not about how good the lemonade was but rather what would become of this fledgling partnership with the corner lemonade stand.
My wife restrained me from going back to the boys and giving them a lecture on partnerships – probably a good thing. But the more I thought about how hard it is to sustain a successful partnership, I wanted to go give them some free advice! But rather than rain on their sunny day and spoil the fun of making a few bucks on their family, friends, neighbors and unsuspecting Sunday afternoon visitors, I decided to write this blog post. At least this way if they really want to know, they can check it out for themselves!
But the reality is that partnerships are hard! While they may seem fun and exciting in the beginning, they can become tense and stressful if they are not handled properly. Here are six (6) tips, advice or recommendations that I would have shared with my neighborhood young entrepreneurs:
1) Start with a written partnership agreement. While it seems that this would not be necessary – particularly among friends – it is critically important that there is a written partnership agreement in place from the start. This should define how the business is structured, who owns what percentage of the business, how are decisions made, and how profits and losses handled (among other details).
2) Establish a Buy/Sell Agreement. Long before there is any talk of someone cashing out, a buy/sell agreement must be in place. This will define how the value of the business will be determined, under what conditions can one of the partners sell out, who had first rights to purchase another partner’s ownership, whether spouses or children will have partnership status if the primary partner dies, and many more unexpected and largely undiscussed circumstances arise. Once you enter into a partnership, you MUST account for your exit. Everyone will exit a partnership and if it is not clearly defined, it will create unnecessary drama, concern and confusion.
3) Establish your clearly defined roles and responsibilities. Often times partners like to start with everyone having a say in every decision. That doesn’t work for very long. It confuses other team members, slows down the decision process and inevitably ends up hurting someone’s feelings when a tough decision has to be made that everyone is not in agreement with. Create a functional org chart and put each partners name in one of the positions. Be decisive about this.
4) Don’t hire your relatives. Ok, I know that sometimes it works out ok. But most times, it is inviting nothing but trouble and heartache. It clouds the judgement of the partner whose relative is now an employee. It makes giving meaningful performance feedback almost impossible and it is likely to ruin the next family Thanksgiving dinner!
5) Start with the intention of working yourself out of your job. The best move that partners can make is to get the business to a place as quickly as possible so that the partners can oversee the company rather than be involved in the day-to-day operations. While you may begin as friends, once a critical part of the business is relying on one of you to get something done quickly or efficiently – and it does not happen – the friendship is strained. And, if one partner ends up working a lot while the others are not, you can imagine what that does to the partnership. It is better to oversee and manage as partners rather than be a slave to the business.
6) Take time to enjoy your friendship. Don’t let the responsibilities of the business trump who you are as friends. Keep some of your pre-business rituals and outings. Make time to get away from the business and enjoy your partnership. Don’t let the business suck the life out of your friendship.
I can’t think of any business that is more important that a meaningful relationship. Whether the partner is your spouse, a college buddy or folks you’ve known for a long time, the advice holds. Do these six (6) things and you’ll improve your chances of turning that lemonade stand idea into a thriving, successful business venture!
You have other tips from your personal experience? Please share them. Just reply to this blog post and I’ll be sure to share your ideas with my neighborhood boys (if they survive to set up their stand again next week)!