Many entrepreneurs think that having a partner in business is great; however, it’s important to recognize that while partnerships offer numerous benefits, they also come with their share of challenges that require careful consideration.
In this episode of Influence by Design, Samantha and Tim speak about the potential results of choosing the wrong partners and what you need to do and think about before forming a business partnership.
While a business partner can bring added expertise, support, and resources, entrepreneurs should be aware of the potential complexities that can arise from this arrangement.
A harmonious business partnership stems from having a shared vision and goals, clearly defined roles and responsibilities, putting agreements in place and so much more. To find out more about how you can leverage this collaboration with Samantha’s and Tim’s first-hand experiences and insights, let’s dive in.
IN THIS EPISODE YOU’LL DISCOVER:
- The importance of understanding your skillset and strengths in partnerships (03:10)
- The value of having a partnership vision before entering one (04:59)
- What the decision-making process looks like in partnerships (06:23)
- How partnerships impact and grow business numbers (08:45)
- The power of putting partnership agreements in place (13:50)
- The opportunities you can get from partnerships (15:52)
QUOTES
- “You don’t know what you don’t know, or you don’t have skill sets in different areas thus having partners is a really great way to be able to grow your business.” -Samantha Riley
- “You need to be clear on the vision; where you want to take the business and how you want it to get there. Because it’s difficult to make decisions if you don’t know what the end goal is.” -Samantha Riley
- “You want to have complementary skill sets and strengths that you can bring to the table, in order to create something that’s greater than you’d be able to do yourself.” -Tim Hyde
- “If you want to be the CEO of your business or your partnership, set your vision out and go with it. Stop checking around to see if people are following you.” -Tim Hyde
RESOURCES MENTIONED
Influence by Design episode 503: 11 Mistakes Preventing Business Growth
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TRANSCRIPTION
Samantha Riley Snippet(00:00):
Bringing in a partner is a really great way to grow a business. But one of the mistakes that we see one of the mistakes that both of us have made, is not getting some of these things in place. But the flip side is if you get all of this right, it can be really, really valuable to grow your business.
Tim Hyde Snippet (00:18):
What are the things that people are actually committing? What are you going to put in place to ensure that the party coming into your business is going to deliver all the things that they promised each deliverable as a component of share?
Samantha Riley Intro (00:38):
Welcome to the Influence By Design Podcast. I’m Samantha Riley, authority positioning strategist for coaches and experts. If you’re ready to build a business that gives you more than just a caffeine addiction, and you dream of making more money, having more time, and having the freedom to be living your best life, then you’re in the right place, it’s time to level up.
Welcome to today’s episode of influence by design. I’m your Thursday co host Samantha Riley, and joined by my lovely Thursday partner, Tim Hyde. How are you, Tim?
Tim Hyde (01:04):
I am Well, Sam, how are you?
Samantha Riley (01:06):
I’m doing very well. We’re continuing along with our theme of 11 mistakes that we see business owners making that prevent them from taking their businesses to the level that is possible.
And today we’re going to touch on the subject of choosing the wrong partners. This subject I had a little bit of a funny feeling about coming into this week, I guess because you know, I have had this happen in the past and you have to, but we’re not going to focus on the negative part of it, we’re going to teach and share through our learnings on how, you know, the topic of having partners is something that can be really helpful to take your business to the next level.
And really what you can do to make sure that it works in your favor. Would you have said that differently?
Tim Hyde (01:56):
We’re just doing some research in pulling this episode together on the number of unicorn businesses or super unicorn businesses who have been founded by a single person.
And there’s actually not very many, there are a couple. Absolutely, there are a couple of these businesses out there. But more often than not, you know, the unicorn businesses that are household names for us, you know, like the Facebook’s and the Twitter’s and Canva and so on actually have a businesses that were founded in many cases by more than one person.
Samantha Riley (02:29):
And in most cases, we discovered three was the magic number
Tim Hyde (02:33):
three was the magic number. In most cases, I’ve had a business with five business partners before,
Samantha Riley (02:37):
which absolutely astounded me, I think I had to pick my jaw up of the table. Five to me sounds like really hard to manage?
Tim Hyde (02:47):
Well, it’s I think it’s that understanding about what role is everyone gonna take? You know, who’s going to be the more active partners? What’s the issue? Who’s not going to be an active partner?
But you’re absolutely right, Sam, I think you know, and even you and I were talking about it, you know, we’ve we’ve got different skill sets, you know, I’m really good at numbers and today’s conversation I’m gonna be leading in, and you’ve got skills in different areas as well.
And I think about, you know, one of the things we want to look for, when we find partners have it, you said if you find people that are to the same ends up having arguments with him, but you want to have these complementary skill sets and strengths that you can bring to the table in order to kind of create something that’s greater than you’d be able to do itself?
Samantha Riley (03:30):
Absolutely. I think the the way to say this is you don’t know what you don’t know, or you don’t have skill sets in different areas. And I think having partners is a really great way to be able to grow your business.
But as my accountant said to me, you do need to have a few things in place before you go into this, like don’t blindly go in and say, oh, you know, you’re my best friend, let’s go into business tomorrow. There’s got to be more conversation, and quite a few things to discuss, I guess.
Tim Hyde (04:04):
It comes down to, I guess, really, you know, having that deep conversation upfront about what is each party bringing to the table. It doesn’t matter whether you’re a complete startup, right, if you have nothing in place, whatsoever. It is exactly the same conversation.
If you are bringing an existing business to the table, say for example, you know, in some form of future utopia, Sam, where you and I were to combine our businesses, you know, we’d have to look at what do I bring to the table and what do you bring to the table?
And you know, where does that sit in terms of what we each believe is equitable, to move forward. And do we have that shared vision to where we want to go right, but you’ve got to have that real understanding and open and somewhat vulnerable conversation about well, what do we think would we want from this?
Samantha Riley (04:57):
Yeah, yeah, they’re definitely To be a conversation about what the vision is, what do we what are we, as business partners? Where do we all anticipate this is going to be going?
Because you know, right at the beginning, if you’re having a conversation of partner, a going over here to the right, and partner be going over here to the left, it’s going to be really difficult, right from the beginning to be able to make it work.
So there needs to be some discussions around well, where do we see this going? What are the, you know, what are the skills that you’re bringing some sort of conversation around money and dollars of what each is bringing? How are we going to organize to take it out? Lots and lots of things?
Tim Hyde (05:37):
Yeah, you know, and what’s the decision making process? What areas of the business are we going to have decision making process on? You know, are we going to, you know, because I think as soon as you start stepping on each other’s toes and saying, you know, that’s not how it should be done, didn’t do it this way.
You know, that causes that animosity and that sort of frustration. In their business. I think even if we look at some of those unicorn businesses, where there’s multiple partners, someone is clearly taking the tech lead, click funnels.
Sam, if you didn’t know, Click Funnels was founded by five guys, I did not know that actually go, clicks on Russell Brunson says, you know, I don’t have some of these other skills. But this is the role that I was kind of assigned to take as the face of Clickfunnels. And as the CEO of Click Funnels, and that’s the role he’s kind of molded himself into
Samantha Riley (06:23):
that you just use the word CEO there. And I think that’s one of the big things that needs to be discussed right at the beginning, who is going to be that CEO, the way this was described to me is, even if you’re, you’re at, you know, 90% of the time, or 99% of the time having the conversation and everyone’s like, yet yet yet, we’re all in agreement, there are going to be times, or could be times where there’s a bit of a stalemate, where someone’s like, No, I’m digging my heels in, this is what I want to do, and someone else wants to do something else.
There has to be that time where someone’s got a 51% decision, and a 49. So that at least we can, you know, move forward. And that’s definitely even Leon and I, in our business, there is a CEO, so that at any time if there was a decision that had to be made, that we’ve got it in place, and it’s in writing, there is an agreement in place on who, who is the one that’s going to make that decision to move forward. And I think that’s a really, really important thing to have in place. Yeah, absolutely.
Tim Hyde (07:24):
You know, it’s not just it’s not this is not just a financial relationship that you’re getting into, and I’ll share with the story in a sec, of one that my wife is going through, but it is that decision making process someone needs to lead.
And a very dear friend of mine, who, you know, was a partner in my last business. I’ve known for 41 years. He said to me, you know, very early on when it kind of like, you know, the decision was made to make me the CEO, when I was kind of just leaving a committee, I would constantly turn back to my partners and say,
Well, you know, guys, this is your money as well, because we’re all mates. Yep. And that was really important to me that we stay, we stay friends. I kept turning back to them and saying, Well, you know, here’s the decision we want to make, do we want to spend this $50 on that thing, or spend $100 on something else?
And he said to me, and isn’t it he’s not a business guy, right? He’s in the police force is there to me, if you want to lead lead, don’t ask for permission. Which is one of the most valuable pieces of advice I’ve ever had is if you want to be the CEO of your business, or your partnership. Take that situation out and go with it. Keep checking around to see if people are following you.
Samantha Riley (08:39):
Yeah, totally. So this is not my wheelhouse. But Tim, I’d love you to talk around the numbers. There’s different models around equity or rev share revenue share. Can you take us through some of these different conversations or thoughts that we need to be having? Or
Tim Hyde (09:00):
I’ll give, I’ll give some context here. My wife’s business, which I have talked about on the show before, and she’s a buyer’s agent, she’s bringing in someone into her business at the moment. And I know he wants he’s interested in owning an equity share. He doesn’t want to be an employee.
And I think one of the things we get again, she’s kind of working out well, is like, well, what are you bringing to the table, except extra arms and legs of things that I can do anyway? Right.
So that’s the first conversation that I think we need to address. Are you just extra arms and legs? Or are you bringing a skill set or network a connection or cash to the table that can help us accelerate our growth?
Same thing applies whether you’re a startup and you don’t have a business yet or whether you’re an existing business with existing revenue. Okay, you know, put those things in Go. Yes, no, yes. No, yes, no.
But I think the second thing we need to look at is when You’re buying into a business or when you’re having someone buy into yours, work out whether you need cash in the business to accelerate it, or whether you want to sell part of your business to take that cash out and realize, you know, some of your hard work when those are two things, obviously, if you put cash into the business, it’s diluting your shareholding.
But the overall business is in worth more, if you’re taking it out, well, you’ve got lower value to what that business is actually worth. Because in our case, it’s, for example, let’s give a number of say, $500,000. You know, if someone comes in with 500,000, will the cash is still in the business, but typically, that 50% that they know, oh, well, half of that asset is $250,000 cash in the business.
So you’re giving them 50%, for them to just take the two 50 million? Well, hang on, it’s not, they’re not actually buying as much as they think they are. Yeah. But if I give you 250, and you take it out, well, that’s 50% shareholding, but there’s still no cash in the business to necessarily do the next, you know, do that next stage of growth.
So again, we’re looking at whether we need the money in the business to accelerate or the when they will do their skill set in the business to accelerate. And that’s probably the two things we need to to consider. If you’re looking at some other way, if there’s no particular network or skill set, or cash that’s coming in, maybe a revenue share, and earn in might be a better approach.
Okay, so you set particular milestones and say, Well, if you can get us from 500k to a million, will you earn 10%? Well, you will 20%. And all you earn 5%, or whatever that number happens to be, but this is your area of responsibility. So we know that you’ve actually contributed to that to that growth.
I love it, though. It’s not it’s not an easy calculation. But I think you’ve got to work out what is it that you want from and if someone’s going to buy in? Do you want the cash out? Or do you want the cash in the business? Firstly, so again, coming back to that one, I’m not sure if I explained it very well to us. But you know, you’ve got a business and $500,000 for how much percentage do they get?
Samantha Riley (12:22):
Okay, I think this really comes back to what I mentioned at the beginning, you need to be really clear on the vision, and where you want to be taking the business how you want it to be getting there. Because it’s really difficult to make these decisions if you don’t know what the end goal is.
Tim Hyde (12:37):
Yeah, ultimately, when we’re coming back to this, we’re looking at you, right, that’s that vision, but also, what are the things that people are actually committing? You know, one of my former business partners that bought into my previous enterprise, brought in cash, you know, brought in the promise of opening doors.
But the doors never got opened. So, you know, what are you going to put in place to ensure that you’re, the party coming into your business, is going to deliver all the things that they promised? Right? So you might say, The cash is worth this much, right, because we need new website, or we need to get new desk chairs, or, you know, we need a new we’re opening a new store, right, or investing in plant, right?
But no, maybe maybe put an equity piece on the table for the other things, you know, for every new client you bring in? Well, that increases your equity stake by 2%, or 3%, or 4%, or something, so that each deliverable as a component of, you know, shear.
Samantha Riley (13:46):
So talks about vision, all of that, what you’re talking about here, it’s really, really important to get those agreements in place. First, you know, we were talking what’s one thing that I would want to leave listeners with it is that the agreements need to be in place. And the way that my accountant described it to me, is get your divorce papers in place before you need them.
Tim Hyde (14:09):
It is that prenuptial agreement. This is what do we bring? Or what to expect? Where are we going? How are those decisions going to be made? And if we don’t agree, what happens? If I want to exit at some point more how does that happen? Because Because you’re bringing a partner in doesn’t mean to say that the there forever.
Samantha Riley (14:31):
I think that bringing in a partner is a really great way to grow a business, bringing different skill sets, bringing finances bringing all sorts of different things. But one of the mistakes that we see one of the mistakes that both of us have made is not getting some of these things in place, maybe not getting our agreements in place properly, choosing the wrong partners, whatever it is. But the flip side is if you get all of this right it can be really really valuable. How To Grow Your Business
Tim Hyde (15:01):
just accelerated so much in the same way as getting a good employee who can do things that you can’t do getting a good business partner. And there’s no question, you know, having a business partner invested in growing your business, they will grow it faster than an employee, they do bring 100%
They will bring that level of enthusiasm and positivity and the extra hours and effort that goes into being a business owner. Right compared to an employee, an employee, now we’ll look at the clock and go and, you know, it’s five o’clock now. That, that, that owner will come with that owner mindset as well.
And they’ll do over and above what it is to get to where their goals are. But you’re absolutely right, Sam, you know, we don’t have those agreements, we don’t have an aligned vision. It’s just not gonna work.
Samantha Riley (15:51):
Totally. I was just thinking, as you were saying that, you know, if you think about shark tank, and when people when the sharks put the, the, you know, the proposals to the people that are in the Shark Tank, it’s not just I will give you this much money, it’s I’ll give you this much money, and I will open doors to this or I will be able to introduce you to, you know, the suppliers or I will be able to, there’s always or very often more than just the money.
Tim Hyde (16:22):
Yeah, you’re right. I think that’s to be honest, money is good. The other thing is that I better
Samantha Riley (16:27):
I agree the other things are better, because they’re things that will exponentially grow your business. Would you have another business partner team?
Tim Hyde (16:37):
Yeah, I think I would write one. I think I would.
Samantha Riley (16:41):
Yeah. 100%.
Tim Hyde (16:42):
I agree. They very valuable. Yeah, well, you’ve already got one, Sam.
Samantha Riley (16:47):
I have and we’ve just had someone else come to the table. So I haven’t even told you that. Yeah, great conversation is definitely something to think about. If there’s any, you know, if you’re listening to this, and it sparked some ideas, definitely feel free to reach out to Tim or I can do that on socials.
All of this our social links are in the show notes either on the app that you’re listening to or over at influenced by design podcast.com And we’d love to open up the conversation with you. This is nerdy business conversations that we love. Thanks for listening. Thanks for joining me again, Tim.
Tim Hyde (17:24):
It’s very good to meet you soon.
Samantha Riley (17:26):
And we will catch you again on the next episode of Influence by Design. Ciao.
Samantha Riley Outro (17:56):
Thanks for joining me for this episode of the Influence By Design podcast. If you want more head over to influencebydesignpodcast.com for the show notes and links to today’s gifts and sponsors. And if you’re looking to connect with other experts who are growing and scaling their business to join us in the coaches, thought leaders, and changemakers community on Facebook, the links are waiting for you over at influencebydesignpodcast.com
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