One of the biggest temptations for new entrepreneurs of any age is to jump into starting a business with a friend—someone they’ve met at an industry event, for instance, or a colleague from a previous job. But as business guru Brian Tracy warns, spur-of-the-moment partnerships are fraught with danger.
He’s right. I’ve seen partnerships destroy wealth, health, and friendships, but I’ve also seen partnerships turn ambitious entrepreneurs into millionaires when partners have been chosen wisely.
Much of my wealth has come through successful partnerships with Matt Smith, Joel Marion, and Bedros Keuilian—three of the best collaborators anyone could ask for. Why? Because we know each other well and we share the same pillars of success. We are as concerned about each other’s success as we are about our own. And we know what to expect from one another.
Profitable partnerships take time and effort, but can be confidently launched with five proven principles:
1. Know Thyself and Know Thy Partners
“You can’t make a good deal with a bad person,” Warren Buffett once said. He would know. Buffett, and his partner Charlie Munger, have been working together since 1959.
A person’s past behavior is the best predictor of future behavior, but you won’t know a partner’s past—and true self—if you jump into business after a couple of drinks at a conference. I’ve seen this happen, and watched partnerships go sour. Not anymore.
Author Dave Kekich said it best: “Don’t enter into a business relationship with anyone unknown to you without requesting references dating back at least 10 years. If your potential partner doesn’t have good, enduring relationships, stay away.”
It sounds harsh, but it’s true. A person’s behavior has a tendency to repeat, and their cycle of bad habits will likely continue. If you see signs of these pitfalls, avoid a partnership.
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2. Start with Clear Communication and Expectations
Have adult conversations from the get-go. Establish who is responsible for what parts of the business. Make the partnership terms clear and concise, and be sure to write them down. A single page summary of responsibilities should do to start.
3. Get It In Writing
Speaking of writing, craft a strategy not only for success, but for failure. Put your goals and mission in clear, concise language.
Also, define an exit strategy for yourself in case the business tanks. It must be clear how the business will be divided, or if there is a way for one partner to buy the other(s) out. All of these are standard in partner contracts, but if you don’t have them in place, things can get ugly.
“Don’t enter into a business relationship with anyone unknown to you without requesting references dating back at least 10 years. If your potential partner doesn’t have good, enduring relationships, stay away.”
4. Partner With People Who Have Strengths That Complement Your Own
There’s little sense in partnering with a great copywriter if you’re also a great copywriter. But if you can find a great partner with strengths in areas where you are weak, then the synergy (and potential success) is automatically greater.
When I partnered with Bedros Keuilian in 2010 to build an Information Marketing Mastermind, it was clear that he was an expert in selling from the stage, paid advertising, and business-to-business sales. My expertise was in business-to-consumer sales, affiliate relationships, and content creation for the mass market. Our skills overlapped in some areas, such as e-mail marketing, but there were enough complementary skills to ensure the growth of the group.
5. Partner with Individuals Committed to Personal Development
“We both share the theory that you should hang around good people,” Munger said about his relationship with Buffett. “Always behave better every year than you behaved the previous year. Warren and I don’t agree on everything, and yet we’re respectful of one another.”
The principles of respect and self-betterment are central to a successful partnership. While Bedros and I benefit from each other’s sales and marketing skills, the greatest assets we bring to our relationship are in personal development. He challenges me to overcome my inter-personal limitations and social anxieties. In turn, I help him hone his self-discipline and create more structure in day-to-day routines.
You shouldn’t be an ethical or moral clone of your business partner, but you should share common personal goals. Put these ahead of profits and you’ll enjoy a long and valuable relationship.
Buffett says it best: “The asset I most value—aside from health—is interesting, diverse, and long-standing friendship.” Let this be your approach to partnerships as well.