Avoiding the business partnership train wreck: Creating Great Business and JV Partnerships

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By Scott Street

When starting a new business it is important to have all the working relationships and fundamentals organized before diving in blindly. For instance, if you need specific software for your business, then you may want to look into Software development companies in phoenix or within your local area so you are ready to take on everything that will come your way as you get started. Getting all the help you can is beneficial in creating a great business, whether you are a lawyer and using companies like Bolter to help with something like a Brisbane-based law firm start-up, or whether you are like me and decide to go with a partnership.

Nick and I have a fantastic business partnership. Without a doubt, our partnership helps us be the best parts of who we are plus some because we know that the other person will help keep us in line and see things that we may not. In addition, we have found in life that working as a team rarely accomplishes a non-physical job (something that uses your brain more than your body) quicker, but almost without exception, the quality of that job is far better than we could have done on our own. Over the past five years, we have gone from building one house to building 15 per year (with that number being set to go up considerably more in the next couple of years). In that time we have raised over $3.5 million in capital and purchased over $13 million in real estate.

Here is the thing – you may not be looking for a business partner specifically, but if you are joint venturing (JV) on properties you are in fact in a form of a business partnership. The principles in this article may not completely translate, but we have done enough JV deals that we can say that we do reference many of the below points in selecting (yes, selecting) who we will partner with.

When it comes to business partnerships the reality is 80 percent of them fail. Eighty percent! This is why if you are seriously considering a business partnership you should have the right business plans in place to reduce the chance of failure. Any business partnership is not something to enter into lightly, and with those odds, you don’t want to start a business partnership with just anyone. And, not only considering the partner, there are many other factors that need to be accounted for. For example, if you were to join hands with your friend and start a law firm together, there are many technicalities including business registration, hiring reliable law firm it security solutions, clients, types of cases, location, etc. that you need to look out for. When it came to our joint partnership, we knew each other for quite a few years and had volunteered in the same organization under what were, at times, some pretty stressful conditions. We knew how we worked together and in addition, how we worked together in difficult circumstances.

We wanted to share with you some of the most important partnership principles that we see. This isn’t an exhaustive list, but rather a sampling of what we have found to be the most important thoughts for us when reflecting on our journey so far. You may want to use them when considering partnering with another person, or to help evaluate and improve a current partnership you are in.

  1. Similar Goals, Similar Direction: We don t have the same goals in life, and we don t want to accomplish exactly the same things, but there is enough similarity in where we are going and what we want to do that it is really workable for us. This means we have a similar grid for how we want to build our business and the payoffs at the other end.
  2. Shared Business Values: We both share the same values. Empowering others (not micro-managing), creating real win-win partnerships (and making sacrifices to benefit our investors), serving those around us to success (not being a dictator), and treating all people with value and respect are a few key items for us. We don t yell at our tradespeople or employees when they make a mistake, and we are willing to stand behind our word even when it costs us. The core of how we do business is very similar, so we are able to work off of the same expectations and assumptions. Of course we challenge each other on those values and continue to refine and explore them, but it is a common starting point for us.

  3. Appreciating Different Skill Sets: We both have different skill sets, which I will expand upon shortly. We think that the key here is not just to have different skills, but to deeply appreciate, seek out, and put a profound value on the skill set of the other person. We think that in many cases this actually changes how we work.

Our Skill Set Differences: An Example

For simplicity, I (Scott) will write out an example. Nick is the more visionary of the two of us and sees reasons to do something (not the roadblocks), while I am the more analytical and see more of the roadblocks or risks (not all the reasons to do something). When Nick brings a great new idea to the table, I work hard to say, Let s do that and also watch for these things .. . My honest personal reaction would be to just see the reasons not to do it, which may kill the idea. That would deflate Nick and the reality is we would never do anything. Yet at the same time Nick realizes we can t do every idea that comes along, and he respects and values me enough to share ideas with me. He also realizes that he needs that discerning eye to see what might cause an idea to fail, or be too risky to try. I respect and value him enough to put stock in all of his ideas and to help make them succeed. This actually creates an environment where Nick dreams more and dreams bigger knowing that I will help guide his ideas safely forward or say if an idea really is not going to work. It also helps me look beyond what I would normally see while being able to add some organization to help the idea become a reality.

  1. Trust: To work with someone that has a different skill set, we have found that trust is a very important factor. Not only do we have to trust that we will do what we have committed to for our company (and do to it in a way that reflects our company values) but we trust that the work of the other person has been done well. Basically, we can t be looking over each other s shoulder, micro-managing each other every day. When our company was smaller, we were involved a lot more in the decisions each other made. As we have grown we have to trust more that we are getting the job done. This is not blind trust at all, but a function of the volume of work we both oversee day to day.
  1. Like Each Other: When you are business partners with someone you spend A LOT of time together, and some of that time is spend together in stressful times or around delicate conversations. A key that helps drive us forward is that we actually enjoy being with each other. We are interested in each other s lives, in our families, and in the other things we do in life. Again, in this area we have similarities (i.e. we both enjoy sports). That underlies our difficult moments because first and foremost we are friends that care for each other.

  2. Humility: Humility is a foundational component of our business partnership that extends into every area. It means that we approach each other not expecting that we know everything, or that we have all the answers, respect that the other person has something important to say or add, and recognize that the needs of the other are as important as our individual needs. It also means seeking first to understand and then be understood, and it means understanding that we both need to win for us to see any true success. Humility also has to ask the question, Am I the problem? , when facing issues about your business or partnership. Finally, humility leaves room to ask for help, admit defeat, or confess that a decision you have made will cost the company more than expected. We have both been on both sides of this conversation.
  1. Freedom to Fail: This relates closely to the point about humility. As much as you need humility to admit your mistakes, if it is in a partnership where mistakes are not expected then you are probably not being realistic. We try and run a very tight company with attention to detail, but sometimes one of us makes a mistake. Neither of us likes those moments, but it is a part of living life and moving forward. If the standard we expect from each other is perfection then all of the time we are destined to fall apart.

  2. Don t Forget the Legal Stuff: If 80 percent of business partnerships do fail, then it is wise to make sure you have everything organized and outlined so that if a break-up does occur it can be management easier. I don t imagine having these delicate conversations in the middle of a break-up is a recipe for success. Our lawyer, Mark Warkentin at Linley Welwood, has been great at helping us know how to stick handle what can be a complicated process at the correct times so that we are well set up for the future.

Nick Derksen and Scott Street own Summit Pacific Properties. Both Nick and Scott sit on the REIN Advisory Board, have their Gold Pin from REIN and are 2013 and 2014 REIN Players of the Year in BC. Their company builds houses and develops land in Chilliwack, BC as a way to expand their rental portfolio. Contact them at nick@summitpacificproperties.com or scott@summitpacificproperties.com.

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