On partners that make deals successful…and those that don’t When it comes to business—and life—good partners are worth their weight in gold. Robert, of course, is my number-one partner in everything. We are business partners, investing partners, marriage partners, and play partners. Is it always peaceful and happy? Haha, far from it. No true partnership is. If the partnership does not allow space for one partner to disagree, to speak her or his mind, and to question the other partner’s ideas, then it’s not a real partnership. Two rules for partners My previous mentor, Frank, taught me two invaluable lessons about choosing partners wisely: “Rule number one is: Never take on a partner who needs money.” Frank explained to me that if a prospective partner’s number-one goal is to put more money in her pocket, then she will make and support decisions to satisfy her immediate need for money versus doing what’s best for the investment or the business. And if her primary purpose is to make money for herself, then we are not aligned from the start. “Rule number two is: Never give equity to a person whose services you can buy in the marketplace.” Let’s say you have a duplex and, between your full-time job, your two kids, and assisting your aging mother, you decide to hire someone else to manage the property. Your girlfriend says to you, “Instead of paying an outside company to do it, I’ll do it for 10 percent of the deal.” You now have a choice: Keep 100 percent of the property equity for yourself (since you put 100 percent of your time and money into acquiring it), and pay a monthly fee for a property-management service. Or, give up 10 percent equity of your duplex instead of paying the monthly fee. By granting equity (a percentage of the property) to someone else, that person is now your partner. It’s a good guess that they are offering you their services because they have no money to put into the deal, thereby violating Frank’s first rule. Also, by giving away 10 percent of your cash flow and 10 percent of the profit when you sell, this option may end up costing you a lot more in the long run. What makes a good partner? To me, good partners have aligned values. They are generous. The goal is that everyone in the deal prospers. And they are people I enjoy being around. If I don’t want to go out to dinner with someone, why would I want to go into a business deal with her? An associate of Donald Trump once wrote, “You can’t do a good deal with a bad partner.” That is so true. No matter how good the project is, if you have a partner who is unethical, greedy, and uncaring, then that deal is doomed for disaster. A bad partner can break the deal. A good partner can make the deal. A good partner is priceless. I am very fortunate to have very good partners around me today.
Posted on: Sun, 09 Mar 2014 05:23:55 +0000
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