How To Find A Business Partner That’s Right For You
By JD Esajian on July 7, 2017
Finding the right business partner can take your business to a whole new level. Instead of losing deals or missing opportunities you will have the resources to take action. As positive as finding the right partner can be getting involved with the wrong partner can set your business back dramatically. You will despise the time you spend together constantly squabbling about petty items which can eventually lead to finger pointing, lawsuits and litigation. A good partner is like a marriage in that you don’t always have to agree on everything but you need to have the same goals and vision in mind. On the surface, a potential partner may seem like a good fit but before getting too far you need to take a step back and make sure you are really on the same page. Here are five things you need to find out prior to forming a partnership.
- Strategy. There are dozens of ways to be successful in the real estate business. A niche that may interest you may not appeal to a potential partner. The first thing you should discuss are the types of deals you plan on pursing. Do you only want short term fix and flip rehab deals or would you be open to a rental property in the right situation? Is there a scenario you would look to wholesale a deal or a specific property type? You should talk about which markets appeal to you and which would be deal breakers. You also need to talk about a plan for lead generation. Deals are not just going to fall on your lap. There may be a scenario where you need to spend some money to get your phone to ring. If so you have to discuss what type of leads, how you will work them and how you will pay for them. Being friendly with someone is not enough to jump into a partnership. You need to iron out potential strategy before getting too far.
- Goals. Your strategy and goals usually go hand in hand. Simply put, what do you want out of the business? The easy answer is to make as much money as possible but you need to map out a plan to achieve it. For some people, the bottom line is not the most important thing. They want to retain their full-time job while investing in just a few opportunities a year. For others, it is their primary source of income and they are willing to do anything to make the business work. Talk about your short and long-term goals and how you plan on getting there. If your goals align don’t align for the long term you would be better off working on a deal to deal basis. Talking about a five-year plan may be uncomfortable but it is better to have this conversation up front than when you are involved in a deal.
- Fit. The common thought is that you and your partner need to be in lockstep on everything you do. The reality is that some of the best partners don’t always agree on everything. They always have the same goals and a respect for the other person but agreeing isn’t mandatory. It is healthy to have a debate and see an opposing point of view. What is more important than agreeing with everything is having a good fit. You and your partner need to complement each other’s skill set and compensate each other’s weaknesses. If you are both handy and want to do the work on the house eventually you will butt heads. If you both like to control the conversation someone needs to step back or the partnership won’t work. Put on the table the areas where you think you excel or what has made you successful. Ask your partner to do the same and see where you may be able to pick each other up. You should be able to know pretty quickly if the fit is there.
- Financial Demands/Expectations. The biggest reason that investors shy away from partnerships is because they don’t want to deal with financial demands and expectations. Talking about finances isn’t easy but it is essential for any partnership. Start by discussing any upfront capital requirements. Both partners should have some skin in the game to keep them interested and motivated. Even if it is not an equal split there should be something. From there you should discuss how you plan on splitting up the potential profits. This can be a touchy conversation but you both need to be on the same page now before any work is started or offers are made. It is important to remember that you are not negotiating with a bank to try to squeeze every dollar out of them. If your partner isn’t happy with the split they won’t work as hard which will impact your bottom line. A little give and take is needed to keep both parties happy.
- Time/Work Commitment. Like any good team you need to discuss roles and obligations. There should be a rough idea of who is going to handle a specific task when it comes in. Some of these tasks will be more time consuming than others. The time commitment should be a consideration when it comes to dividing up profits. If one side feels they are doing a lion’s share of the work for a reduced share of the profits they will eventually leave the partnership.
By taking just a little time to vet your partner you can feel confident you have the right fit. Never jump into any agreement without knowing exactly what you are getting into.