Business Partnership Mistakes You Should Avoid

Your ability to succeed and grow your business will be determined largely by how well you learn the art of the business partnership.

I’ve been in deals with great partners, mediocre partners, and terrible partners. I’ve had more than one deal blow up in my face solely because I chose the wrong partners.

Your partners define everything about how successful your business will be.

Good Partner, Bad Partner

I want to show you a framework that my father shared with me for managing a business partnership that he uses as a guiding light (especially in tough times) to determine what to do next in his business.

He calls this “Good Partner, Bad Partner.” It’s not a very complicated way to look at a business partnership, but its power lies in its simplicity.

Business Partnership Grid - Good Partner Bad Partner

Whenever you find yourself struggling with a business partnership, its time to take out the grid and make decision about the best course of action. When I’ve had to agonize over decisions about whether to double down or shut down – this grid has provided me with tremendous clarity.

If you’ll notice – the key factor on the grid is not the quality of the deal itself, but rather the quality of the partners.

Regardless of the economic opportunity, bad partners can sour a good deal. Any deal where you have a bad partner you will likely end up needing to exit the transaction sooner or later.

On the other side of the coin, good partners can save even a bad deal. If you have a good partner the right choice is to stick it out make the business partnership work.

Business Partnership Lessons

The challenge of course is finding and ensuring that you are dealing with good partner first and foremost. You sure can save a lot of headaches (and heartache) on the front end by avoiding these critical business partnership mistakes.

No method for selecting the right business partners this will ever be perfect, but building on the lessons of seasoned entrepreneurs is not a bad place to start.

In that vein, I wanted to share a few insights and lessons that I have learned along the way and a few that I have taken from business people who have seen many more partnerships than me.

Much of this research was put together by veteran entrepreneurs Bill Hammack, the CEO of NewOrleans.com, and his business partner Lou Zimmers who served as former CFO of Michigan Bell and was a highly successful technology and publishing entrepreneur.

Seasoned businessmen on their own, they also interviewed several entrepreneurs and top executives from the likes of Fortune 500 companies and billion dollar private conglomerates to put these lessons together.

What they found were a striking number of common patterns why business partnerships fail.

Unequal contributions (real or perceived)

Let me repeat that last part – real or PERCEIVED. Even a perceived imbalance can throw a business partnership into chaos. It’s absolutely critical to define the role of each partner in detail and communicate as clearly as possible from the start. Everyone should be on the same page about what expectations are and what each partner is contributing to the deal.

Failure to reduce everything to writing

Everything needs to be “put on the table.” Especially compensation! Give the document to a disinterested party to find poorly defined terms.

Failure to fully define expectations

Expectations are not easy to verbalize. Each person hears it differently (reflecting his or her background and self-interest). You even have to define “Success.”

Partners with different objectives or bad chemistry

Understanding your partners objectives and clearly communicating your own is essential on the front end of any deal.

Lack of integrity.

While it’s impossible to ever truly know if your partner has a lack of integrity, this underscores the reason why its so important to focus on “fit” and getting to know each other before entering into a business partnership.

Poorly Defined “Exit Strategies.”

​How you value the enterprise is always a contentious issue. ​You need to play the “what if” game to identify the possibilities. A failure in a business partnership has some of the same attributes as going through a divorce. Like a divorce, you need to identify what was brought into the relationship and what was created together.

When circumstances change for one of the parties.

A business partnership can sometimes fail when circumstances change for one of the partners (e.g., health, family concerns, etc.). These changes cannot be anticipated. The best that can happen is an evenhanded unwinding of the business partnership. That is why it is critical to define exit strategies up front.

Successful Business Partnerships

So what are the secrets to a successful business partnership? With all of these mistakes in mind, here are a few key things to do to make sure that you start your business partnership off the right way.

Communication

There are three kinds of communication. No communication, miscommunication, and over-communication. There is no middle ground. If you are not over-communicating then you are either not communicating or you’re miscommunicating. Period. This applies to a business partnership just as much as it applies to everything else in your life. Don’t beat around the bush. Be as honest and direct with your partner on what you want as possible.

Understand Your Partner

Understanding comes from putting other people first. Focus on providing value for your partner. Spend more time listening than talking. Make sure you understand clearly their goals and objectives.

Fit First / Business Model Later

Get to know each other and focus on “fit” before you dive into the specifics of the business partnership. Learn about your partners on a personal level and the business side of things will flow naturally.

Begin With The End In Mind

To quote the famous lesson from the “Seven Habits of Highly Effective People” – starting with the end in mind helps your business partnership avoid a lot of headaches along the way. Define your exit strategy and your goals up front.

Put Everything In Writing

This comes directly from the mistakes above, but it bears repeating. Fully define your expectations on the front end. Sit down and have a long conversion defining exactly what everyone brings to the business partnership and what their roles and expectations are.

What have your experiences taught you? Have you had success or failure with a business partnership in the past? What was the biggest lesson you learned? Let me everyone know in the comments below.

If you enjoyed this post, I’d be very grateful if you’d help it spread by emailing it to a friend, or sharing it on Twitter or Facebook. Help spread the word about what it takes to make a business partnership successful.

Thank you!

(Lastly, hat tip to entrepreneur Rob Kelly who has another great post on how to create a successful business partnership)

 

Five Random Life Lessons From Danny Meyer

danny meyer salt shaker

As you know I’m a huge fan of Danny Meyer and everything he’s done in the hospitality business. If you’re familiar with the Salt Shaker Theory – then you will enjoy these life lessons from Danny. I love reading great books about business and entrepreneurship and Setting the Table is no exception. Here are a few of the great life lessons I took from Setting the Table.

Give First

“I would enter the restaurant business with a potent combination of my father’s entrepreneurial spirit and my grandfathers’ legacies of strong business leadership, social responsibility, and philanthropic activism. And I would have a chance to give others two things I craved: good food and warm hospitality. I had begun to understand that business and life have a lot in common with a hug. The best way to get a good one was first to give one.”

“If I want our guests to take an interest in us, I’d better take an equal interest in them.”

This is really one of the most important lessons in business and in life. Give to others first and help other people. That’s how you become a valuable resource and ultimately how you build strong relationships.

Have Fun Being Serious

“ ‘We have fun taking service seriously,’ he said. ‘And as for perfection, we just hide our mistakes better than anyone else!’ That was a refreshing insight for me as I continued to hone my own version of hospitality.”

I am a huge proponent of this. Work hard and play hard. You have to be able to have fun with what you’re doing but also be able to take it seriously. I think the way Danny phrases it is perfect – have FUN taking it seriously.

Be Respectful

“‘Leave the campsite neater than I had found it’ (That concept remains, for me, one of the most significant measures of success in business, and in life.)”

I take this quote to mean a lot of different things. Don’t be selfish, don’t be entitled, be respectful to others. It’s such a simple quote but the implications are far reaching for how you should behave in business and in life.

Make People Feel Special

“Everyone goes through life with an invisible sign hanging around his or her neck reading, “make me feel important.” Giorgio and Mary Kay had it right. The most successful people in any business that depends on human relationships are the ones who know about that invisible sign and have the vision to see how brightly it is flashing. And the true champions know best how to embrace the human being wearing the sign.”

“Ideas at their best happen for people. At their worst they happen to people.”

“Feeling seen and acknowledged is a powerful human need.”

“For most people it’s far more important to feel heard than to be agreed with.”

Not only is this absolutely one of the most important lessons in social media, but it rings so true when talking about management, leadership and really the entire hospitality industry. Many businesses have been built on this idea alone.

Know Your Identity

“It was that they had no clear idea what Eleven Madison Park represented as a dining experience. Was it a bistro or a grand restaurant? Was it inexpensive or for special occasions? Was it French? Was it a place for sandwiches, potato chips, and cookies? Until we had answered those questions for ourselves, we couldn’t avoid confusing our potential customers. Know Thyself: Before you go to market, know what you are selling and to whom. It’s a very rare business that can (or should) be all things to all people. Be the best you can be within a reasonably tight product focus. That will help you to improve yourself and help your customers to know how and when to buy your product.”

Restaurant’s live and die by their identity. The storied past of restaurant failures is often a tale of restaurants failing to ever define what they truly want to be and relentlessly defending their values.

Which quote is your favorite? Join in the convo in the comments or hit me up on Twitter

Give First, Ask Questions Later

Giving is often an overlooked part of the business world. So many people are only concerned with “What’s In It For Me?” The real secret to success is to help other people first and give to them without asking for anything back.

Giving first can be a powerful act that can engender credibility and trust. When you give something away to someone without any conditions you suddenly stand out from the loud and clamoring crowd of people screaming “me me me me buy my product!”

What do I mean by giving? I’m not talking about free product samples. I mean giving information, time, or help. Offer to help someone out for free. Brainstorm ideas for other people and just offer them up without asking for anything back. Give something valuable.

Help other people become successful and help them build their careers. To paraphrase Dale Carnegie:

“You can become more successful in two months by becoming really interested in other people’s success than you can in two years trying to get other people interested in your own success.”

All the most successful bloggers follow the same strategy of giving. They give away tons of free and valuable content without asking for anything in return. Giving their blog content away loops readers in. They become more familiar with the blogger and they like their content and writing style. Maybe one day they purchase something from the blogger, maybe not.

These content creators aren’t hard selling you their products or ideas with cheesy advertising. They are becoming a valuable resource to you, a source of information and ideas. By giving away all their content for free they build credibility with their reader base. They also build relationships.

Don’t focus on “What can this person do for me?” Focus on what you can do to help them. Without asking for anything back. Giving to people first creates solid foundations for a relationship. Keith Ferrazzi writes about this in his book “Never Eat Alone:”

“Real Networking is about finding ways to make other people more successful. It was about working hard to give more than you get. … Learn to become indispensable to the people around you.”

Find a way to solve other people’s problems. That’s what selling really is at the end of the day – solving someone’s problems for them. The key to giving is that it builds a foundation for you to help people solve their problems and builds a relationship that can later be mutually beneficial for both of you.

To be successful, to create value, to build relationships – you have to give more than you get. Gary Vaynerchuck – the wildly successful social media mogul has a rule called the 80/20 rule of business. Give 80% of any relationship off the bat and watch the relationship blossom. He is comfortable giving four times as much to someone as he gets back from them because he knows that builds the foundation for real success and real relationships.

You have to be willing to take the leap first. Give something away. Don’t keep score and don’t ask for anything back.

Check out Gary’s 4 minute video on 80/20 rule right here.

James Altucher also has an awesome post on his blog about giving you can check out here.

 

The Salt Shaker Theory – Danny Meyer’s Secret Sauce For Restaurant Management

Danny Meyer’s “Setting The Table” is one of the best books ever written on the restaurant business. An exciting read that covers not only Danny’s life but also his philosophies on business and success. One of the most remarkable ideas from Setting The Table is the “Salt Shaker Theory.”

“Your staff and your guests are always moving your saltshaker off center. That’s their job. It is the job of life. It’s the law of entropy! Until you understand that, you’re going to get pissed off every time someone moves the saltshaker off center. It is not your job to get upset.

I love the last line – “Its not your job to get upset” – its a remarkably insightful line that almost channels buddhism. Business owners and restaurant operators often struggle in the face of change and uncertainty. How should you react if your salt shaker keeps getting moved?

“Your job is just to move the shaker back each time and let them know exactly what you stand for. Let them know what excellence looks like to you. And if you’re ever willing to let them decide where the center is, then I want you to give them the keys to the store. Just give away the fuckin’ restaurant!” Wherever your center lies, know it, name it, stick to it, and believe in it. Everyone who works with you will know what matters to you and will respect and appreciate your unwavering values. Your inner beliefs about business will guide you through the tough times. It’s good to be open to fresh approaches to solving problems. But, when you cede your core values to someone else, it’s time to quit.”

The salt shaker is a powerful metaphor for one of the keys to success in the restaurant industry – maintaining high standards and core values. Change is inevitable and you will always be faced with challenges along the way. The key phrase is “let them know what excellence means to you” – this quote isn’t about never changing or never adapting – its about never wavering on your values. Danny Meyers takes this compelling parable and explains how it informs his managerial style.

“Understanding the “saltshaker theory” has helped me develop and teach a managerial style I call constant, gentle pressure. It’s the way I return the saltshaker to the center each time life moves it.

I send my managers an unequivocal message: I’m going to be extremely specific as to where every component on that tabletop belongs. I anticipate that outside forces, including you, will always conspire to change the table setting. Every time that happens, I’m going to move everything right back to the way it should be. And so should you! That’s the constant aspect. I’ll never recenter the saltshaker in a way that denies you your dignity. That’s the gentle aspect. But standards are standards, and I’m constantly watching every table and pushing back on every saltshaker that’s moved, because excellent performance is paramount. That’s the pressure. Constant, gentle pressure is my preferred technique for leadership, guidance, and coaching. It’s the job of any business owner to be very clear as to the company’s nonnegotiable core values.”

It’s such a simple analogy but I think it drives home a great point – your values define you and sticking to your standards is essential to effectively managing and leading your business.

If you enjoyed this – you might also like my post Five Random Life Lessons From Danny Meyer. He is a truly inspirational restaurateur and has so much to teach about life and the restaurant business.