We all are at different stages in our business careers. Some of us just starting, some of us growing, and some of us getting close to retirement. But no matter the stage, we all probably think once in a while of ways to share the weight of business.
For some, that means a partnership. What is a partnership, why would you have a partnership, and what are some tips to make them succeed?
Not everyone wants a partner, but some partnerships are created out of necessity – a partner might be your cash cow, for example. Some owners might want to share the responsibility and workload of a business, while others might be nearing retirement and want to pass along the torch, so to speak, so might bring on a partner to learn the ropes and eventually take over.
I started my business with a partner, my grandfather. He subsequently got sick and passed away before things really got going for us. Since then I’ve run the company solo. While I enjoy the freedoms of not having to consult anyone on decisions, I also have at times envied those who have partners to take a load off.
Promise and Pitfalls of Partnerships
I’ve reached a point now that I wouldn't want a partner in my asphalt business. I’m comfortable with our operations, and I think changing the mix would create more headaches than it’s worth.
That being said, if I were to expand or buy another business, I would seriously consider a partner -- not so much to share the weight, but more so to create an ownership “dream team.” I find value in people’s life experiences, so if I could partner with a winner, it might be a no-brainer.
I have seen many asphalt industry partnerships fail. Trying to decipher why is a whole other task, but my general observation says partnerships fail due to a lack of communication. Inevitably one partner feels like they are doing more work than the other. I see this all the time. It’s mostly because in our industry one partner ends up being the field leader, while the other runs the administrative aspect of the business. It just makes sense to divide responsibilities that way.
When tensions start to heat up, there’s almost no turning back. Like clockwork, each partnership failure I have observed started with little grumblings and miscommunications. That soon evolved into not talking at all, and then finally to the point one partner splits.
In some cases, the business carries on with one owner, but in a few of the more tragic cases I’ve seen, the business closes. (Unfortunately, there’s also the possibility that one partner might not be honest and forthcoming, which leads to a breakup. Examples of that are usually one partner taking the company’s equipment to moonlight on his own.)
How to Help Partnerships Succeed
Here are a few things to consider to improve the likelihood a partnership is a success.
- Each partner needs to have some sort of skin in the game. They need to have either invested their own money or assets to the business. Those with no investment aren’t likely to have the same passion as the invested partner.
- Partners should be selected for their talents and what they can bring to the table in addition to investment. Maybe a potential partner has a Civil Engineering degree, which can be ever so valuable in our industry.
- Consider hard before partnering with a friend or family member. Those relationships make partnering in a business environment difficult to manage.
- Start the partnership with a buy-sell agreement. This is a simple agreement that states if at any time either partner wants to exit, you execute the agreement as it states. The agreement needs to clarify a value and buyout process. It’s also prudent to re-visit that agreement on an annual basis to update the terms and valuation. If a partner leaves, you execute the agreement, and there is no discussion or negotiation to cause conflict.
- Make sure to communicate. Have weekly, scheduled meetings to discuss the company. Make sure everything is transparent and open to each partner. This will alleviate any worries of potential “funny business” going on.
At the end of the day, I believe if done right partnerships can be a good thing and help take a business to new heights while sharing the responsibility of running a business.