Friday, January 16, 2009

Biz Partnerships: Marriage Without Sex

I attended a tech entrepreneur talk last night, and was struck by the speaker's insistence that the best way to move ahead with a tech business is with a partner. He also thought that it is best to wait a few months until you have worked together to discuss equity shares, etc.

It is true that partnerships can be very beneficial, especially in the tech industry, but my experience is that partnerships are also very difficult to manage, and take lots of care and attention ... like a marriage.

In fact, I think that a partnership is just like a marriage in many ways, except in a business partnership you typically see more of each other and you don't have sex and love as a foundational glue to get you through tough times.

The No. 1 reason for divorce is disagreements over money. Thus it is no surprise that business partnerships can be rocky, since the relationship centers on money - how it is spent, how it is made and, ultimately, how it is split between the partners.

To avoid a nasty fate, here are the three things I recommend to all business partners, regardless of whether they are just starting out or have been together for decades:

1. Establish a Shared Vision: you will not succeed as a business partnership if one of you wants to be a millionaire and the other simply wants to have a modest income. Likewise, if one of you wants to revolutionize the industry and the other wants to use best practices as a foundation for a solid, proven business model, you will struggle. Establish a shared vision that you both believe in. Write it down and make all future business decisions based on this vision. Of course you will each have additional goals and desires, but this shared vision will always unite you and make decisions smoother.

2. Establish an Exit Strategy: yes, this is like a pre-nuptual agreement, and it couldn't be more important. I know, I know, it takes all of the romance out of the engagement, but it is very necessary. A simple but excellent partnership exit strategy gives you both a clean way to exit the business partnership without going to divorce court, which will leave both of you with nothing but depleted bank accounts and a bad taste in your mouths.

3. Meet Quarterly: establish a regular, no-excuses quarterly meeting during which you do not discuss day-t0-day operations of the business. All you should talk about in this meeting is how your partnership is going. Review your shared vision - make sure you are both still holding up your end of the bargain. Review what you are each doing and discuss behaviors that are driving you crazy about each other. Again, this takes away some of the romance, but it also allows you to air differences before it's too late to remedy them.

2 comments:

Monica O'Brien said...

Just wanted to say I'm taking a class called Designing and Leading the Entrepreneurial Firm and the three things you mentioned are found in almost every single case of successful entrepreneurial firms. My entire class is about how the founders of a company play a huge role in defining the entire culture of the company for years to come. Thanks for sharing!

Virginia Ginsburg said...

Monica, thank you for your feedback! I'm glad to hear that your class is teaching realistic strategies for success.