Selling your business (Part 3)
__When partners break the Golden Rule.
Looking back at the times I have sold businesses or stakes in businesses, there’s one reason I’m almost guaranteed to sell. Do you know what it is? Wrong partners!
When I was younger, I would tough it out and fight, but these days, on the rare occasion that my due diligence fails to spot that I have the wrong partners, I sell immediately!
I was once involved in an amazing tech business with two able partners. We had equal shares and one of the partners was managing it. One day whilst going through the financials, I noticed something which suggested he was enjoying all the benefits. I asked one of them to explain how they did the calculations, but I did not get a straight answer.
I listened quietly as he tried to bamboozle me with the maths. I did not say anything. The following day, I called and asked him to buy us out for very little, even though it was worth millions. He gleefully accepted my offer.
Within a few months the business collapsed. Let’s just say they did not understand the full value of my contributions to our business.
As an entrepreneur who’s planning to build a big, big business, you need to understand that you can rarely do it on your own; you’ll likely need partners. It’s my job to find the right partners. It’s also one of the hardest jobs that I do. And now, even after more than 30 years in business, I’m still mastering this important skill.
The first question you have to ask about partners is: Why do we need partners in business? There are many different kinds of partners:
# Partners who can provide capital;
# Partners who can provide technical expertise (or specialized knowledge) that you don’t have;
# Partners who can provide access to markets and opportunities;
# Partners who can provide services to your business.
You’ll need partners to undertake things you cannot do alone, and partners to share risk.
It can be very good to have partners. Even Bill Gates has partners, and continues to start new ventures and investments with partners. You just have to learn to find the right ones, and how to manage relationships with them.
Here’s one key law of partnership of any kind:
__ “Do unto others as you would want them to do unto you.”
Most of you know this as the “Golden Rule.” As a partner, you do not want to be mistreated or cheated by your partners. So don’t enter relationships with an ulterior motive. Don’t do anything that creates mistrust between you and your partners.
The spirit of an agreement is more important than the letter; never break either. Don’t act in bad faith towards your partners.
There are many excellent reasons to work in partnership, and also many bad ones that will lead to heartbreak. We’ll discuss some of those later on. For a start:
# Do we share core values?
# Do we trust and respect each other?
# Do we agree on the goals and vision to take the business forward?
# Do we agree on how we’ll use the money raised and how the profits will be distributed?
You must want to see your partners prosper because of what you’re doing together. I know this sounds obvious, but there are people who don’t want to see their partners also prospering and getting rich! If my partners are happy and prospering, I feel really good.
# Choosing the right partners is critical.
In my next series, I’ll talk about the hardest thing in business – building an organization.