Was any musical partnership more conflicted, more destructive and successful than John Lennon and Paul McCartney? If you’re thinking of setting up a business partnership, there are many lessons to be learned in this strange and tragic tale.

photo credit: PVBroadz

Feeling Lonely? Looking for a Partner?

‘What do you expect! I’ve only two hands, you know!’

Maybe you’ve caught yourself pleading with your wife, husband, kids or friends

One of the problems in running your own business is as the business grows you have to  master (or attempt to) new skills. While these may not be difficult, they eat away at your time and disallow you from doing what you are best at.

Example?

Let’s say you’re a talented Interior Designer. You have a nice list of customers, good references and are profitable.

You want to expand. How?

When you started, your week was like this

Meeting Clients – 5 hours

Writing Proposals – 5 Hours

Designing – 20 Hours

Buying Goods for Clients – 5 hours

Admin – 5 hours

Email – 5 hour

That’s 45 hours.

Then your business took off and the phone never stopped ringing.

Now, your week is like this:

Meeting Clients – 10 hours

Writing Proposals – 10 Hours

Designing – 20 Hours

Buying Goods for Clients – 10 hours

Admin – 10 hours

Email – 10 hours

That’s 70 hours.

If we look at those 70 hours, you can see that some of these tasks could be delegated, outsourcing or shared with others. The money comes in because of your design skills not because of the time you spend on email or on Admin tasks, such as filing tax returns.

You have three options:

1. Delegate – for example, admin, email and tax work.
2. Outsource – for example, web design
3. Partner – with other designers and share projects you can’t handle

Each of these has its respective pros and cons.

Many single person business who experience growth start scaling up their business by:

1. Delegating small tasks to either a friend, family member or another reliable source.
2. Outsourcing tasks such as web design, PR, Marketing, and other activities. Sites such as oDesk offer these services at a reasonable rate.
3. Partnering with a person whose skills compliment their own (e.g. another designer) or someone who fills a gap in the business. For example, a web designer who needs a Developer to code the sites she designs.

Let’s assume that you’ve delegated as much as possible, outsourced others, and now are considering a partnership.

Letting Go Is Hard To Do

If you’ve grown your business from scratch and nurtured its development, the letting go phase can be painful.

And it’s risky.

There is no guarantee that a partnership will work. Lennon and McCarthy were a wonderful duo at the start but then moved in opposite directions as each found their own voice.

I bet if you listen to Abbey Road you can tell which songs are by John (the harsher ones with the sharp edges?) and which are by Paul (the smoothies that warm your heart?).

Advantages of setting up a Partnership

Many of the most successful companies in the UK (in relation to turnover per person) are two-person businesses. Classic examples are small accountancy firms, web designers, PR firms, and other consultancies.

A two-person partnership offers several advantages over a single person business:

• Focus – Each person can focus on their core strengths.
• Balance – What one person dislikes to do, the other may love. Examples are partnerships where one prefers to stay in the office doing the books/coding/design while the other wants to be out and about meeting people. This Yin and Yang duo often work very well as both feel complemented by the other’s skills.
• Traceability – maybe not the right word but in a small partnership you can get to the root of the matter very quickly. If problems arise, you can work back to where they arose and  rectify them. This can be nightmarish in larger organizations with layers upon layers of management teams.

Disadvantages of setting up a Partnership

Depending on the scale and complexity of the business, there are several reasons why many small business owners prefer to go it alone.

Once you get into a partnership, you need to consider:

• Liability – You’re responsible for the mistakes your partner makes.
• Failure – Your success can be under-mined by your partner through incompetence, laziness or other destructive habits.
• Ownership – Your ideas (e.g. Intellectual Property) is also the property of your partner
• Credit – Your partner can/may convince others that they thought of the best ideas and steal your thunder.
• Separating – Even if you want to close or dissolve the business, the partner can make things difficult, further eroding the success of the business.

Key Criteria

Before you enter a partnership ask yourself:

• Protection – How could this end? Protect yourself so that if it doesn’t work out, you can extract yourself and still own the core assets.
• Future – Where do you see this business in 3-5 years?
• Success Criteria – What criteria are you using to judge the success of the business?
• Motive – Why does the other person want to join you? Are they getting a better deal than their current situation?
• New Partners – Determine how partners can join and leave the business.
• Setup Fees – if necessary, look at how much each partner needs to put into the business to get it running.
• Roles – agree on what roles and responsibilities each partner will have. During discussions, your potential partner may want duties or responsibilities that conflict with their skill-sets. You need to be careful here as the duties assigned to each partner form the DNA of the business. Once decided, it can be hard to remove these job titles. You also need to agree on what each title means. What is a Creative Director? or a Chief Marketing Officer?
• Track Record - Have they ever worked in a partnership before? If not, have they even worked for another firm before? If they have never worked with others before, you need to weight the risk of surrendering your business to someone who may need direction, support and training.
• Business Plan – this needs to map how the business will develop over the next 36-60 months. Use your Business Plan as the metronome that determines the direction of the business and to remove any ambiguity or assumptions about where the business is heading.
• Profits - how will the profits and losses be divided.

Of all the things to weigh up, how the profits are divided is what you need to examine most.

If you feel that you bring 75% value to the business, then you need to get this percentage of the business profits. If not, you’re under-selling yourself and ultimately will regret the agreement.

Next week, we’ll dig deeper and look at how to find a business partner that shares your goals.

Over to you.

What’s the #1 mistake people make when choosing a business partner?

I preferred to avoid risks, especially big ones, until I saw this short video by Jeff Bezos. In less than four minutes he changed my perspective on how to take risks and have more confidence in your decisions.

He describes the framework he uses to deal with risk-taking and gives examples of how you can apply this approach to your life.

[Video] Jeff Bezos & Risks Assessment

How to use the Regret Minimization Framework?

Like most great things, it’s very simple. If you have trouble making a decision, for example, leaving a high paid job with all the nice perks to start up a business, then you can use this framework.

After all, this is the way he justified his decision to himself when starting Amazon.

We’ll come back to justification later on but, for now, keep it in mind.

Regret Minimization Framework

To reduce the fear you have of taking a risk, try this:

• Imagine you are now at the end of your life, about 80.
• You look back on all you have done and all you have NOT done.
• You regret certain things you did, for example, hurting others and causing them pain.
• BUT you deeply regret NOT doing things when you had the time, energy, and opportunity to do so.

As we age, it’s what we COULD have done but did not that hurts the most. Other things we accept as they were part of growing up, maturing or things beyond our control.

Think about this…

Ask yourself, at the end of my life, would I regret not taking the chance to setup the business (when you really felt it would work)?

Chances are you’d regret it deeply. You won’t regret that you didn’t make enough money, or had a bigger car, or wore fancy clothes but you would regret not doing what you felt was part of your calling.

Others might call this your destiny, vocation, fate, talent… it doesn’t matter what you label it as. It was something you felt you could achieve and you let the opportunity go. That will hurt if you don’t take it.

Bezos assessed his life and decided that he could forgive himself for many things but this business (Amazon.com) had to happen. He didn’t want to meet himself later in life and have to justify his (lack of) decision.

and…

Taking a long-term view allows us to stop thinking about the mundane daily worries that clog our thinking.

By reviewing our lives from a future place (eg as an 80 year old looking looking backwards), we’re removed from the little things that distract us.

The other side of this is how we justify this decision to ourselves.

How We Justify Things

Another way of looking at this is how we justify our decisions.

Look at how you justify things you buy.

I often disguise my true motives with loftier aims. For example, I bought an iPad because I wanted to be in the loop. Like a small child, everyone else had one, so I wanted one.

The justification was… this is an education tool/I can learn how to monetize my business with this/my kids will learn things with it.

When I go on expensive holidays, I can justify it be pointing to all the hard work I put in over the year. But, at the back of my mind, I simply feel that I deserved it. Explaining that to other can be tricky, awkward, and embarrassing depending on who you’re talking to.

Conclusion

Emotions often drive our decisions: we use logical arguments to justify the outcomes.

We can reduce our fear of Risks if we fast forward to the end of our days and revise these decisions. From that place, what seems like a risk to us now, appears almost irrelevant.

Why would you not take the risk?

I would urge you to watch the video and see if you agree with what Mr Bezos has to say. His arguments are very compelling.

Let me know what you think.

Over the past few weeks we’ve looked at how to write business proposals (and business plans) to generate new business opportunities. One way to succeed in this area is to understand how the ‘Business Case’ is generated within an organization (as this is often written before the actual RFP is sent out) and the type of concerns the business analysts have when writing Business Cases.

The second point to consider it that if your relationship with the client is sound, you can help them address the salient points in the business case, for example, if they approach you with a ‘rough idea’ of what they want. Business Cases can be seen as ways to ‘test the water’ from a financial perspective and see if the core concept is worth investing in.

Business Case Template

What is a Business Case?

The Business Case outlines the benefits, competitive edge, and other gains the company stands to make if it invests in this project. For certain projects, the Business Case is a fore-runner for a Request For Proposal (aka Invitation To Tender) where business proposals are accepted from external firms.

Over the coming weeks, we’ll look at how to write, review and assess business proposals. For now, let’s focus developing the Business Case.

I’ve put together this Business Case checklist which covers most all areas related to the project/service you are exploring. This checklist should help you address areas such as Achievability, Benefits, Costs, Critical success factors, Resources, Risks, Scope, Strategic fit, and Value For Money.

Business Case Checklist

To ensure that your business case is complete, examine the following points:

1. Achievability — this ensures that you (and other parties) have the experience, expertise, and resources to manage the project. Examine different approaches that can overcome any potential obstacles, e.g. additional resources, timelines, or budgets.
2. Assumptions — speak to all stakeholders and gather their main assumptions, e.g. in the case of outsourcing IT development, that the Intellectual Property Rights will be owned by your organization. Examine whether these assumptions are valid or not.
3. Benefits — outline the benefits, and opportunities, that each option provides. Identify the high-level benefits that align with your company’s main business objectives, and explore how these benefits can be measured
4. Costs — obtain indicative figures for the cost of the project over its entire lifecycle, not only the implementation costs. You may want to factor in 15-20% for scope creep, if appropriate. Also, determine who will pay for the project, if they have agreed to do this, and the payment method. Examine how to get an acceptable balance of cost, benefit, and risk.
5. Critical success factors — seek consensus with the other stakeholders on what constitutes success. If you do not take this step, stakeholder will have different expectations of the final deliverable. Define success factors that are specific, measurable, and achievable; identify any other factors that could affect success, such as the delivery of other parallel projects.
6. Dependencies — outline the internal (e.g. staff availability) and external dependencies (changes in the marketplace, new government legislation).
7. Options – gather details on all available options that could meet the business needs. Consider the trade-offs associated with each option, and the degree to which each option meets the project’s needs. Make sure that you have included the overall supply chain’s needs, i.e. the organization, partners, suppliers, staff and customers.
8. Procurement — send an Invitation to Tender (ITT) to prospective contractors. Evaluate their bids. Hold presentations with the most impressive bids.
9. Project Group — identify those (individuals, units, and departments) who are involved and/or affected by the project. Determine their interests and endeavor to resolve any potential conflicts.
10. Resources — scope the anticipated resource and capabilities requirements that you will need, such as staff, IT, workspace, equipment, and funding.
11. Risks – Capture all anticipated risks – plan contingences. Prepare a high-level estimate of the costs for each risk.
12. Scope – define what is in/out of scope with the existing budget; scope what can be delivered with a reduced budget, with indicative delivery dates; ensure that there are no conflicts with other on-going projects. Look at the impact that delaying the project or under-delivering could have.
13. Stakeholders — identify their role, responsibility, availability, and contingencies if they become incapacitated/released from the project.
14. Strategic fit – confirm that the project is still required and that its objectives are in line with the company’s business goals.
15. Value For Money — examine how to get Value For Money from the contractors, contractors and other third parties. Agree what constitutes VFM with the project stakeholders.

Once you have checked off these points, your business case should be ready to send to the project stakeholders.

What are your thoughts? What have I missed?

About the Author: Ivan Walsh provides Business Tips for Smart People on Klariti.com. His also runs the popular Business Planning Blog at http://www.ivanwalsh.com. Follow him on Twitter @ivanwalsh

PS: The Business Case Template is here.

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