I have always joked that partnership is a worse case bad marriage but its far worse than that, or at least it can be if you do not tackle the hard questions upfront and you pretend it will fix itself when it arises.
When you borrow money as an entrepreneur you become an employee again and you have bosses you may grow to dislike
Podcast Key Note/ Takeaway
Before you form a partnership or borrow money from people; you have a whole lot of homework to do.
a)You have to work extremely hard to put your optimistic biases out of the way because nothing ever goes as planned and everything and the critical things do change.
b) You must understand the true cost of the money borrowed and what happens if your assumptions are not correct.
Below are some of the lessons I am learning or learnt from my experiences.
- Get a lawyer to address every possible thing that can go wrong- focus on what happens when you disagree on anything and everything
- Research other businesses or other industry to see how they have done it
- Are they open minded, and open to free discussion on controversial topics or ideas?
- Money changes everyone regardless of how well you know them
- Are you tied to the same vision, are your personalities compatible, can your families hang out together? do you have the same work ethic? do you have the same social habits? can you stand the person or you can tolerate them?
- True character comes out in trying times. Business successes and failures changes the dynamics of partnerships and really puts it to the test.
- Rather than giving equity or forming partnerships – Hire as consultants or employees
- When you take money from people to run a business, you are invariably working for them now.
- Your brand vision will be tested or forced to compromise with partnerships or pressure from investors.
- Investors are driven by Return on Capital and they may not be as patient as you are
- It’s may be easier to borrow money from family, they want you to succeed and they are willing to sacrifice more for you and will be forgiving if things do not work out.
- If you must, borrow only a fraction of what you think you need- test your assumptions
- Easy money = expensive mistakes. there are things only experience can teach you.
Thank you for listening and reading our podcast. See you on the next episode.