The Kangaroo Part 10 – Won’t Ya Be My Partner?  Part 2 

by

Stu Silver / “Uncle Zally” Zalman Velvel

 

It’s 10 PM on the third Sunday in May, and I’m still in Ocala, in our doublewide. My grandchildren are sleeping in the guest bedroom, secure in their role as the “Future Trailer Trash of America.”

Last week, I discussed partnerships because one investor I trained had an unfortunate partnership experience. I wanted to impart whatever wisdom I could to prevent this from happening to others.

In the previous blog, I started in reverse, by first going over how to end a partnership. I did that so if you should choose badly, Grasshopper, you can reverse your way out of the partnership easily. You, and your money, don’t want to be trapped in a long nasty relationship.

 Once you agree on the partnership pre-nup, then you should iron out the mechanics of the partnership: the percent of ownership, who gets what money and when, and who has what responsibility and duties.

Then you need to sit quietly, by yourself, and think about the following:

1-   Trust  

2-   Money

3-   What your partners bring to the table besides money

4-   Goals (vision)

Believe me, after the excitement, the dreams, and yes, even the greed, wears off on a deal, and it always does, because reality has a way of spicing up your dreams with aggravation and problems, you will be left with each other. If your partnership bond is weak, it will fracture and break, adding aggravation on top of aggravation.

So the first thing to think about is this: Do I trust my partners? Will I have to watch them around any cash, or around the check book? Will they walk the talk, and hold up their end of partnership, or try to give the least they can, and take the most they can get away with? If you like and respect your partners, so much the better. But …

 If you don’t trust your partners, then don’t do business with them.

Go out and find better partners. If you have a good deal, there are other excellent partners out there waiting to pitch in and do their part. Don’t waste your time on people who will keep you up nights wondering when, and how, they will screw you. No deal is worth it.

Now let’s talk about money … or the lack of it. Let’s face it, many early partnerships are created by a need for money. Many times, someone is the “money person” and the other is the “working person,” the one who gets the job done. If the split on the profits is 50/50, which it often is, then don’t expect that relationship to last long.

In the beginning, the working person can’t do the deal if there is no money to buy the deal. BUT after the working person creates a track record for himself or herself, the money person will be replaced by a banker, a hard money lender, or private money.  10 – 15% interest is less costly than 50% of the profits.

Don’t misunderstand. As long as money partner understands that the only basis of being together is that he or she has the money to buy the deal, and other than that, there is no further input, and therefore the relationship will be short-term, then there is nothing wrong with it.

For me, the third component is most critical – what each partner brings to the table besides money, like skills and talent. If one partner is great at fixing up the property, but has the charisma of a rotten avocado, and the other is a marketing genius and super salesman, but doesn’t know a hammer from a nail, then that is a powerful complementary combination. Each one has skills the other badly needs for success.

A partner’s unique skill creates a long term need and benefit. For example, my partner, Crazy Gersh, can’t do paperwork. He  actually repels forms and documents. He doesn’t have long term focus either. When he goes to sleep, the hard drive inside his head erases, and he wakes up with a fresh new outlook on the day – God bless him.

But when there is a sewer problem, a water problem, an electrical problem, any problem,  Gersh will not stop until that problem is fixed. He simply won’t give up.

I take care of the paper work, the marketing, the long term planning. Gersh gives me the peace of mind that the problems in the field are taken care of, and taken care of correctly.

Do you want hear something funny? I think Gersh works harder than I do, and he thinks I work harder than him. That is a probably one of the best indicators we have a great partnership.

Our kind of partnership is threatened when one of the partners thinks he can replace the other’s talents with a salaried employee, instead of paying a share of the profits. That doesn’t hold true with Crazy Gersh. While I can hire different contractors to replace his skills (and he could hire an office manager to replace me) nobody gives me the peace of mind that Gersh does. I know that he is always looking out for my best interests, and his.

I normally wouldn’t have added the fourth criterion, a sharing of goals/vision, but recently I met a friend who is extremely talented in business. His strengths are his strategic planning and timing, the trust he creates with people, and the passion by which he carries out his vision. He is a wonderful partner.

However, he changes and evolves constantly, so that every five or ten years, he loses his passion for the partnership’s goal, having accomplished what he considers enough. He then wants to move on to a new and different goal, with a fresh new passion.

This leaves his partners wondering, “What the heck happened? What changed?” The answer is, one partner changed inside, even though the partnership’s goals did not.

 This kind of partnership can be handled by assuming, right from the beginning, that there will be a break up sometime down the road, using the pre-nup, and a lot of money to split up in the future.

That’s a whole lot better than a kick in the head with a wet boot, isn’t it?

Cheers!

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