Partnerships: How to Choose Them, Avoid Epic Disasters, And Set Them Up for Success

Foreign.

Ryan Daniel Moran here with another episode of Freedom Fastlane. And today I'm going to be answering some questions that I've seen come in very frequently from people have contacted me on Facebook or commented on posts that I had. Over@the freedomfastlane.com blog, we're doing something a little bit different, and it's an experiment, if you will, that I'd love your participation on. I am taking questions for the podcast over@freedomfastlane.com if you head over to the blog at freedomfastlane.com you'll see a banner on the right side labeled Ask Ryan. You click on that banner, it will take you to a survey where you can type in some questions that will help me to help you guys the best. So if I see a question that a lot of people are asking or one that just catches my attention that I want to address on a podcast, then we'll do a show about it. And this topic is something that has come as a result of a lot of people asking the same question. And it is about partnerships. It is about how do I find partnerships, who do I partner with, how do I structure them? But what is really important is for me to kick things off by telling you that partnerships are the most expensive decision that you will ever make. So it's worth for us to talk about the not just because they can be beneficial or disastrous, but because they're the most expensive decision that you make in your business. Because they're just like a marriage, right? As a marriage, you are giving up half of your worth, half of everything that you are. And if we're looking at it from a relationship perspective, hopefully everything that you are to that person in exchange for a lifelong partnership. Well, partnerships in business are exactly the same. You are giving up your share of the business in hopes that together you can make something much, much greater. But it's expensive. And partnership mistakes are even more expensive. I personally have lost as much as $50,000 on partnerships that should not have happened. Business ideas that we kicked around and said, hey, let's do this together. Let's do it 50, 50. And that turns out to be an absolute disaster. So I come to you as an expert in ruining partnerships, and I'm going to tell you some of the mistakes that you may already be making unconsciously when you're entering into a partnership and what to do about that, because I have gotten much, much better in the last few years as my perspective on partnerships and has changed drastically and now I'm actually able to do them with you. Know some, some success. If you get partnerships wrong, they're expensive, they are costly, they are frustrating, and yet everybody seems to have them. Everybody seems to do them regardless. Because there's this temptation for us to get together and make ideas happen. I think it's because we operate under a few fallacies when it comes to partnerships. The first fallacy that people make when they're entering a partnership is that by entering into a partnership you will have half of the workload. That is not the case when you are entering into a partnership. You have the same amount of work, sometimes even more work, because now you have to manage your partner as well. So if you're getting into a business or a partnership under the belief that doing so will cut the workload in half, you are sorely mistaken. In fact, if you're going into a partnership, you have to let go of this idea that your partner is going to do half of the work anyway. The reason for that is because when we are in a partnership with somebody, we only see the work that we personally are doing for the most part. We only see the times that we're thinking about business. We can't see into our partners brains, we only see see into our brains. So we can manage how much time or how many ideas we're coming up with, or the time on the phone with that vendor that we're spending. Whereas your partner may not see that and we don't see the partner doing that either. So we will never have a perception that our partner is carrying half the weight that we are. That's not the idea. The idea is not for us to have half the workload. It's for our combined resources to be something far greater, more than two times what we could have done together. That is a successful partnership. So let go of the idea that your partner is going to be doing half of the work or that you are going to be doing half the work. Because chances are you both probably think that you're doing more than half the work. There was a poll done with married couples where they asked how much of your partner do you think he or she puts into the relationship and how much do you. And almost 100% of the people taking the survey said that they thought they put in more than 50% of the work into the relationship. The same is going to be true with your partner. You both are going to think that you're right. You both are going to think that you're working harder. So you might as well let go of the idea that this is half the workload. Before you even get into the partnership. The second fallacy that people operate under when they're getting into a partnership is that they should partner people just like them. Partner with people that have the exact same skill sets as them. And this often happens when two idea people like myself are sitting in a room and they come up with a great idea and they say, hey, you want to do this? You want to make it 50 50, let's do it. Those are the worst types of partnerships that because they're two people with the same idea entering in something together, expecting for half the workload to be on each person, when they have no defined roles and they're just idea people and nothing ever gets done. Those are the worst types of partnerships. When you're sitting around and you both got a great idea and you say, we should do this thing. That's a major fallacy with partnering people who are just like you. Because if you're partnering with people who are exactly like you or one of you is unnecessary. Let me say that again. If you're partnering with someone who is just like you, then one of you is unnecessary unless you have extremely well defined roles. That's when we can make it workable. The third fallacy that people operate under when they're entering into a partnership is that if you brought the idea to the table that that is worth 50, 50. If you brought the idea to the table that it's yours and that is worth half of the equity. It's not. Okay. That is not worth half of the equity. So if you are talking to partners and your partner offers a certain skill set and you say, well, I have the idea, so I should keep half of this, you're wrong. Ideas are worthless. If you say, I have an idea, I will say, I own a goldfish. What else do you want to talk about? That doesn't matter. Ideas are worthless until they are put into action or they are hitchhiked onto something that is going to take that idea into reality. So if you have great ideas, awesome. Cool. What are you doing with those ideas? To simply say, I have the idea and I'm going to partner with somebody who's actually going to do it. You are not worth half. You are that. The idea is the smallest part of the equation. The implementation process is actually what is driving the value. So that does not give you extra worth into a partnership. And the final fallacy that people operate under is that all partnerships should be a 5050 split. Meaning if you're entering into a partnership with another person and you both have the idea together that you should automatically just split everything 50, 50. That is another fallacy that you may be operating under if you are entering into a partnership. Let me recap. These are the thing, these are the myths of entering partnerships. And then we'll, then we'll talk about what to do about them. And they are that getting into a partnership will half your workload. The second is that you should partner with people who are just like you or always agree with you. The third is that ideas are worth significant equity. And the fourth is that all partnerships are 50, 50 or most partnerships are 5050 splits. Those are the myths, the fallacies of going into going into partnerships. You see in business. This is something I want you to understand. In business, equity is the most important thing in the world.

If you end up selling your company one day, equity could be worth millions and millions of dollars.

Equity is the most expensive thing to part with in your business.

So choose who you divide it with very, very carefully. Most people get into business for some sort of selfish reason like they want to make money or create a better lives for themselves. And you are having that, you are giving away a large amount of that to someone else. So unless you think this person can make your benefit from the business twice as beneficial, do not partner with that person. It would then be better to hire. There are two times I've come up with when it makes sense, it makes the most sense to partner with someone. And the two times that I have come up with are if you are on one side of a cash investment, meaning someone has cash, the other person implements or has time and you create a marriage out of that. I have done this several times. I have partnered with people inside of my tribe because I have Amazon based businesses. I teach plenty of other people how to build Amazon based businesses. Some of them don't have cash to start out, but they're really hungry. I have a lot of knowledge. For a very low amount of money, I can go in and purchase a large percentage of their business, offer some expertise. I have cash, I have ideas. I have expertise and experience. They have time and drive. I have no time to work on other businesses. So we make a trade. I'll provide some cash and some ideas for equity and your hustle. That's where a partnership might make sense.

I have a relationship, a partnership with my buddy Sean. We built Zen Active Sports, our yoga products company together. And in that business I had the experience, the contacts, the mentorship if you will. And Sean was really, really good at getting a lot of things done and Wanted to learn something new. We both put up cash, and as a result, we've had an incredible marriage, if you will. We've had an absolutely incredible partnership because I bring certain things to the table, he brings certain things to the table. We never step on each other's toes. I invest cash, he invests his hustle, and as a result, we have a tremendous amount of appreciation for one another. Compare that to some of my previous partnerships where I was just like the other person. We didn't have clearly defined roles, and we hated it because we both felt like we could be running the ship better than the other person. I know I can't do what Sean does. Sean knows he can't do what I do. And as a result, we have an incredible amount of appreciation and things actually get done because I can focus only on what I'm really good at. He can focus only on what he's really good at. This kind of bleeds into the second opportunity when it makes the most sense to partner with somebody, and that is when you are first starting out and you're looking for someone with complementary skills of your own. For some people, when they're starting out, they don't have the cash to hire employees. If that's the case, then it might make sense to partner with someone else because you don't have to pay them anything. It comes out of profits. And if they have complementary skills, then the two of you can focus on what you are best at doing and. And that can create some synergy in order to grow the business. If you have the cash to avoid a partner, by all means do so. Because you can't fire a partner. You can fire an employee. It's a lot more expensive to fire a partner because you often have to buy them out of the business. Remember, partnerships are the most expensive thing in your business. They're even more expensive than taxes. So be very careful and calculated when you are entering into a partnership with someone. Let's talk about what it looks like to enter into a partnership that has potential to work out. This is how we stack the deck in our favor to make sure that we are setting a partnership up for success. It looks like this. When you're approaching a potential partnership, first thing you need to do is list your best skills and what you bring to the table and have your partner do the same thing. And look at exactly. Do these complement each other? Are these the same? What are you bringing? What am I bringing? And by the way, the idea has zero value. So if you're writing down, well, I Had the idea. I have a goldfish. Let's talk about more things that don't matter, okay? That doesn't factor into the working arrangement of the partnership.

If you think that you can just come up with an idea and give it to somebody who can run with it, you're gonna have a very unsuccessful partnership. You will grow to resent one another.

So we look at where are we best and where is that other person best? If we only focus at what we were best at doing, what would it look like if it's the same thing? Don't partner together. If you both say, well, I'm really good at marketing and you're really good at marketing, don't go into a partnership together unless you already have a team of implementers around you. Because when you look at the skills that you bring and where you're best, they should be very different. They should be focused on very different areas. The best meaning one person is really good at consistently coming up with ideas and driving things forward or being creative, while the other person is very good at automation, systemization, project management, hiring people, getting things done.

If you put two implementers in a room, they'll implement a lot of potentially bad ideas or they won't have new ideas to implement. If you put two idea people into a room, you have a lot of ideas with nothing getting done.

So I look to partner with implementers. It's one of the reasons I love the tribe so much. The tribe is going to be opening up again soon. It's going to be opening up again in October, and it is. As of right now, I'm planning on it being the last round of the tribe, but some really cool partnerships have come out of the tribe, and if that's something you've been interested in, you may have an opportunity in October to get inside. Some really great partnerships have come out of there and I've partnered with people inside of the tribe. But I digress. List your best skills and where your greatest value is and what your partner's greatest skills are and where they are best and see where can we focus so that we are complementing each other rather than stepping on each other's toes. Then we look at what value do each of these areas have. Cash at the beginning of a business is very, very valuable. So if you're bringing cash, if you are bringing expertise, if you are bringing contacts, these are extremely important things when it comes to a business. Whereas another person may list their skill set or what they plan to bring to the partnership. I'm not an implementer so sorry, implementers. I'm having a hard time coming up with things that you would list, but my partners would list the ability to manage deadlines, get things done. And this would be at the beginning of a business, I'd be looking to hire that later in a business. But at the beginning of a business, if you're partnering with somebody with complementary skills, then what they're able to manage from a work perspective may be the value that they bring to the table.

Then when we are very clear on where we are best and what value that brings, we start to get an idea of what our possible equity split might be. By the way, if you're bringing money to the table, that alone can be worth 50%. So if you are funding the entire business, that can be worth as much as 50% if you're funding 100% of it. If you're funding less than 100%, it may not be worth 50% of the business. So if you're funding it and bringing skills and expertise to the table, it should not be a 50, 50 partnership.

It should be more than 50% in your favor if you're the one doing it, and vice versa. If somebody else is bringing expertise to the table and funding to the table, you should not be getting half of that business.

If you're bringing in equal funding and then you are equally dividing out the value, then you can look at a 50, 50 partnership.

But cash is very valuable, contacts are very valuable, Expertise is very, very valuable. And we need, once we have defined what our percentage split is, be very, very clear about what your roles and expectations are.

Be blunt and painfully obvious when it comes to what the roles are. Who manages this person? Who manages this situation? If this happens, who manages it? What is the expectation of me? What's the expectation of me in this case? How about this case?

My partners and I know that they are not expected to come up with new ideas. If they do, it's a bonus. That's my role. My partners know that they're not expected to write much copy. That's my role. And my partners know that they're not expected to bring cash to the table. I do.

We're very clear about our roles and expectations for from the beginning. And you refine this as you go forward. And finally, as you're approaching a potential partnership, ask yourself really tough questions that are, what ifs? What happens if this partnership doesn't work out and we both want out or one of us wants out? What happens if we make a million dollars and we disagree on how to spend it. Who gets final say? What happens if somebody wants to buy our company? How do we evaluate that decision?

What happens if we lose all of this money?

Ask yourself the what ifs. So there are no questions going into it, but you can refine it later if they do come up. So let's recap. This is how you set yourself up for success in a partnership. You list your best skills and what value that has to the overall partnership. You're very clear about roles and expectations and you ask yourself very tough questions. Just for clarity's sake. Take the friendship and the relationship out of it and look at the partnership.

And be very strategic and very clear about your roles and expectations. I am very upfront with my partners when I get into a business and when I say, listen.

If we in one year are a million dollar a year business and that's as big as we want to grow it, are you going to have a problem? If you're working 40 hours a week and I'm working five.

Are you going to have a problem with that? Because as I see it, my role is to fund this and get it going to the million dollar level and I don't want to grow it beyond that. If you want to grow it more than that, let's just sell it. So are you okay running it really hard? Well, I do nothing because I'm bringing this, this and this to the table. And if that's what you want, then you need to bring it up at the beginning. So I'm very clear about that from the beginning of.

I'll do this with the expectation of X. And at the end I don't want to be working more than I'll fund things, but I won't spend time on it.

So be very clear with your partners about what your expectations are. I mentioned before that the worst partnerships in the world are when two people come up with an idea and there's like, hey, let's just do it together. Because we both had the idea. Those are the worst partnerships because ideas don't bring value to the partnership. One of you will start out working the other and it will be a problem.

Another really bad partnership is when you're partnering on skills that you could hire out. If you have the cash, if you have the expertise, if you are established.

Then partnering with other people only makes sense if you have some sort of ulterior motive, like it's a friend you want to help out or if it's because you have your money invested into other things. I partner with people. Two years ago When I decided to make a major change in my life, I partnered with other people because I wanted to be investing in those people and growing them as like my partnership team. I wanted to have a group that I could count on, a group of implementers that I could go to for business ideas or we could mastermind together and I could invest in these people. I wanted them to have skin in the game where now if we want to grow those businesses, we're not looking to take on more partners. We're looking for really awesome employees. Now some people, and I'll reach this level one day. I'm not there yet, but some people are able to think of a business and just hire it out without partners. I'm not at that level yet. I like having people with skin in the game that I know are in it for the long term that I'm gonna, if I'm gonna invest in them, they're gonna be around literally forever. That is why currently I'll take on partnerships when I'm starting a business. I also just love the idea of buying into a business and providing mentorship or leadership and not being involved in the day to day worker operations. That's a very attractive position for me. So I will often start businesses or partner with people where I'm the cash and the mentorship and I let them do all the work while I provide some feedback that is for me personally, a great working arrangement. Let's wrap things up with talking about how to find potential partnerships. First of all, look at the people who are in your current business or that you're hanging out with in your current business. For example, the tribe. I have this group of people, most of us are Amazon sellers and we've gone through courses together. After a while. After this next round of the Tribe, which is going to be open in October, if you want to get in, make sure you're, you're staying tuned for updates over@freedomfastlane.com if you want to be in the tribe, be opening in October. After this next round, it's going to be moving in a new direction where we're going to be opening up to more businesses than just Amazon type businesses. And it's going to be a more intimate group but also a higher level group. So I encourage you to get in when it opens up at this next round. But we do partnerships all the time together. People will partner up in that group because it's easy when you're in the same business with a group of people to identify your skill sets of what you bring to the table. One of my students, Zach, is partnering with people. He's built a million dollar business and he's mentoring people who are just starting into this type of a business. He provides some funding and some expertise. They do the work. And this is very attractive to both parties. I do this. More advanced people will do this. So look at the people you're hanging out with in the business you're in, like the tribe, like even business forums or business groups that you go to or mastermind groups that you're a part of. Great partnerships can come out of that if you follow the rest of this criteria. With clearly defined roles, with analyzing what value each person is bringing to the table. If you follow these rules, then going to people who are in your existing business can often be successful partnerships. The second is through your success network. If you haven't listened to the podcast on developing your success network, it is the group of people that is supporting you through your business. And we go through how to develop that in the podcast about developing your success network. And these are people who are supporting you, who are mentoring you, that have shown interest in what you're doing, going to them and, and asking for mentorship in the form of a partnership or asking if they know anyone who can contribute to the business idea that they know that you are already pursuing. And finally, for me, I'm going to my students, my case studies, my best employees, the people who have just shown that they can knock it out of the park, the people who have shown that they can work really hard, the people that with a little bit of direction, they have been extremely successful because I know I can continue to provide a lot of direction. That's my skill set. That's where I provide unique value so I can enter into someone who is the life of a new entrepreneur and provide some insight. If I know that they're a workhorse, then that's somebody that I'm interested in partnering with. That's somebody that I want in my tribe. That's somebody that I know that I can help be successful. Because with that energy and with that drive, I can provide little tweaks along the way. And we both make a bunch of money doing it, because I've done it a bunch of times before. Now, if your skill set, if your history, if your expertise is in a different area, then look at what people will benefit the most from that expertise. Those are potential partnerships for you. So since I have an audience, I'll go to my audience and.

Find people who I can partner with on that. My partner, Paul on my supplement company was in my audience. We developed a friendship, and now, as a result, we have a partnership and a business together. Because I've seen that he's an implementer. Listen. Partnerships are some of the most important decisions you will make in business. And people often too hastily run into partnerships that they regret later. Just like being in a bad relationship, it closes you to opportunities that exist outside of your current partnership. And they also can be extremely, extremely costly and hold you back from the potential that you have. So when you're entering into a partnership, don't do so carelessly. Be very calculated about the partnerships that you decide. Because if you can get the same skills by hiring out what it is that you're partnering up with somebody on, then there may be a mistake in partnering with that person. There's no need giving up half of your company, half of your dream, half of your business, half of your lifestyle to somebody who is not going to make your business at least twice as strong as it was previously. A great test that you can take to see if you might be a good partnership with someone is the Colby Index. K O L B e dot com and the Colby Index will analyze how you get things done. It's something I make all my employees take. It's something that I make all of my potential partners take. Because if you don't understand how someone gets things done, then you may communicate with them in a way that is not serving them. For example, my partner Matt is just a voracious researcher, and he's just able to research and collect an immense amount of data very quickly. And since I know that's what he's best at, we use that in looking at the data of our funnels of looking at what types of products are going to sell best in the marketplace. He's just incredible at research, and I am fast start. When it comes to the Colby Index, I know I'm going to take a lot of data and I'm going to make very fast decisions, and we're going to go in a certain direction and I'm going to keep my head down and go in that direction. So we know how to work with each other based on the way that we get things done. Using a test like the Colby Index will be very revealing about if you're going to work well together. And again, I make all my employees take this, too, to make sure that they're going to work well into our team. Don't enter into partnerships hastily. Don't do it just because it might be fun to work with. That person and don't do it just because you both have the idea. Enter into a partnership when the two of you together can build something much greater than you could do on your own. Do it when your skills complement each other and do it when the amount of value that each of you brings to the table outweighs what you each want. When I enter a partnership and I'm providing cash, I want the business growth more than I want the cash. So I enter into a partnership knowing that I can sacrifice some cash while somebody else is growing the business or running the business, whereas that person wants a business and doesn't have cash, so he values the cash more than he does his or her own time. That is when a partnership is valuable. Hey again. I've said it twice now. I'll say it a third time. The tribe is going to be opening up again in October. It's going to be a great opportunity for those of you who are looking to start a business, to find partnerships, to get good ideas and to get some mentorship in a way that is very affordable and a way that is going to serve you very much on your entrepreneurial journey. That's going to be opening up in October and you can get all the details as they become available. Will be announcing it on the freedomfastlane. Com newsletter, so make sure you are subscribed at freedomfastlane. Com and stay tuned for that announcement when it's ready in a few weeks. Thanks for listening to Freedom Fast Lane everybody and I will see you on the next show.