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How to NOT get screwed over thread.

Have you gotten screwed over with business partners before?


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Royce2

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We know that there are many factors involved that turn partners, colleagues, etc. against themselves. I think it is very important to have a solid thread that will possibly prevent such things happening to anyone reading this advice.

This thread's purpose is a collaborative pool of advice to protect yourself from getting "screwed over".

NOTE - I am going to be writing from direct experience and from other perspectives that I know. I am not the person to go to in terms of technical contract security or whatever you want to call it.

My very first piece of advice: IF ITS NOT WRITTEN, IT DIDN'T HAPPEN

Always write a contract/statement where both parties will
1. Understand their outcome
2. Understand their role in the partnership.
Plenty of biding resources available online

Never, never, ever take anyone's "word"; not your friends, not your brothers, not even your grandmas. Not only for your sake, but also for theirs. A lot of times it never begins with the thought of screwing someone over from the start. It grows over time and then turns into greed or pressure, whatever it may be.

Of course taking someones word is okay to an extent, for example things of less importance that do not involve the structure or intent of the collaboration.

Personal experience of this hopefully you can learn from this one. I know was an idiot:

I started a Social Media Marketing company with 3 people. Myself, my brother, and a good friend of mine. Now thank God that we are in somewhat good standing now. My friend brought my brother and I together and explained the idea that he had, he said we will split the company 3 ways, he has the money and expansion, my brother has the management, I have the sales dep. We agreed and went in on this, literally quit our jobs... Soon enough friend says that there are "complications with splitting 3 ways"(complete bull crap). Soon enough our dumb asses were stupid enough to agree to his "word" where he said that we will start off minimum wage and that we will get heavy commissions and then future shares when company gets rolling.

He was throwing unnecessary cash away from the start. Leased a waterfront office for "image". Bought 5 imac pros for in house design service... and much much more. Soon enough his overhead is 8k per month for everything and only making 5k per month. Before all of this my brother and I were trying to convince him to not do any of that to start, unnecessary. Because he was "owner" of the company and thought we didn't know what we were talking about.

Fast forward 3 months. He fires me because he's been spending too much money. No hard feelings though right? And then he announces to my brother a month later that he is shutting the company down the next day... THE NEXT DAY. He knew damn well my brother had a wife and 2 kids, and failed to give him any notice. Just like that, this guy spends 50k+ on all expenses if not more.
Would have had a successful company if we could just have the equal decision power and shut his a$$ up. All the money spending really was a nice touch, but it had to be done at the right time.

Feel free to share your experiences and knowledge of how to protect ones self. This thread will be dead if you dont heh.
 

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amp0193

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I'm in talks of a possible partnership in what would be a side venture for me.

I'm taking it really really slow, and I'm seeing value in this approach. It's also out of necessity, as my main focus is on my business.

We'll do a call, then I'll let it digest for a few weeks. Then we'll do a couple emails back and forth, and I'll wait a week or two between each email. Just to mull things over. I'll type out replies, and then come back a week later and see if I still feel that enthusiastic about the idea as I did in the moment I typed it, and revise as needed.

A few months into talks, and I'm finding that my initial eagerness has waned, although I think the deal still has potential. But, if I had rushed into something when emotions were high, I think I would've done something stupid.

Proceed into partnerships cautiously and carefully would be my advice.
 

Get Right

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Proceed into partnerships cautiously and carefully would be my advice.
This is excellent advice.

Unfortunately you can't prepare for everything that will come up. I only do partnerships when there is no way I can get there by myself.
 

amp0193

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I only do partnerships when there is no way I can get there by myself.
This is good advice as well.

Holds true in my case.

There has to be significant value brought to the table by the other party. Value I'm not capable of providing.
 
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Royce2

Royce2

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This is excellent advice.

Unfortunately you can't prepare for everything that will come up. I only do partnerships when there is no way I can get there by myself.
Excellent point actually. So many times we don't realize that we don't even need a partnership.
 

RazorCut

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I'm not a big fan of partnerships (and I've had a few over the years so feel very qualified to answer).

The problem with partnerships is that several years down the line one or either of you may want something different from the business relationship.

People grow apart as well as closer. As we get older our goals and our circumstances change and so may not always align. One might want you to put more time in or one might want to sell their share. What happens down the line if your partner suddenly died and their spouse (who you don't get on with) now has their share of the business? All these things can, and have, happened. Plus a myriad more.

Also if you both have equal shares (which is important for both of you) then you should have, say, 49 percent each and the other 2% should be with an accountant you can both trust. That way if there is a disagreement that you are both unable to resolve the accountant will have the final say and will do what is best for the company regardless of opinion.

Personally I would avoid partnerships at all costs, though there are plenty of people that make them work. If you need expertise buy it in on an 'as needed' basis or take on an employee and either pay them well or give them a bonus related package so they get a percentage of their salary from results to make sure they are (and stay) incentivised. I don't agree with commission only pay structures personally but that's just me. (I've seen too many companies take advantage of people under those circumstances).

In the meantime learn what you cannot afford to hire in and learn how to sell regardless as this is a skill any entrepreneur should have.

Last thought: if you are still determined to go down the partner route choose them as carefully as you would a husband or a wife. You will probably spend as much, or more time with them than you would a spouse, and it will be just as painful and costly a process if it ever comes to a divorce.
 

fhs8

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95% of people will open a business and fail or barely break even. That leaves you with 5% of decent business partners who know what the hell they are doing. If you bring on two other business partners on average I would expect a 0.0025% chance (or 1 out of 400) of having two decent ones. Heck most people are up to their head in credit card debt. If they can't even manage their own finances what makes you think they can handle business finances??

Partnerships also bring on unnecessary legal risks. Lawsuits between partners are commonplace. If you can't do something yourself then get an employee.

BTW I voted "no" because I've never had business partners before and not because of good experience with business partners.
 

RazorCut

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I'm in talks of a possible partnership in what would be a side venture for me.
If I were considering a side venture my input would be only advice, contacts and financial investment. I would treat it as an investor or dragon/shark would. If it took more than a few months of my time on a part time basis plus occasional meetings I wouldn't want to know.
 

Kruiser

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Think a little bit like a lawyer. Identify and mitigate the downside risks. Ask "How can this arrangement blow up in my face and what exactly will happen if it does?" Then mitigate those risks and allocate them between the parties. So often, entreprenuers only look at the upside and they assume everything will go perfectly. Lawyers assume everything will fall apart and account for those risks. You need to account for both the upside and the downside.
 

minivanman

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You are doing it 100% correct. Only have a partner for side ventures. That way, you have your bread & butter and get to play with a partner on other stuff. I've had a great partner for many years and we've both had our bread & butter that is our own. Then we have our partnership.

I also have 'partnerships' and I use the term loosely, with several others nowadays. I either build a website or invest a small amount ($1000 max usually) and give advice. I only take a small amount so I make sure they have enough profit to stay in business. Usually it is with people that either just work it alone or have a few workers.

It has all worked out great for me. My partner of many years and I have had some success and some failures. We never blame each other for the failure, we move on to the next. Or, if he wants to stay with a business that I don't like, he can but I'm out. Or, last month I asked him if he wanted to go in on this one business with me and he didn't sound excited and never really gave me a yes or no..... so I did it myself. When it comes to a side venture, I don't worry about it too much.... if it makes money.... YAY! If not, I don't cry over it.
 

Private Witt

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So many times we don't realize that we don't even need a partnership.
So true. I need to remember this as I'm striking a lot of deals as I have more success. Closing those partnerships sound great and look awesome on paper but sometimes the headaches can be mindblowing and being stuck in bed with unneeded chitbricks is a nightmare.
 

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minivanman

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I'd vote against a partnership until you have everything in place in your life and then have fun with the partnership. Like was said above, most of the time, you see a partnership...... oh wait.... a squirrel..... anyway, you see a partnership as a shiny new dime. Then the shininess fades to malachite (that blue/green crap that sometimes is all over a dime).
 

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