Partnering with Someone You Barely Know

[Guest-5ty5s4]

Here's a question for you guys.

Let's say you have a great idea. You have set up all your IP. You have kicked things off, it's going well, but you are hamstrung for time, and you realize you don't have the ability to be in 10 places at once, nor do you have sufficient technical skill to get your business off the ground alone.

This all sounds pretty normal, right?

So, you look for a partner, a first employee, someone to help you out.

And, let's say, you find the perfect person! Someone WAY smarter than you, who knows the technical side of your industry like the back their hand. They've even started a similar business successfully.

However, let's say you find them through the internet. And you barely know who they are.

How do you protect yourself? Do you hire them with a rev share or commission-only agreement if you don't have much income profit yet? Would you be willing to give them equity in the business if you haven't even met them in person? Or would you fly across the country first to shake their hand, and make sure to photo-copy their driver's license and stuff while you're at it?

Curious what some of the heavy hitters think, even if the feedback they give me is "you're an idiot for posting this" @Antifragile @Vigilante @Kak @ZCP @NeoDialectic

Edit: adding @heavy_industry and sorry if I didn't tag you, just added the first people who came to mind!

 

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[DMass]

Id proceed with extreme caution.

Definitely do not partner with them if you don't know them.

Maybe offer a short term contract so you can evaluate their skills and personality.

I went into partnership with someone I'd known for a few years, very technical, the opposite of me, on paper the perfect partner to compliment my skillset.

3 months after partnering I kicked his a$$ to the kerb.

They made all the right noises, spoke a good game. But turned out to be a did.

You never really know how someone is going to work, behave, or perform until you give them a chance. In my experience it was far more hassle than it was worth.

My advice - give them a chance but nothing else. Don't give them any equity or confidential material until they have proved themself. Make sure you watch them and get a feel for who they are, you can make a call then.

 

[pickeringmt]

Man, I ventured into partnerships last year and it is very difficult. What you are asking is about the same as marrying someone under the same circumstances. There is pretty much no way to know and it is an expensive/painful thing to find out. Even if you have known someone for years, you just can't know how that person will react to a massive workload, lack OR excess of money, or any of the infinite possibilities. On top of that, your partner gets divorced, loses someone, has an accident, gets sick, etc., and can totally destroy themselves and you just watch it happen.

 

[Raoul Duke]

@fastlane_dad
@NeoDialectic

 

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[BizyDad]

Here's a question for you guys.

Let's say you have a great idea. You have set up all your IP. You have kicked things off, it's going well, but you are hamstrung for time, and you realize you don't have the ability to be in 10 places at once, nor do you have sufficient technical skill to get your business off the ground alone.

This all sounds pretty normal, right?

So, you look for a partner, a first employee, someone to help you out.

And, let's say, you find the perfect person! Someone WAY smarter than you, who knows the technical side of your industry like the back their hand. They've even started a similar business successfully.

However, let's say you find them through the internet. And you barely know who they are.

How do you protect yourself? Do you hire them with a rev share or commission-only agreement if you don't have much income profit yet? Would you be willing to give them equity in the business if you haven't even met them in person? Or would you fly across the country first to shake their hand, and make sure to photo-copy their driver's license and stuff while you're at it?

Curious what some of the heavy hitters think, even if the feedback they give me is "you're an idiot for posting this" @Antifragile @Vigilante @Kak @ZCP @NeoDialectic

Edit: adding @heavy_industry and sorry if I didn't tag you, just added the first people who came to mind!

I would never fully partner with somebody that I don't know. Their bad habits affect you. Their divorce affects you. Their bankruptcy affects you.

Would you marry a woman sight unseen? Would you marry her after 3 dates?

Business partner is just a marriage of a different kind.

So if you're going to go the route of full partner, find a way to work together first. Maybe that commission salesperson idea is a good one. Set up an option for them to buy into the business. Or earn equity into the business after a period of time when you guys are comfortable with each other.

Don't give up majority to a single person. (Which is a rule I broke in my recent business acquisition, but I knew the guy for years and it made more sense for him to be majority owner).

Lastly, when vetting a business partner, I asked a lot of questions about their goals. Their wants. Their attitudes towards business. Think of it like interviewing, I'll ask interview type questions:

Tell me about time when you handle the tough situation.
Would your family be supportive of your entrepreneurial endeavor?
How long do you see yourself doing this?
Why did you choose to get in this industry?
If we go into business together, what would your preferred exit strategy be?
What happens if we come up to a point where we both can't agree on something? How should we proceed?
How much time do you have to devote to this?
We've agreed to start with x funding, but what is your attitude on raising capital? Taking out loans? Do you have more funds of your own that you could put in?
Let's say we've got a troublesome team member. Trouble is kind of minor. Do you prefer we fire fast or train them up?

By asking a lot of questions up front, you can get a field for whether you two have a similar approach to business. You don't have to be in lockstep, but you should be aware of what your differences are and how to resolve conflicts while everything is warm and fuzzy in the beginning.

Hope that helps.

 

[Guest-5ty5s4]

I would never fully partner with somebody that I don't know. Their bad habits affect you. Their divorce affects you. Their bankruptcy affects you.

Would you marry a woman sight unseen? Would you marry her after 3 dates?

Business partner is just a marriage of a different kind.

So if you're going to go the route of full partner, find a way to work together first. Maybe that commission salesperson idea is a good one. Set up an option for them to buy into the business. Or earn equity into the business after a period of time when you guys are comfortable with each other.

Don't give up majority to a single person. (Which is a rule I broke in my recent business acquisition, but I knew the guy for years and it made more sense for him to be majority owner).

Lastly, when vetting a business partner, I asked a lot of questions about their goals. Their wants. Their attitudes towards business. Think of it like interviewing, I'll ask interview type questions:

Tell me about time when you handle the tough situation.
Would your family be supportive of your entrepreneurial endeavor?
How long do you see yourself doing this?
Why did you choose to get in this industry?
If we go into business together, what would your preferred exit strategy be?
What happens if we come up to a point where we both can't agree on something? How should we proceed?
How much time do you have to devote to this?
We've agreed to start with x funding, but what is your attitude on raising capital? Taking out loans? Do you have more funds of your own that you could put in?
Let's say we've got a troublesome team member. Trouble is kind of minor. Do you prefer we fire fast or train them up?

By asking a lot of questions up front, you can get a field for whether you two have a similar approach to business. You don't have to be in lockstep, but you should be aware of what your differences are and how to resolve conflicts while everything is warm and fuzzy in the beginning.

Hope that helps.

This all makes perfect sense. Perhaps a "partnership" is too strong of a word and the creative joint venture is a better option. A contractual creative agreement. I'm curious what the options are... Whether you are hiring someone to help with sales, or hiring someone to help you build software (and get a part of the royalties?).

In many cases, it's just too expensive to hire a full time employee. This creative JV thing really got my gears turning when @Kak introduced it to me.

 

[Kak]

When I think of partner, I think of someone or another firm that can dramatically improve my business in some form or fashion. I generally do not give half of a company or even stock. I’ll let them share in the profits we create together in a predetermined way.

Under that definition, I am almost willing to “partner” with anyone that’s willing to eat what they kill. If there’s synergy, I’m generally interested in at least hearing someone out. I have built everything I’ve built on these types of partnerships.

That said, you will find giving away half of a company to one person in the beginning just to make your life temporarily easier is an expensive decision later.

 

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[heavy_industry]

Edit: adding @heavy_industry

Thanks for the tag.

Unfortunately I'm not the right person to answer this question, because I am very biased and my approach could be seen as a limiting belief, or a strategy that is not conducive to maximum growth:

I would avoid having a partner at all costs because I do not want drama.

It's not about the money, it's not about trust.
It's about the awkward social dynamics of having two people at the driver's wheel.

For me, business means FREEDOM.

I want to be in charge and responsible of everything.

 

[Antifragile]

Here's a question for you guys.

Let's say you have a great idea. You have set up all your IP. You have kicked things off, it's going well, but you are hamstrung for time, and you realize you don't have the ability to be in 10 places at once, nor do you have sufficient technical skill to get your business off the ground alone.

This all sounds pretty normal, right?

So, you look for a partner, a first employee, someone to help you out.

And, let's say, you find the perfect person! Someone WAY smarter than you, who knows the technical side of your industry like the back their hand. They've even started a similar business successfully.

However, let's say you find them through the internet. And you barely know who they are.

How do you protect yourself? Do you hire them with a rev share or commission-only agreement if you don't have much income profit yet? Would you be willing to give them equity in the business if you haven't even met them in person? Or would you fly across the country first to shake their hand, and make sure to photo-copy their driver's license and stuff while you're at it?

Curious what some of the heavy hitters think, even if the feedback they give me is "you're an idiot for posting this" @Antifragile @Vigilante @Kak @ZCP @NeoDialectic

Edit: adding @heavy_industry and sorry if I didn't tag you, just added the first people who came to mind!

Thanks for the tag @thechosen1 - and your vote of confidence in my ability to answer this type of question!

Unfortunately, I don't really know...

I've never been in a situation like this, yet I've always partnered with people and companies. The issue I'd face with this is simple: TRUST.

Trust is an elusive concept that most of us think we understand but barely scratch the surface:

1. Trust = this person has a good moral compass and won't screw me at the first opportunity
2. Trust = this person has the technical abilities to carry out promises made
3. Trust = ... has grit to carry on when things get tough
4. ... has people skills to communicate well, as well as or better than me?!
5. ... has time and will have time to work on this even if life events change things
6. ... has the same objectives as me
7. ... is willing to listen to me and vice versa, willing to tell me I am wrong, when I am wrong
8. ... is not hiding something that if knew it, I would never go into business together
9. ... etc.

How do you solve for all that when starting a JV?

That's a great thing about building an enterprise level company, it typically solves for many of the TRUST issues. For example: what happens when a person dies? If the business depended on that person... so will follow the business. Yet when Steve Jobs (for all the crazy value he delivered) died, Apple continued.

Same with partnerships. Partnership with a person without ever meeting them is like marriage.

Business partner is just a marriage of a different kind.

BizyDad nailed it here.

Hope this is helpful to you... I don't think I'd partner with anyone the way you described above. Even one meeting won't be enough. It's like a first date. Marriage will have to wait.

But I would partner with companies (or better yet, hire them) if they have required experience, longevity etc.


EDIT: while I typed my answer, 3 great replies came in! I can't keep up - which is even better. Seems like we are hitting similar points.

 

[ZCP]

Would have to be case by case. I like what @Kak said above.

Just like anything .... you need CLEAR scope/deliverable/cost/schedule. Set those expectations and accountability clearly.

I also would just bring up the exact conversation with them ..... 'Bro, how do I trust you and bring you in? How do I not give away the farm? What could you bring to the table here?' ...... see how that convo goes.

As presented, start small and build trust / confidence. Have both parties 'do what they said they would do' during a trial period with clear outs.

 

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[FastNAwesome]

Superb answers by so many accomplished forum members.
I'm taking notes rather than giving any advice.

What I can do is throw in my .2c for whatever it's worth...

Would you be willing to give them equity in the business if you haven't even met them in person?

My experience with this (minus the equity part) was that it's more about the person,
than whether we meet in person.

Folks are however they are, so honest ones will be honest
even when they have all the means to screw you over, and someone
else can look you straight in the eyes, shake your hand and still scam you.

I've had and have incredible relationships and trust with folks I've never met,
as well as those I know in person.

I've also had bad experiences with both kinds.

My advice - give them a chance but nothing else.

I like this. If you can work together without jumping straight to equity, why not start there?

Business partner is just a marriage of a different kind.

perfect description!

When I think of partner, I think of someone or another firm that can dramatically improve my business in some form or fashion. I generally do not give half of a company or even stock. I’ll let them share in the profits we create together in a predetermined way.

I really like this.

Brings it down to simply a business risk, just like any other.
Simpler to part ways.

 

[Johnny boy]

Can’t believe this wasn’t already said as priority number one….cmon guys..

Talk to him first before anything else.

You’re sitting here doing a bunch of thinking and strategizing. He might not even reply to your message.

“Hey I saw you’re a badass in X industry and I’m starting a company in that industry and wanted to reach out”.

Just start a dialogue.

Look at it like this

“Hey guys I saw this cute girl and I’m thinking I’d marry her. Should I ask her if she would want a marriage with 2 kids?” Bro, maybe just go say hi and see if it even goes anywhere first?

Also, if you are bringing in someone to run a company better than you who has more money than you, then that’s not a good spot for you. It’s their company now. You are now their employee.

Bring in someone who knows things if you need experience. Bring in someone to do busy work for you if you’re too busy. Bring in an investor if you’ve got the time and they’ve got the money. Those relationships are synergistic and win win. Partnerships that conflate responsibilities are awkward.

“Hey, here’s my business. It makes money but we can grow faster with more money. Give me your money and I’ll run the business”. That works

“Hey, I’ll pay you a steady salary and you’ll work as our strategist for this specific role in an executive position”. That works.

“Hey, I’ll pay you to be a worker. You will be a normal employee and handle tasks to free up my time as an operator”. That works.

“Hey, I’ll pay you to consult me so I can learn how to do a business like yours”. That works.

“Hey, let’s both run the business and split responsibilities. We will be equals”. That does NOT work like the others. No bueno.

But first you need to just talk with the guy to see if he’s even willing to get involved in any way whatsoever.

 

[Guest-5ty5s4]

But first you need to just talk with the guy to see if he’s even willing to get involved in any way whatsoever.

Already done that on a couple things. In one instance it’s a real estate thing, guy has a construction biz. In another it was a guy who wanted to partner on my fishing product biz.

 

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[GW@GCA]

As others have said, I'd definitely speak with them to understand their goals out of a 'partnership' and what their expectations said partnership would be. To some a partnership would just be collaborating while maintaining separate businesses and to others it would mean having a 50/50 split in ownership.

When seeking outside help, I've always categorized it in two ways: people with skill sets that I do not have (and that I cannot easily acquire) and people with skillsets that I either do have (or could easily acquire). The only time I would even consider a sort of revenue split or equity based partnership is if the person/company offered a complementary spread of skills or assets that I need and can't obtain within a reasonable amount of time.

For your case, I'd certainly hold off on any sort of equity agreements. As others keep saying, that can come with a huge swath of issues. If possible, a commission or revenue split on whatever projects you are collaborating on for a fixed amount of time may work best to "trial run" this potential future partner.

You can always play this off to the partner by saying you don't want to have to get lawyers involved with changing the articles or organization or whatever relevant business docs and that you want to keep things simple for the time being by just working out some sort of commission or split.