Choosing Business Partners & Being Burned Alive

Posted by Warren Bergen on Friday, December 2, 2011 Under: Business
Those of us who have thrashed our tail to break the surface and seized the bait that twirled in wait, often find ourselves repeatedly and forever drawn by an unseen force down the path of a new venture. The lure of entrepreneurship swings a shiny hook.

A tremendously significant element of a new venture is choosing your partners. For the ensuing years, you will likely spend a great deal more of your waking hours with your business partners than you will with your spouse, or any significant other that cares to hang about in a non-paid capacity for that matter. A lot of new start-ups are created by friends, which is entirely understandable. A lot of those friends start the venture conversation over drinks, also understandable and delicious.

"I want a new hoodie, but every hoodie out there sucks."
"Yeah, you're right. They do suck."

"You know what would be awesome?"

And so another grouping of thrashing fish begins their ascent and grabs the hook. Jerry, Steve and Mike(there's always a Mike) had been friends since grade 8 when they got detention for too many investigations into sodium and water or Mentos and Cola. Ten years later, they decide to become partners in the span of 90 minutes, ask the waitress for a pen and map out a plan on the proverbial napkin. 

Maybe it will go great and they'll build it up and have a great time doing it together as friends. What a wonderful thought. Maybe they'll catch a sudden wave and be thrust into the golden glow of the venture sun and an IPO will make rock stars of them all. Maybe all of them will remain just as they are right now; decent, hard-working, logical, genuine friends. Maybe nothing will go wrong and all will go according to plan. But...maybe not. 

Jerry designated himself CEO(well it was his idea). Steve became in charge of getting hoodies manufactured and Mike was left with getting retailers to sell their line. And for a while, it worked and it was fun. They had pizza at meetings and beers after work, but Steve kept wanting to take notes and have decisions recorded. Mike thought that was just weird. Then Jenny, who was Jerry's girlfriend, starting hanging around...a lot. She started showing up with hoodie designs of her own. Steve and Mike looked at each other, nodded in agreement and protested to Jerry. Jerry thought they were being ridiculous. 

"She's helping us and not even charging us for it. You guys should show a little gratitude." They shrugged and went back to work. 

Steve and Mike showed up everyday at 7am and worked until late. Jerry was there most days, but usually didn't show up until 9 and seemed to be out more than in. 

"I'm having meetings."

Steve and Mike didn't know who these meetings were with.

"Why is he having meetings without us?"

"We can't always involve each other in everything. You guys have your work to do and I have mine."

Mike started getting orders. The hoodies were selling and he needed Steve to carry more inventory to keep up with demand. Some stores complained about inconsistency of supply. One store dropped them for another vendor that also made wristbands. But Steve couldn't simply produce more inventory because the company didn't have enough cash to carry that much inventory. Quality issues cropped up. Mike dropped an armload of hoodies with arms of uneven length. He was tired of getting yelled at by retailers and put an accusing finger in the face of Steve. Steve pushed Mike hard against the wall and disappeared with Jenny for the rest of the day. Despite the issues, sales were growing and things were happening. They had a brief period of solidarity when they got their pictures taken for a local newspaper.

"Investors should be really interested in a company that is struggling to keep up with demand." They said.


Steve thought it would be a good idea if Jenny was the model for the promo shots. 

 "I have a camera." Steve said.

Jenny and Steve started spending a lot of time together because she was making designs and Steve was getting these designs through production. They started having frequent lunches together and went out to take photos in outdoor locations around the city. This bothered Jerry, but he didn't have time to talk to either of them about it as he was busy meeting with lawyers, accountants, and potential investors. Later, Jerry fired Steve over "recurring production and quality issues that were inconsistent with the brand promise". At least that was what he wished he had said. Steve sued for wrongful dismissal. Steve asked Mike to join him as he walked out. Mike stared at his feet. Jerry hired Sam, a Vice President in charge of sales and Mike was informed that he would start reporting to Sam. 

Sales increased, new experienced people solved production and quality issues and a board of directors was created when the first round of investment was secured. Jerry and Mike had a beer the night the deal closed, but didn't talk much or stay very long. Things kept changing. The board need reports. Jerry resisted. The board directed him to his obligations in his employment contract. There were just so many things they all needed him to know. And increasing sales wasn't enough. They wanted to know about contribution margins, inventory turns and they kept harping about lagging accounts receivables. 

In the end, Jerry was invited to resign. Moments after being walked out the front door, Jerry sat in his car staring at the keys in his hand, partly because he didn't know where he was going to go, but mostly because he was entirely numb. At the bar in which they bore their idea, Jerry picked up his phone and called Steve. 

"I just thought we could make some hoodies."

You just might have the best friends in all the world. If you want to keep them as friends, leave them just as they are. Someone has to be CEO and that person has to evaluate the performance of the others. Are you ready to be on either side of that conversation? When evaluations repeatedly uncover less than acceptable performance, you'll fire your friend(s) or be fired by them. Even if nothing particularly nasty happens, your friends become your work friends and after work, you will find that you want to go hang out with other people so that you don't end up talking shop all night. Of course it could be worse if you chose family or a spouse as a partner, but that's a whole other kettle of fish. 

In one of my first deals, I had two partners. One of the board members invited us out to his cabin for a day of water skiing, BBQ and wine. It was a good time until that night when we tried to light a fire on the beach with wood that was still damp. A little gas was used and the logs were quickly ablaze, so I approached the fire thinking the gas work was done. The flames were high enough that I couldn't see what was happening on the other side. What remained in the container was thrown at the fire, through the flames and accidentally onto me. That night, I found out who my partners were as they threw themselves on my flaming body. We were business partners and not a particularly harmonious relationship. There was a lot of tension, but looking back I can see that everyone was just trying to do what they thought was best for the business. We didn't agree on everything, but that moment showed I was surrounded by great people. With the flames so quickly extinguished, I have no scars that remain. I have long ago stopped flinching from flame, but memory is certainly clear.

Pick the right skills. Pick the best people. Be clear about roles and performance expectations. Don't just talk about it. Write it up and have everyone sign. Clarity helps keep things simple and just might help keep you from getting burned.

Got a story about partners? Tell it here! 

In : Business 

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