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You might be thinking about starting a partnership, but I’m not sure you’re taking this seriously enough.
You know when people say partnerships are like a marriage? It’s not just an analogy. You truly are joining together with someone—and that means getting the WHOLE package.
Everything about this person comes with the deal. Their punctuality, communication style, mindset, how they treat you when they’re stressed—you get it all. It’s not just like a marriage in concept, it’s like a marriage in that you’re joining with a person!
If you do decide to go into business with someone, then there’s the ownership split, the finances, the compensation, the payouts, the investments—it’s all quite complicated.
Matt and I both have been (and still are) in various forms of partnership agreements and businesses. We share our insights and lessons learned from those experiences. We give you some tips on starting out and what to consider when thinking about partnering up.
We also touch on partnering with friends or family and if it’s the right option for you.
Matt is in a ton of partnerships and has had success with many different arrangements. But for me, I explain why I have no plans to enter into any more partnerships in the future.
Highlights, Takeaways, Quick Wins
- You can split money 50/50, but someone should have a 51% stake.
- At the end of the day, someone has to make the calls and take responsibility.
- If someone gets offended by a partnership agreement, they’re not going to be a good partner.
- Give job descriptions to define the roles of the partners.
- Take the same level of consideration with a business partnership that you would take marrying someone.
- If you want to bring someone on as a partner, get to know them as a person.
- Have an exit strategy.
- If your spouse is your business partner, you have to juggle two relationships with the same person.
- Talk about your end goal with your partner.
- Don’t make not having money your excuse for doing a partnership.
- 05:08 Sean: I’m really interested in what Matt has to say on this, because I feel like he has a lot of experience with this. Not only has he been in a lot of partnerships before, but he has a lot of existing arrangements. How many partners do you have, Matt? I know he has a lot of crazy arrangements. Let’s focus on the simplified version of a partnership: imagine two people wanting to start a business together.
- 05:48 Matt: Imagine this: Sean and I just met and Sean asks me the question that we both dislike, “What do you do?” What do you say to that? A lot of people ask how I run all this crazy madness, and I say, “Partnerships.” They ask me, “How many do you have?” but that’s a bad question.
- 07:00 We have our general contractors and then we have our subs for everything—plumbing, electrical, carpentry, you name it. A couple of months ago, we added fence guys, because we’ve been getting a lot of fences that we have to do for our properties and other properties that we manage. You know what? New business. That was a couple of months ago, and then recently, for all the fences that we put up, which was well over a few hundred, people were saying, “Hey, my fence is starting to show that the rain’s been beating on it, people are weed whacking around it… Can you come stain/repaint it?” I said, “Sure!” It’s doing really well.
Never Go 50/50
- 07:59 Sean asked how many partnerships I have, but I don’t know if we want to do that. I’m hesitating because the way I do my partnerships is weird. It’s not like a general, “Sean, would you like to go into business with me?” A lot of the businesses you hear of are something like, “Me and my friend are going to start our own web firm,” so everybody’s all excited and they do this 50/50 business, which is typical. The problem is, those partnerships usually don’t work out. I’ve had many partnerships that were 50/50 and almost all of them have failed because everyone wants to be the chief. Usually, everybody has money and is thinking, “I put this much in,” and it’s just a mess. Don’t do 50/50.
- 09:16 Sean: At one point, Matt had a 50/50 business, and I told him, “Matt, you’ve got to get this to 51/49.” Jay is asking, “What are your thoughts about 50/50 partnership? Bad? Good? Who will make the decision?” Never split ownership 50/50. You can split money 50/50, but someone should have a 51% stake because someone should be the leader, take charge, have the final word, and make the decision. If we’re honest, someone is always going to work harder in the business. They’ll take up the slack, do what needs to be done. Maybe they had the seed of the idea or they’re the more natural leader, or they’re more invested. Someone needs to be that person. If at this point you’re thinking, “I don’t know about this Sean,” then you’re not that person. Everyone else is nodding their heads. If you’re that person, you need to be the one to take charge if you are considering a partnership. Get that 51% ownership. This does not mean that it’s not an equal deal where you both consider big decisions.
At the end of the day, someone has to make the calls and take responsibility.
- 10:34 Matt: I’ll take the real estate business as an example. We’ve been doing a lot of small funding for these houses so I don’t have to use my money. I’ll buy a house and then I have a line of people wanting to invest for me, so I’ll call them up and say, “Hey, how much do you have for me? I’ll be there to pick it up tomorrow or next week.” I compile those numbers, and based on how much they give me, they get a percentage of shares for that project. I will always own more because I’ll invest some of my money. The crews and management is also some of my percentage that I own out of the equity. I have a ton of partnerships in that, but the most anyone owns is 27% or 30% in those projects or businesses.
- 11:34 We’ll have a big board meeting at the beginning and I’ll tell them, “This is the house, this is what the designer made, this is approximately what the transformation is going to look like, these are the expenses, here are our options,” and we’ll go through every single one of them. I’ll ask every one of them, “What do you think about that color? Should we do a regular door or french doors? What do you think about this landscape?” They get some input, but the final decision is on me. I have a pretty big investor in another one of my houses who wants 50/50, and that was one of those things where I said, “I can only do 51/49. Now, I’m okay with splitting 50/50 on the profits with you, but on paper, you’re 49% and I’m 51%.” This guy is well into his 50s and I’m 25, so it’s kind of hard to tell someone double your age that they’re going to be under your leadership, especially since I’ve found a lot of my older investors still want to be the leader.
- 12:48 I say, “I’ve done this quite a few times and I have a procedure, and we make money every time now.” I’ve already made all my mistakes in the past to know what’s going to work now. After I give them a little speech, they say, “Okay, fine.” A lot of people just want to be in control, but if you’re not natural at doing this, you don’t have the experience, and you don’t know what you’re doing, how can you lead? Our military doesn’t just throw out a soldier and say, “Lead us,” especially a new one. They wouldn’t know what to do; they wouldn’t know the different strategies that an experienced general has. A lot of my partnerships are like that, where I’m 51% and they’re 49%, or I’ll have two partnerships, but I’m still that 51% shareholder. I have a lot of partnerships that are a 50/50 profit payout, but on paper, it’s 51/49. Those are some of the most successful partnerships that I’ve had.
Include Your Partners
- 13:47 That is what has helped us grow so quickly. We make a good amount of money, but when you have money coming in and being invested, it’s like going to the bank and getting a $1 million loan with someone who only has a $10,000 income. Your business would skyrocket. It’s like these startups that get millions of dollars and aren’t even making any money. That’s one of the benefits of having partnerships; you can really boost up your reserves. At the same time, you have to know what you’re doing. In a lot of my partnerships, we have disagreement. A lot of the time, if they’re a partner, they’re invested. For some of them, I’ll just do loans, notes, to where I owe them. They don’t own any shares in it, I just owe them however much money.
- 14:43 Sean: Are they really a partner, or are they more of a contractor in that case?
- 14:48 Matt: They’re more like a private lender. That has nothing to do with partnerships, but sometimes, if they’re trying to get to know the business or get their feet wet, I’ll put them on as a partner of 3% or 12%, so they can be involved in the meetings and see the processes. They can go onsite; they’ll get a key.
- 15:16 Sean: When you say “give them a note,” you don’t mean that you gave them money, but that they gave you money?
- 15:23 Matt: A note is basically a loan from them. I have a couple that works for an engineering group; they’re engineers, they make good money, and they do really well in their careers. They want to have some rental property, so when they retire, ideally, they’re still getting money, and when they get to a certain point, they can sell all those houses and sit on a really nice amount of money. They want to learn how we take care of our properties and how we rent. They asked if they could invest money with me and own equity so they could be involved in the meetings, because I explained to them, “If you just lend me money, you don’t get to be involved in the entire process. As a partner, you’re in the business and you own some of whatever the project is.” I gave them 27% or something like that. A lot of times, I’ll let them pick the paint or things like that.
I want my investors to feel like they’re part of this because I’m grateful, even if they only gave me 27% to fund the project.
- 16:37 I don’t care if they gave me 0.01%—I have family members who have given me 1% to fund projects, and I treat them just as good as someone who gives me $100,000. One of the things that has really made me successful in partnerships is that by treating everybody equally, they’re always telling somebody. It happens sometimes that they’ll tell a “rich uncle,” and I’ll get a call from Rich Uncle Milford, who heard from five other people who invested with me five or six months ago. He’ll say, “Hey, I want to get involved in this,” and he’s dropping $250,000. You want to be nice to your partnerships and treat them equally.
- 17:34 Sean: Let’s bring this back down to the ground for someone who’s just starting out and they’re thinking, “All these percentages are super overwhelming.” Maybe we can give them some starting out tips, some guidelines to keep in mind when going into a partnership. My experience with partnerships is that my second business was a partnership web firm that we ran for a little over three years. It ended on amicable terms, but it wasn’t always smooth sailing. I learned a lot of things the hard way. That was my experience with partnerships. Client work was a 50/50 ownership split, and I didn’t learn about 51/49 until later on. After I had already gone into a partnership, my grandfather was kind of wary. Most partnerships aren’t going to last, so he was really skeptical. He asked, “Why did you do a partnership instead of just starting up your own business?” Someone is always going to be the leader, take charge, have the original idea, stay late and work hard, and I know I’m that person, maybe to a fault.
- 19:06 I like to do things myself—that’s why it took me so long to even hire. I could probably do well if I partnered up with more people in business, just doing joint venture pursuits. I tend to not do that. My tendency is more towards doing it myself. I know I need to compensate on the other side for that a little bit, but after the partnership, I decided that I would start my own business and do my own thing. It was my decision to say, “I want to own this business. Maybe I’ll hire people and bring them on, but I want to be the sole owner in this.” From my three plus years of experience in a partnership, these are my pieces of advice. Maybe Matt can piggyback on these and let me know what he thinks.
- 20:12 Matt: My mentor told me, “Partners should only be for dancing.” That made me chuckle, but then it made me think. Don’t get me wrong, there’s good partnerships out there if you structure them correctly.
- 20:34 Sean: Set expectations. It sounds obvious, but a lot of people don’t do this. They say, “Okay, we’re partners. We’ll figure this out.” You need to set expectations ahead of time. This is what’s going to happen when and who’s going to be responsible. Also, talk about worst case scenarios. People don’t like to go there, but you need to talk about it. “What if I die? What if you don’t want to work here anymore? What if you decide you want to sell half of your stake?”
- 21:08 Matt: I’ve done this enough to where I’ve made enough mistakes and I’ve lost companies that I’ve just had to give away. You know how it is; you want to keep that friendship, so you just give it to them even though it’s valued at a certain amount. From now on, we do a partnership agreement for everything. It’s a religion now. If I talk to someone, I’ll say, “How do you feel about a partnership agreement?” If they cringe, that’s a red flag.
- 21:42 Sean: Absolutely. People say, “Is it kind of like a pre-nup where someone could get offended?” No, this is a partnership. It’s a business. If someone gets offended by a partnership agreement, they’re not going to be a good partner. This is important. Yes, you should have trust, but the agreement isn’t undermining the trust. It’s like saying, “Because we trust each other, let’s get this in writing and have something we can both refer to in the future.”
- 22:12 Matt: It’s not only that. Let’s say I died, then the business would go on to somebody else, but my wife would still have shares in it, so she would still get money from it. There’s a lot of other things in there too. Lots of times, when I’m having a conversation with a new partner, I’ll explain what this is for. A lot, if not all, of them, say, “Is this like a pre-nup?” It’s not, but it is. You explain to them that you have other things in there.
Along with a partnership agreement, give job descriptions to define the roles of the partners.
- 23:00 They know for sure that they’re going to get 49%, but there’s still a job description they have to sign. A lot of that is also in the partnership agreement, that they agree to do these roles. There’s daily, weekly, monthly, and quarterly things that they have to do in order to hold up their end of the partnership, and if they don’t, there’s a clause in the partnership agreement that says two things: either you can kick them out of the company, or they can choose to walk away and you can buy out their shares.
- 23:42 Sean: First, YOU absolutely have to have a partnership agreement. Even if you’re still trying to figure out a lawyer, just type up your own thing, so at least you both are invested and serious about it. Sign it, and even if that doesn’t hold up in court, it’s better than nothing. Make it a primary goal to hire a lawyer and bring that piece of paper and say, “Can you make this official?” Find someone who’s familiar with partnerships. You have to do this, and I say this because I didn’t. There’s a lot of details to that. It came down to expectations not being set. Worst case scenarios were not talked about, and it came down to me giving up my entire stake in the business because this person was a friend and we had mutual friends. It affected my and my wife’s social lives.
- 24:53 I decided to say, “You know what, we don’t have things in writing, and it’s just not worth the headache.” I gave up my whole stake. You need to talk about worst case scenarios, you need to have a partnership agreement, and you need to define roles. One of the other things we ran into was trying to keep it general. When you start up a business, for one thing, you need to define the type of work that you do. Say you want to do a project on the side and, to you, it’s unrelated. “We’re making apps and I want to do woodworking.” That’s easy—go do your own thing. It might not be woodworking, it might be something like user interface design as a freelancer, which might get a little bit messier. Your partner is going to say, “Hey, what are you doing man? You’re stealing our clients. You’re competing with us.”
- 25:49 You can run into issues like that. We did as well, because I was doing something that, to me, was very different from what we were doing as a business, and he said, “Hey, shouldn’t that be the business?” I said, “No, look at this other thing. Everyone who comes to me individually for this thing I redirect to the partnership. This other thing that’s totally unrelated is my hobby on the side.” If you don’t set expectations, you run into problems. You have to talk about what will happen if you die, if you want to work on this side thing, and all of these things.
Talking through a partnership agreement is going to be a little bit awkward at first, but it won’t be nearly as awkward as if you have to talk about it later.
- 26:33 Matt: That’s what really sucks. If you think you’re taking the easy road to not talk about it, you have no idea what’s coming toward the end. If you’ve ever had a bad partnership, you know what we’re talking about. Since I have businesses for pretty much everything, a lot of my partners will complain. I had a roofing partnership that went bad. I had a lot of money invested in that business, so I basically had to give it up, give it to him, and say, “Let’s just part ways. I’m losing money, and you’re not cooperating and doing what we had discussed.” This was before I got smart and had everything in writing so we actually had something to follow and we weren’t winging it.
- 27:29 You have to find that one person who’s willing to put in more time than the other. Yesterday, I was messing with my employees. I said, “Who wants a raise here? I’m leaving now. It’s 9pm and I’m about to go home, shower, eat, and work more on the computer. Who wants to go with me and do more work?” Crickets. The person that’s saying they’re going to work after work has to be the 51% shareholder. If you’re honest with yourself and you would rather go home and play video games, watch Netflix, or spend time with your family, I’m all for that, but you should probably not be the main shareholder.
- 28:26 Going back to the roofing partnership that I had, this guy was excellent at what he did. The problem was that he wanted to just do the managing and the working of it and he didn’t want to do any of the paperwork or getting the jobs together—anything outside of working on the roof. In a lot of my partnerships, that’s what we do. We do a lot of the paperwork and schedule the next jobs, since we have the audience and the work. He also had roles to follow, basic stuff like keeping receipts, which he wouldn’t do. That’s a big no-no. Our CPA was livid. You have to have this job description and partnership agreement that discloses all this stuff.
- 29:09 If you go online and get a general one, it’s not going to have all this stuff. You’re going to learn this over time. I’m going to talk to my assistant and see if we can get a template for what we have, see if that can help some people out and keep them away from what we had to go through. This is one of those beanbag time moments to think, “What is that other partner going to do?” I always tell them, “What do you feel that I should be doing?” Your communication with that person has to be solid, so you feel comfortable to text them in the middle of the night with a question or concern.
Partnership is More Serious Than You Think
- 29:59 Sean: There’s a lot of people listening right now that do not take this seriously enough. They’re like, “I want a business partner. That sounds great! I’ll do half the work! I’ll find someone who’s a good fit, who can do the work that I’m not good at.” You need to take this a lot more seriously. You may have heard people say, “You need to treat business partnerships like a marriage because they are like a marriage.” Don’t just think, “That’s a great metaphor.” No, seriously, take the same level of consideration that you would take marrying someone and hopefully spending the rest of your life with them that you do with a business partnership. It is that serious. You need to evaluate everything about their personality.
- 30:43 How are they when they get upset? How do they treat you? Do they interrupt you when you try to talk? How is that communication? If that is not good, if you just met this person yesterday or six weeks ago, you should not be going into a business partnership with them. You don’t know them well enough. You’re going to get screwed over this.
If you want to bring someone on as a partner, get to know them as a person.
- 31:03 Matt: One of the things we look at when we’re doing partnerships is getting to know the person. We really do. This is why I’m flying out to go and meet a couple of people in North Carolina, because they want to partner up with me. I want to get to know them, I want to know about their grandkids, I want to know about their dogs, I want to know what makes them happy and what makes them sad. I get to know these people as much as possible. I’ll ask them about certain things that have happened with us and see where their values and morals are in different situations, what their answers are, and how they react. That’s a huge thing that I’ve had success in—being able to figure out if this person has values and goals that align with mine.
- 31:58 A lot of my partners have gotten scared off when I tell them about Lambo Goal. Right then and there, that’s a red flag. They have plenty of money? I don’t care if they have billions. It’s a hard thing. I honestly don’t think we could have been at the point where we are without partnerships, but we’ve failed enough to figure out what works for us, and that’s not 50/50. We just don’t do those anymore. I think we only have three 49% holders now. I don’t want somebody else to tell me, “I think we should do it this way,” especially if they have no clue what they’re talking about. I’m trying to get to a Lambo Goal here. As much as I enjoy the business, I have a goal and I want to get there. If you want to join the bandwagon and reap some of the benefits along the way, I’m all for it. I love helping people. If you find this random person that you’ve only known for six weeks, even if they seem great, get to know them first. See what makes them tick and what makes them mad.
- 33:38 Sean: With friends or family, it’s easy to say, “Great place to jump ahead! I already know them.” It’s a lot more complicated than that. Before we get to that, I’ve got two more tips I want to wrap up with, and I’m also interested in talking with you about why you shouldn’t go into a partnership. A lot of people jump to partnership because they can’t afford to hire. They think that rather than pay someone they’ll give them a piece of the business. Two quick things: establish clear roles and boundaries, which we’ve touched on before, and then have an exit strategy. This doesn’t necessarily just have to be acquisition, but whatever your goal is. Is this is a lifestyle business? Does your partner want to be bought out? Do they eventually quit? Do you work toward acquisition? What happens after the Lambo Goal?
Talk about your end goal with your partner.
- 34:45 Matt: Even before that, along the way, I’ve had guys who wanted to partner with me, and one of the things we do as we’re talking about our goals is set small goals. You want to set small goals you can reach to get to your bigger goals—it’s stepping stones. I’ll say to a lot of these guys, “What do you think, based on our projections, is a reasonable amount for us to make this quarter?” They’ll say, “$25,000,” with a brand new business. I’ll say, “Do you really think we can make $25,000? Let’s be honest.” They’ll say, “Yeah, I think we can do it. No problem.” If somebody says they can make whatever the amount is “no problem,” they’re lying. There is no sure amount you can make; there are tons of things that can go wrong. Projections are literally guesswork, it’s stuff you put on your whiteboard. My wife was making fun of me for getting a whiteboard for my shower this week.
- 36:00 You have to make reasonable numbers, reasonable projections, and one of the things I’ve learned when bringing on new partners is that they’re too ambitious. Obviously, they’re excited about putting together a business and getting going, but you have to be reasonable and realistic. You can’t just make ridiculous goals and get mad when you don’t make the goal that’s ridiculous. If you have a partner that’s too ambitious and they’re always getting angry because they’re not meeting the projections they’re making, that’s a red flag.
- 37:11 Sean: When are you not working? We’re all in. I’m working till 11pm, midnight, all the time. In the shower, use waterproof notes. Even when I consume, I’m creating. I watch #AskGaryVee and on his YouTube channel, I write hundreds of words of a comment on every single episode. I watch and I’m writing, and I put this away. I save my writing. I turn it into other outlines or my own videos. Even when I’m consuming, I’ll pause, go to my notes, add things, or add to-do items. I’m always on, jam-packing everything I can. Shower time is thinking time, planning time. You’ve got to take advantage of every moment you can. If you can get your friend to drive, do that, and use that time to think or write.
- 38:28 Matt: That’s excellent. My employees are always giving me a hard time, saying, “We’re like your chauffeurs, driving you around,” and I say, “If you want to do my job and always be strategizing, feel free. I’ll drive.” One of the things I’m starting to figure out that has made people successful is always learning things. One of the things I liked about Sean was that he was always ahead on whatever it was.
Entrepreneurs who are really successful are always learning.
- 39:32 Look at Tesla. He wasn’t even qualified to start an electric car business to the level that it is, but the guy went out and learned everything that he could about electrical cars. The next thing that has really helped make him and others successful is that they strategize. They’re in the shower strategizing, in the bed, waking up in the morning, drinking their coffee, and they’re thinking about, “What if we did this, or so-and-so in this company did this?” You’re not just sitting there thinking about ideas; you’re executing. That’s why my family get’s mad at me—because I’m always busy. It’s because I’m always learning. All day, I’m taking notes, sending them to my assistant or taking voicemails. At the end of the day, I’ll compile all that, and I’ll have some sort of strategy we can execute.
Partnering With Friends or Family
- 40:41 Sean: Robert says, “If you haven’t documented expectations in writing, then you have no guarantee that every partner has the same expectations. If you’re uncomfortable talking about the boundaries, contingencies, and the ‘what if it goes bad’ discussion with a prospective partner, than you should not go into partnership with that person.” Someone was saying, “Business partnership with your spouse: a good or terrible idea?” There’s a lot to think about. I want to read what Robert said and then I’ll share my answer.
- 41:20 Robert says, “My business partnership is with my wife. The first thing I would say to anyone considering partnering with their spouse is not to do it, unless:
- You have a very strong marriage, with completely open communication.
- You have a similar mindset and vision for the business.
- You have a clear understanding that one of you is going to be putting in more work than the other. It’s not right or wrong. It is simple a fact that my wife works way more than I am able to do so on our business.
- 42:13 The marriage bit seriously complicates things, because marriage has to be 50/50. It has to be each person equally and fully invested. 50/50 is 100%—it’s two people putting in 100%. They’re all in. Business partnerships need to be 51/49 if you’re really going to go anywhere and not have two people trying to figure out who’s the lead and who’s making the decisions in the business.
If your spouse is your business partner, you have to juggle two relationships with the same person: one is 50/50, one is 51/49, and that’s complicated.
- 43:02 Matt: It’s not impossible, but it’s not for everyone. I wouldn’t go into it. You hear of people that have successful businesses that started in their basement, husband and wife, but not every marriage is strong enough to do that. If you want to split the profits 50/50 that’s fine, but what about when it comes to who’s the person who’s going to make that decision? Going back to family and friends, my family is the most competitive family you’ve ever met. Everyone one-ups each other. If Matt has $101 in something, everyone’s got to put $102 in. We did a house together and whenever you do a partnership, it’s always good to have an advisor—a 1% shareholder who is an advisor. You don’t have to do this, but this is a new thing we’re implementing.
- 44:17 I have a mentor whom I respect, who is successful, who has experience in partnerships, multiple businesses, multiple industries, so I feel like he is qualified to be the partnership’s advisor. He’s a 1% shareholder. That’s nothing, but we need his advice sometimes. Even if I own 51%, and as an example, Sean owns 49%. He can come in and say, “Sean has a point if we do it this way, but Matt has a point if we do it this way. From my experience and my professional opinion, I would do…” whoever’s way. That’s his two cents. The guy with 51% makes the final decision, but he gets to hear from a third party who has successful businesses.
- 45:08 In our family, we did two different houses. I did one with my brothers and one with my entire family. With the one with my brothers, we elected my dad to be the advisor because he’s the most calm. He doesn’t go to his favorite, even though one of us is his favorite. He’s that level-headed person who will look at the facts and then make a decision and say, “This is my two cents.” It just so happened that my middle brother had the 51%. I didn’t want to be number one because I wanted to see what he could do. If he made decisions that failed, it would be a good lesson for him to learn. I elected that we have my dad be the advisor, so he could see that the three perspectives wasn’t always us trying to go against his idea, it’s just a different perspective.
- 47:01 My dad would say, “You know, Matt’s right.” I’m not trying to blow my own horn. I would say, “Dad, say it confidently, ‘I like what Matt is saying.'” Having the advisor helped give a third party perspective. It’s something new we’re doing that is really helpful.
Partnering When You Can’t Afford to Hire
- 47:30 Sean: What about someone who says, “Yeah, I want a partnership,” but it’s really just because they can’t afford to hire? How do you determine if someone has a skill you’re not good at and you should just hire them and pay them well, or if you should give them a stake? Let’s assume they can’t give that person a ton of money, so they think, “I’ll just give them a stake and they’ll work for that.”
- 48:00 Matt: When I started the roofing business, I didn’t have the money for the materials or the tools, and this other guy did. Thinking back now, I would know how to structure it to where I could afford to do it. Back then, I was in that mindset. I really wanted to start this business, this person seemed like a decent person, and he had the skills I didn’t have to do this. I didn’t have the money to do this, so I would mention in passing or at coffee that I would give him equity and profits from the business if he joined me. We would have this happy, incredible, perfect business. This is what we tell ourselves. Let’s be honest.
- 48:50 In my partnership, we didn’t have a partnership agreement or anything like that. We didn’t have dedicated roles, who was going to do what, and all that stuff. We didn’t talk about the money. That’s something we haven’t really touched on, but I think deserves a few seconds. You’ve got to see what you’re comfortable with and what the other person’s comfortable with when it comes to money. I’m the kind of person who will invest 80% of my money and keep 20% for myself. I will live as cheap as I possibly can because I am here to do the long game. I’m looking forward to a Lambo as fast as I can, and the quickest way to that is investing in something that’s going to give me a return.
- 49:35 Not everybody thinks like that. This guy was like that. He wanted all the money now. Yeah, the future was coming, but the future would sort itself out. We’re not going to go into that discussion. It ended up being a bad partnership for multiple reasons, but I think one of the reasons was me saying, “Yeah, let’s do 50/50, because I can’t pay you.” I told myself, “I can’t pay myself, so we have to do 50/50 or it’s not going to work.” I’m here to tell you no. If you have to go a little bit longer without doing the business and save money from the day job or start the business yourself, make some money there, and then bring in the partnership, then do that.
Don’t make not having money your excuse for doing a partnership—figure out the money part.
- 50:29 Sean: That’s what I would do. I’m more of the lone wolf. I’ve gotten over it enough to hire people, but before I would go into a partnership now, I would say, “How can I bootstrap this, work super hard for a couple of years, and make enough money to hire someone?” I would pay them what they would have made in the beginning for the first few years, and they’re happy because they don’t have to put in that initial effort. I retain the ownership, and I really like that, but you have to work really hard upfront. It really depends on your long-term vision, whether you want to build yourself and your company up to hire someone and it will eventually look the same or start out from the beginning with both of you in this.
- 51:21 Matt: We have done another thing that has been pretty successful. If you bring on a partner that’s just going to do work for you, he might bring value, but if he isn’t going to bring money into the business, that can also be a red flag.
- 51:40 Sean: Not everyone has money to put in initially; you’re trying to make money. In our partnership, we split the profits evenly, but we put 10% into the company. The company had a shared account that we could use for whatever. That was the way of putting money into the business, even though at the very beginning we didn’t have money to put in.
- 52:21 Matt: With this new kind of partnership we’re doing, you bring money to the table, you own 30% or 40% if I really like you. That’s a pretty big chunk of it, but also, they’re bringing in 40% of that startup money. This isn’t a partnership you can come into saying, “I’ve got a hammer and I know how to use it.” I can get plenty of those guys. You can’t come to my poker game without $5,000. I want to make sure that you’re serious. I want to make sure that, if you walk away from this partnership, it’s going to hurt.
- 54:19 Even when we’re doing these longer, two-year projects, at six months, they have to throw more in the pot. They say, “Oh no, it’s going to come out of my profit,” and I say, “It sucks to be you. You should have thought about that before buying a boat.” The thing I love about business is that you can truly be creative. It’s a blank canvas—you can do whatever you want, just make sure it’s legal.
See what other people are doing and learn from other them.
- 55:00 Don’t just dive in with somebody because they know how to do something and you kind of know and you’re willing to fail and learn. Obviously, you’re going to have to fail, and you’ll learn along the way, but be as prepared as you possibly can and just learn and listen. I listened to podcasts and audiobooks all day. I know a lot of the stuff they’re talking about, but it doesn’t matter. I’m always picking up gems and golden nuggets along the way, and I’m piecing together this easier way to do things. It doesn’t matter the level or where you’re at; you can always learn something from everybody.
Partnerships Aren’t For Everyone
- 56:30 Sean: I think there’s a lot of people who relate to you, there’s a lot of people who relate to me, and right now, I want to talk to team Sean, the people who are thinking, “I’m going to be the lead person. I’m going to hustle, I’m going to stay late, I’m going to work hard and learn how to do this. I’m not going to say ‘can’t.’ I’m going to figure it out. I’m going to bust my butt.” The people who do that, work really hard, and say, “I’m going to make a business that other people want to work for, where they say, ‘I hope that company will hire me.’ I want to make that.”
- 57:17 If you are that person, keep going and continue being that person. You don’t need someone else to win or succeed. I know that this whole show is about partnerships, so the people who have listened to this episode and made it this far are interested in partnerships, but you don’t have to do that. If you’re thinking, “I can’t do everything myself. I don’t know how to do this, I don’t know how to do that,” that’s true, but it doesn’t necessarily mean that you have to do a partnership.
- 57:54 Matt: There are a lot of people out there who are very good by themselves. I don’t think we should make fun of them or look down on them. There’s a lot of big companies out there with that lone wolf guy, and it just so happens that he’s surrounded by a great group of people, but that one guy started this in his garage. We could name plenty of brilliant people who started in their garages and just hustled.
If the kind of person who can get your business going by yourself and hire people along the way, just do it.
- 58:32 Sean: Get advisors, get smart people around you. Don’t be a total lone wolf about it; get people around you, but you don’t have to give up your stake. You don’t have to give up your ownership.
- 59:00 Matt: Try as hard as you can to make it on your own. Develop a plan. Learn from other people. You have no idea how much stuff I’ve learned even in the last week because there’s so much to learn out there. If you feel like you’re that lone wolf guy, go and study people like Sean. Study Sean, listen to everything that he says. Learn from people like that and strategize from the gems they say that you feel you can relate to or you can put into practice, and do those things. You might be a Sean, where you can start a company. Eventually, I’m all about hiring people, because that’s how we grow. Look at Sean—the king of the lone wolves. Being a lone wolf isn’t going to limit you. You’re going to be the 100% shareholder, which is what everybody wants. Try and make it work, but if you can’t, then think about a partnership, but be creative so you can keep the 51%.
- 1:01:10 Sean: It was only a couple of years ago that I started being more open minded and not just saying, “This guy thinks something I disagree with, so I’m not going to listen to anything he has to say.” That’s pretty dumb. You can’t even find a friend who thinks everything that you do, unless they’re just pretending because they want something from you. Don’t worry about people believing 100% of what you believe. Take the gems, apply it, and execute on it.
- 1:01:51 Matt: Sean and I are in completely different industries, but we can have a conversation and we’re excited to talk about each other, what we do, and different strategies that he does that maybe don’t apply to me, but I’ll hear something that he’s saying and boom, I have the next quarter of a million dollar plan. This guy didn’t even know it, but he just made me a quarter of a million dollars, but only because I’m listening to everything that you say. I’m not just letting it go in one ear and out the other because you’re a designer and I’m in charge of a bunch of contractors. I don’t say, “He has nothing valuable for me.” Don’t be that person.
Don’t think you have to follow some textbook for your industry.
- 1:02:34 There’s no such thing. Be open minded, and you’ll be able to learn and execute a lot of things. I’m good with partnerships, but I’ve learned a lot. I don’t agree with the 50/50 thing, and I like how Sean’s about being the lone wolf. Everybody can get a different perspective. Look at the seanwes network. Technically, we’re all these little partners.
- 1:03:15 Sean: I have come back a little from the full lone wolf thing, because I was way down that path. I wasn’t even wanting to hire. I said, “No, I want to do it myself.” It was just silly thinking I could do everything myself though.
- 1:03:53 Matt: This guy would stay up to some ungodly hour writing shownotes. I admire the lone wolf, but even Sean knows that he has to pass that on to some other wolf.
- 1:04:06 Sean: I still write thousands of words a day, but the reason that was a bad idea was because I prepared for a show, so I wrote. I did a show, and then I had to go back and do repeat work, making notes of things I already said and prepared on. That’s time I could be spending making more things. It’s okay to bring on help. I’ve found something that works for me, and I’ve been able to not give up my ownership to do that. There’s so many different paths, so hopefully we gave people some clarity on the different options they have.
- 1:04:41 Matt: A lot of the time, when I’m trying to be creative and think, I’ll go on YouTube and I’ll Google “Partnerships.” You can find a ton of stuff about what other people are doing to make partnerships happen or get a business going. Be open to learning and pick through the gems, and put something together that works for you.