Got Family Quick Bits: Why Partnerships Fail, Part 1

Hello, this is Got Family and I am Carey Berger and today we’re going to talk about one of the reasons why partnerships fail, what is missing in the business plan. You know the business plan actually has three primary parts and most people only think of two. The first one is the dream, the dream of what we’re going to build here, who we can serve, what’s the need in the marketplace, why are we the right people for this, how is this going to work. All that exciting stuff, that’s the part that most everybody wants to focus on, and they should, but unfortunately, it’s only one third of the deal. Second piece is the numbers, and you’ve heard me talk about that many times. The numbers are, of course, where the rubber meets the road, so to speak. The key there is to bring those numbers as close to daily as possible. Realistically, if you get month by month your fine, but annual numbers are worthless. Finally, the piece it’s missing is the ‘what do we expect to get out of this’ piece. That is the part there for the investors, that is the part there for the bankers, and that is a part there for you because even if you did not have partners you would still be the investor, and you should understand what your reason for doing this is, when you expect this to pay off and how do you expect this to pay off? That is a place where, when you have a partnership so often we wind up really having a failure to communicate, and what winds up happening is I expect that I’m going to invest and I’m going to be an owner and based upon that I’m going to receive my money in this way, at this time and it’s going to feel really good to me. You expect that you’re going to invest and you’re going to be an owner, and you’re received in a different way. It’s not that either one is right or wrong, in fact a friend of mine used to use this analogy; it’s like if you’re expecting a pony and you got a bicycle. A bicycle is still pretty good, but if you’re expecting a pony, you’re disappointed. And so that’s what this really comes down to. So, much of the time partnerships will fail right from the beginning with a difference of expectations and it starts with the business plan. Include an indication of how you’re going to invest, are you getting a return on that investment, and if it’s going to happen, when? When is it going to happen? Is it going to happen from dividends, is it going to happen from when you sell the business, and how soon should that be, and what are the expectations there? That’s one of the reasons why partnerships fail and we’ll give you a couple more another day here at Got Family.