Newbie Partnership

[Kyle Baker]

Hello, I've read a lot about going into a partnership with a friend. This friend is and has always been a business minded fellow. For 2 years we talked, built business plans, and have always tried to find something to do together. Finally, he came to me with an interest of his, his dad does it for a living, and asked me if I wanted to join him. RE investing was his pitch. He doesn't need my money but he asked me to join him anyway because of our past together. With his dad guidance we purchased a "buy and hold" property and will have it rented out once the minor updates are finished. From a partnership perspective what do we need to do. One message that has been consistent is to write everything down. The good, the bad, and the what ifs for everything. Is there other things we should consider / try to solidify the relationship now? Our respect for each other is there but he has more knowledge in REI than I do. I'm here to learn and grow and he is here to help and take on a partner for the long hull. Are there any big wins that can help this relationship now ? Thanks much, Kyle

[Bogdan Cirlig]

Truth to be told you can never write everything down. If you try it will look like a nasty 20 page legal document that bends your mind. Business much as Marriage is based not on legal documents to regulate it, but on mutual respect and harmony.

I personally decided that I will never (again) enter in a business with Family and very close Friends. Because I lost BFFs due to a business, and I strained family relationships due to another business. 

The inevitable (as in marriage) is how are you going to handle the "shitz". Because it *will* happen, it's not if it happens, it's to be prepared for when it happens. 2 chefs in same kitchen will always be a disaster. 2 similar personalities/tempers will be a disaster.

You should very clearly know each other and who ends an argument and if either of you can END an argument, regardless of who's right or wrong or whatever.

Also in a business you should agree on who owns what areas of responsibility and agree, cross your heart and hope to... that the person who owns that area HAS the final word on decisions.

Running a business is not democracy, it's like this: I will hear your feedback, from anyone who cares to speak up and I will speak up last after I heard everyone, but I make the final decision. Decisions need to be made in a timely manner without agonizing days of debate. decisions can be corrected promptly if they're wrong. Having one person with final word poses great dangers to your business relationships especially with friends, because you did things together before and suddenly one is "BOSS". I learned that this never works with close friends. They will laugh in your face if you try to say, look, we gotta make a decision and I will make that one: we're going this way. 

To avoid "bossing" around each other, clearly cut dry as I said above, areas of ownership in the business. Since it;s just 2 of you, it's hard to have a tie breaker, but you can agree to have a 3 party tie breaker OR do as Venture Capitalists do, ALL partners have to agree to fund a deal or else it's not going to happen.

Good luck ;-)