Question
I am looking to level up my consulting/freelance business by forming a partnership with one other partner. I have had 3 people interested in partnership but I am worried as I do not know how serious are they. It’s all nice when they are very enthusiastic but I do not know whether they can do what they claim can do. As I am looking for a partner who is better than me in Business Development skills all these 3 posses them in varied aspects.
So let’s say I’m taking one of them as a partner.
His stand (Let's me explain about one of the potential partner)
Here’s what I know about his profile. He is around 20 years older to me and has been working in SME as a Head of Marketing. Has several contacts (which he claims; He has introduced me to some - but all of them appear to be on the same boat as us).
He’s been begging me to start the partnership with him on a 50:50 basis. He has agreed to pay 50% in setup costs & take 50% revenue earned through this business. He appears to be tired of getting business for someone else & wants to run his own business. He doesn’t have in-depth understanding of my business but he claims he has the knack of fixing a meeting with these clients in favor of my business.
My stand:
I have been consulting 2 clients over the past two years and have been doing side projects as well. 2 Months ago I introduced the new business to my existing clients so that I could associate their name with the new company. Very recently, one of the nationwide events highlighted the business name to a large extent in the industry. I am also promised PR offline for this activity which is happening right now. I currently take care of all the management of this firm & also focus on bringing in business (This part is really slow at the moment but I have been optimistic for 3 months now - My business majorly works on a retainer model where are charge about $600 month/client.) I have already built a website for the new business & I have invested in products worth $150 each.
Partnership Roles
If we are to go into partnership, we have agreed that my current clients won’t be a part of the new partnership firm and will continue to be a part of my own personal clientele. However the names will be associated with the new firm
His role will be to leverage his contacts & get me a meeting.
Then I take over the meeting & focus on conversion. Once I handle conversion, I will be looking at delivering the business services by putting up a team & training them accordingly to the new structure I design. (None of which the other partner will be focussing on)
My questions:
This does’t appear to be an easy 50:50 contribution. How should I distribute the stake?
We are sharing our costs equally, but should I be sharing revenues equally? How do I deal with a situation wherein business that converts comes from my contacts & none from his? Does he still get to take a share of the revenue of the firm? Is there a better way to work out a deal? Do I add him as a consultant for a test period & give him a small stake cause I do not know how well he can perform & I cannot pay him a fee?
Answer
Just like when nations form a coalition (partnership) against a common cause there’s always risk to that contributing nations blood and treasure. And lets not kid ourselves, it’s that RISK which you are refereeing to. So, that said, I would not recommend starting that partnership as a 50/50 division. Even your gut instinct in your question is saying that.
So, if not 50/50, how do you? One way is a common goal approach supported by a task-to-purpose objective base. For example, I recently consulted a small three-person partnership cell phone repair business. These young folks had no shortage of people with broken glass phones. They had the idea, they had the model, but they didn’t have the common goal. They convinced themselves that each partner had equal stake in “bringing something back to the business”, or “you need to do this, you need to do that”. That’s not strategy. What I had them do is free think and write down every task they could conceive of. Then I had them agree on their mission statement for their business. Once those where visible we simple placed each task into a prioritized list. Hence, task-to-purpose and moving towards the business objective.
The partnership was forms based on a common goal. Not a 50/50 equity split. Sure, they’re all equal partners, but they all have stake in ensuring the objectives are accomplished.
Just some thoughts from the Spartan Team.
