Partnerships

Posted by Kathleen Fasanella on Mar 2, 2007 at 1:37 pm / Operations, Slavery or Bravery, Small Business / Trackback

One thing we haven’t talked much about is partnerships which is strange because having an opinion on the matter, I’m not known for keeping silent on anything for which I’ve got an opinion. Heh. In responding to the myriad emails I get on partnerships, my greatest concern is the motivations behind the desire to partner up, particularly as this applies to women -since most of you are women. Sometimes when people say they’re looking for a partner, they mean they’re looking for an investor or a backer, a relationship in which the sought partner would bring in the greater proportion of value because let’s face it, ideas are a dime a pallet. Contractors aren’t and there’s a lot more ideas chasing money than there is money chasing ideas. So, in this context, I mean partnerships consisting of two or more peers joining forces.

The latest from my inbox (reprinted below) seems to indicate an impending divorce. One partner is pulling away with what could be avoidance. An ad hoc exit strategy substituting for a formalized one that should have been in place. Actually, it seems doubtful the partner was really committed in the first place. The other partner feels abandoned and similarly, wants to end the relationship as it exists currently, but doesn’t know how to go about it without losing her friend. Perhaps it’s too late to take John D. Rockefeller’s advice, “A friendship founded on business is a good deal better than a business founded on friendship”. However, the infinitely wise Paul Graham says:

… if you think you can prepare for the worst, I think you’re fooling yourself. The other problem with start ups is that people try to figure out how to divide the money before they even have any. That’s the wrong attitude to go into a venture with since you are looking at years of hard times which you want to enjoy rather than thinking about the payoff. And again, if you think you can alleviate potential problems ahead of time you are kidding yourself. The simple fact is that the more you know about the people you are going into business with the better, and don’t expect to get your fair share out of the venture, just be grateful to be a part of something bigger than yourself.

Below is the email that inspired this post, edited to conceal identities.

We started our business together as an equal partnership. Our background is that we’re really good friends and that we always used to make clothes together. We’ve spent lots and lots of afternoons just sewing and talking (stitch n’ bitch I think is what they call it!) We were both kind of at a crossroads with our careers and I suggested that we start a clothing business together and she was thrilled and from there we’ve gotten this far (not so far really).

We’ve been limping along trying to get our first 4 pieces made… from finding fabric sources to finding a pattern maker, etc… And it’s pretty much been ME directing each step of the way. We attended a trade show and she completely disappointed me during that trip because she spent most of the time hanging out with her friends. She took zero initiative as far as attending seminars, networking, or even walking the show. When we got home she said she felt like going to the show wasn’t the right place for us and that she didn’t like it. This infuriated me because she put nothing into it, which is why she got nothing out of it. All that said, I’m ready to end the partnership now. I figure it’s better to end it now rather than wait another 6 months or a year because I know she’s not going to change (people never do). I love her to death as a friend but I will want to kill her soon enough as a partner.

I haven’t told her how I feel. I would like to propose to her that we end the equal partnership and that she still be involved in the capacity of a designer. In the long run I don’t feel like I need her as a designer, I feel like we’re equally skilled in that department, but I do want her to stay involved because I guess it’s the “warm fuzzy feeling” factor. It would be nice if we could still be “partners” in some capacity, not just to completely break it off. But I know now that I cannot share the running and building of this business, it’s just not in me.

I was wondering if you would have any input on how this type of arrangement could be set up. Like would she get paid a flat rate for her designs or could she get paid a percentage? So if the business grows and sales are up she’ll end up making more money as well? I understand that someday if the business actually makes money and she is employed as a designer she could be on salary, but in the mean time what would be another option?

My first advice is practical and then I follow it up with philosophical silliness on partnerships in general if anyone’s bored silly enough to read it.

  • Integrity: You have to be honest with your friend and tell her how you feel.

  • Dissolution: Buy her out, err in her favor if you must. Leave no levers!
  • Value: If value of the venture is in question being that you haven’t launched yet and only have concepts, seriously consider abandoning any designs developed during the partnership and move on.
  • Reflection: Spend some time analyzing the reasons you decided to form a partnership with someone who’s skills mirror your own.

I know it’s hard to do these things. How can you say, I love you but this isn’t working out? You want to keep your friend but you don’t want to keep the business relationship. You already know you have to be honest with her otherwise the business problems will increasingly create distance between you and you’ll end up losing both the business and the personal relationship. Dissolving a marriage partnership is different. While you still may care about them, you rarely want that person to be a continued force in your life.

In general, I’m opposed to partnerships although I know that a lot of you have managed to make them work. I think of partnerships as marriages and with divorce rates exceeding 50%, there’s no reason to think a partnership would end any better particularly when it can be harder to get out of a partnership than a marriage. I suspect that with many DEs who share similar abilities -and this is not a criticism- are motivated through fear, they’re looking for someone with whom to align or buttress themselves from the vagaries of the marketplace. Partnerships can also provide an out, abdication of responsibility, a way of spreading the blame for failure even if it is only to ourselves, in the event things don’t work out. I think it’s better to partner up on projects, call it dating, limiting your involvement with each other on a test project to see how it goes. Another reason entrepreneurs seek partnerships is pain avoidance. We want someone to cover the bases of things we don’t like to do. I’m guilty enough of that. With respect to my own experience, I think it’s better to hire that out if partnering isn’t an option.

Several years ago I’d heard a provocative interview with a woman who’d written a book about prenuptial agreements. She thought that more couples should get them, not as a hedge in case things went south, but as a detailed realistic examination of the parties expectations of the relationship, who was responsible for what, the divvying up of duties and their responsibilities to each other. She saw prenuptial agreements as a way of clearing the haze of idealistic Happy Ever After, a sort of premarital counseling. Business partnerships should be no different I’d think. Have a plan of succession if a partner wants out or is wanted out.

Before closing this post, I spoke to a friend of mine who has a successful partnership. Originally, there were four of them (only two remaining) so I asked him how he managed the transition. First he says that they developed an exit strategy as part and parcel of forming their venture and had it drawn up legally. Two partners left over time, one wanted to spend more time with her young children and the other had a husband who’s business took off and needed her to help him. He said this was handled very straightforwardly, the exit conditions having been clearly established. Secondly, regarding the decision to partner, they’d all worked together in other enterprises previously so they were well aware of the skills and abilities each would bring to the partnership. With regard to conflicts, specifically resentments one partner may harbor towards another over not putting forth the same effort, he said that you have to guard against the mentality of thinking that others are not putting in as much as you think you are putting in. You can’t look at it from the perspective that you (for example) are the one doing the profit generating portion of the work if your partner is doing the portion of the work that frees you up to concentrate on generating revenues.

I have another friend though who says (his partnership is also “successful”) that if he could do it all over again, he’d have done whatever it took to do it solo. Even if that meant working out of his basement and hitting customers door to door. Once you pull in a partner, you’re not the one making all of the decisions and a partner could put the brakes on projects you think are worthy of doing.

The statistics for business survival for partnerships is better than that of sole proprietorships. Still, I wonder how many of those partnerships really became sole proprietorships once the thing was launched and stable. Maybe it’s just where I’m coming from but I’ve heard lots of ugly stories, the worst being that one of the partners takes the intellectual property of the other (developed after they split up) and beats the first partner, having privileged information regarding resources and contacts. What say you? What have your experiences been?

10 Responses to “Partnerships”

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Andrea
March 2nd, 2007
3:46 PM

I Think partnerships can be a great thing, but warm and fuzzy should never be a mitigating factor in your choice. You make partnerships for the sake of the business and not the sake of fulfilling an emotional need. I have a business partner for my marketing business for certain activities…so you might call him a limited partner. When we agreed to be partners we also agreed on who would do what and we respect eachother’s expertise and professional boundaries…which, BTW are different and complimentary. His presence in my/our company allows me to offer more to my clients than I would otherwise. The partnership makes sense.

I would never advocate a partnership wherein either party has the same skillset and/or responsibilities. It sounds like the people in the aforementioned partnership didn’t decide on who would do what and so there was no foundation for the partnership to rest on. It’s a lot easier to tell when someone isn’t holding up their part of the bargain if you know their job description and hold eachother accountable.

Also, as a general businss aside, you are not your business…you are an employee of your business. That distinction can be hard for DE’s because we are driven by passion against all odds…or so it seems most often, so we anthropomorphize our businesses and treat them like a living breathing thing. This also makes it hard to make clear decisions about who we work with . The business dictates what it needs, not what you want. Persoal fulfillment is a symptom of a great business, not the reason for a business.

Best,

Andrea

Josh
March 2nd, 2007
4:09 PM

Is there any data on twin partnerships? Specifically one twin dying from being stabbed in the back by the other twin with scissors or choked with a yard of chiffon because of major differences? : ) lol I kid, I kid.

Karen C.
March 2nd, 2007
4:14 PM

Interesting and thought-provoking post, Kathleen. I see it from both sides. After having two previous legal partnerships (marriage), I really have no desire to be legally connected to another. However, as a DE who is getting very weary of working a full-time day gig and then working (almost) full-time starting my apparel business, a partner, at times, sounds dreamy. Someone who could help me with all of the day-to-day admin stuff. But each day I just keep getting closer, doing it all by myself. And I have the added benefit of only having to answer to my clients.

Kathleen
March 2nd, 2007
4:30 PM

Is there any data on twin partnerships? Specifically one twin dying from being stabbed in the back by the other twin

I wouldn’t risk it Josh -or is it really Jess? Judging from history, you guys can’t tell yourselves apart and with your luck, you’d end up stabbing yourself :).

J C Sprowls
March 2nd, 2007
6:53 PM

Karen C said:

each day I just keep getting closer, doing it all by myself. And I have the added benefit of only having to answer to my clients

You’ve pretty much summed up my opinion on partnerships and publicly-traded companies in two breaths.

Small businesses (esp sole proprietors) are in the most responsive position as their customers are typically right in front of them. The recent trend of publicly-traded companies has been to focus on the P&L statement before (or, instead of) anything else – they typically forget that a consumer exists.

Partnerships, in my opinion, are a distraction unless the partners have different skill sets and clearly defined accountabilities to the business. However, if the business is to survive, one partner must be named the senior so tie-breaking decisions can be made. Otherwise, it’s just a very expensive game of clubhouse

I had a business partner, once, many moons ago. A very nice fellow; but, not a businessman. He worked for me and presented an idea that was viable. He originally pitched it as a sweat equity proposition; but, I made him put up a small amount of hard cash and issued a stock certificate for his investment in that line of business – for 5X his cash, I might add…

His interest (and, likewise, his involvement) with that enterprise waned and his performance became unpredictable. Eventually, I was forced to ask where he felt the business should go. He suggested that we dissolve it. Because of the foresight, it was a simple accounting transaction to buy out his investment.

The next week, my staff and I showed up at the client site and resumed business under a new brand, a new contract, and a different menu. No muss, no fuss… and, best: no downtime or discernible traces!

marina
March 4th, 2007
6:49 AM

This is very sad. I do hope these girls can sort things out well on both sides. There are lots of clues here. ‘a crossroads in our careers’ rang loud bells with me. A business is a career, and changing jobs is very hard and stressful. I did that 3 years ago, – I went from stay at home mum with a little part time job to trying to get back into the job market after more than 20 years. I needed a fulltime income, so starting up myself was not an option. Anyway, this girl has given clues, she didn’t feel the show was the right place for them and she didn’t like it. She needs to be drawn out. Was she looking for the warm and fuzzy too?
Perhaps independent careers advice is a better option.
Above all, be generous and gracious and keep your dignity. Let everyone keep face as well.
Does it always have to be a partnership? If you need skills you can buy them in. Isn’t that what contractors are?
Every group or organisation needs the sort of nit-picky, t crossing person that double checks the figures and brings you down to earth. They are not usually the first person you’d choose to partner with. The more ‘artsy’ and impulsive you are, the more you need them – though the more you probably think you don’t! [I actually married mine!] My husband had his own business 20 years ago and was often asked ‘why don’t you get a partner?’ He is in the motor trade and didn’t trust anyone else enough to work to the same standard, we had a trainee, but his work was monitored.
Sorry to waffle, but this is a very good thread and I’m sure will interest a lot of DE’s
Marina

jasmine
March 4th, 2007
9:28 AM

Interesting conversation! I have had a partnership now for over 3 years, and I would call it successful. We are both DE’s who started a boutique to carry our lines, as well as other DE’s lines. We knew nothing of the boutique world, and have learned much along the way.

We started out as 50/50 partners and friends. Over time, it became clear that I was the leading force and initiator. We spent a little time with the feelings that this created (for me, resentment and irritiation at “doing it all”, and her a sense of being less than, and confusion at why I felt that way) being held inside. I realized this wasn’t good, and had a heart to heart with her, which turned out amazingly well. I detailed all the things each of us did, and it became clear that the partnership was no longer even. We did not start out with any clear job descriptions – I’ll never do that again! Nonetheless, the descriptions were created, and our partnership changed to 70/30. I am blessed with our ability to communicate – without that we surely would have dissolved.

I am happier now that I know I am taking the lead, and she is happier not having as much responsibility, and doing the things that she does best. We are doing more than each of us could on our own, and are playing to our strengths. I know that this is rare, but just wanted to describe one way that it has worked.

I would enter a partnership again, but with much more clearly defined roles to start with, and would take it much less lightly than I did the first time! When all is right, the power of two is much greater than one plus one.

I will say, however, that I would NOT take a partner in my design business! The creative process and my own strong opinions would not be up for debate and compromise. Better to hire out the work to accountants and contractors!

[…] entries: Partnerships How to find investors for a clothing line addthis_pub = […]

[…] find investors for a clothing line pt.1 Investing in a clothing line Investing in a clothing line 2 Partnerships Why contractors won’t partner with you Factoring invoices: Financing a fashion line ADHD dump: […]

georgia
July 6th, 2011
8:45 AM

corrently in a partnership i find this very ineresting. my friend and i went into a partnership because we were both artist, her in graphics and me in textiles. we occupy a space with food, fashion and art. i am in control of the fashion which is paying all the bill and salaries. most time we go without. we are in our first year of business. my partner works indenpendently with her graphics, while my only soruce is the store. iam now manufacturing out of my basement to supply the store. our investment to start, was sowhat equal. she is a good friend, but not really a good business minded person. i decided to still occupy the space but seperate the store as my business.

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