My First Published Book – Prisoner of Fate Cheers!! Today is the first day of
“The only strategy that is guaranteed to fail is not taking risk” Mark Zuckerberg
Have you ever thought about starting up a business with someone or a group of people?
It has been proven over time that great businesses are built on effective partnerships and collaborations.
Many companies home and abroad were founded based on ideas conceived by someone or a group of people who are the founding fathers. A good number of Banks, Audit firms, conglomerates etc. boast of incorporation founded on effective partnerships.
Get it right and you may have landed yourself a goldmine but otherwise the dominos would come crumbling. That said, there is a right and wrong way to go into business partnership with other people. Follow the wrong path, and what started off as an amicable business relationship could end up dissolving into one filled with blame and bitterness.
I will share an experience.
Some years back, an old associate reached out to me from the blues about a fantastic business idea that was bound to turn my life around if I could team up with him. By the time he gave me the breakdown of the business plan it was easy to catch the excitement.
As a corporate worker, I was not really adept with the trading and importation business, which meant that I had to rely on his supposed expertise for execution. With the benefit of hindsight, I can say categorically that I was bamboozled by his entrepreneur skills way back in the university. He was one of those guys who would either sell a flash drive filled with music, or a photocopied and neatly bound textbook, and many more of such petty business ideas. So when he said to me that I would make two million five hundred thousand in returns within 6 months if I put one million naira into his business, I jumped at it. It looked good on paper and that was a cool 250% ROI! Sweet deal. What could possibly go wrong?
Ladies and gentlemen, what went wrong was that I lost my money without getting a call back as to why. The rest they say is history.
Of course, this is just a compressed version of the story and one would expect I should have known better, especially with my background in finance. But did I learn a lesson?
Oh Yes, I did! And I will be sharing some learning points on what to look out for when going into a business relationship.
Let us get some things clear, not everyone can run a business! But we must have multiple streams of income, whether we are in paid employment or not and this is where investing comes in handy.
There are many channels you can invest your funds; the stock, bonds, insurance savings, banks savings product, mutual funds etc. these are the types of investment you go for if your plan is to set funds aside over a long period of time and you want to rest easy. In short, they are the safest and least volatile bet, well except for investing in stock, especially with the way the market is right now.
However, some of us are bold and audacious enough to invest directly in viable business ideas and not through some private equity firms or the likes with an interest to build businesses. In essence we have no choice but to partner and invest our liquid cash in viable business collaboration with the hope of getting a healthy return on investment. This article is for people in this category.
Another thing to note is that although there’s no surefire way to avoid making a business mistake when it comes to partnering with others, but paying attention to some obvious signs can help us switch course before it’s too late.
So how do we make effective business partnering decisions? Here is what I am sharing with you based on experience and opinion-
- Going into business with someone should not be a decision you make in a hurry. Just because you are friends or you’ve done some business with a person in the past does not mean they’ll make a good partner in business. Remember, this is one of the biggest decisions you’ll ever make and it will pay off in the end to perform your due diligence and ensure you’re choosing the right partner.
- It is a relationship- get to know them first, especially if there is no previous working relationship. The biggest mistake you can make in partnering is going into it too quickly and blindly.
- You need to determine what your role would be in the business, i.e. active or passive? Would you be investing your money without taking any active role in decision making that relates to how the business is run or you want to be smack in the middle of the action?
- If it is too good to be true, then it probably is not true! Don’t be carried away by the optimistic figures on paper. It is never a good sign. All variables must be tested. Figures have to be realistic and achievable. There is hardly a business operation that guarantees bumper and unreasonable returns on ROI. Except it is a Ponzi scheme?
- Never forget your contract agreement- everything has to be spelt out in black and white. I tell my clients this all the time. Gentleman’s agreement rarely holds water in business. Quite frankly, having a contract drawn up is safer for all involved. A contract should cover all aspects of the business operation, expectation, obligations, buyout etc. Please get a lawyer with expertise in business law to draw up a legally binding agreement.
- Listen to your guts- not because it is always right but if you have a funny feeling about a business deal it is better to examine this feeling before proceeding. Clarifying and asking the right relevant question about the proposed business may help clear up your hesitation and put things in a better perspective.
- There must be synergy – you shouldn’t be afraid to go into a business arrangement with someone that is smarter than you. Isn’t that one of the reasons why you teamed up in the first place? A great many business collaborations have been ruined by ego. Simply put, if you cannot see the bigger picture with them, don’t do business!
- Don’t venture into a business collaboration that doesn’t reflect your core values- check for alignment and understand the key drivers of the business. This can be relied upon when things get difficult to avoid conflict of interest.
- Do not be afraid to walk away- it is possible that things would not work out as planned. You may decide to quit, lose momentum or carve another path. It is ok to do so in line with the binding agreement, remember point 5 above.
Keep in mind that these are just some of the important elements that should be discussed, agreed upon, when a decision to go into a business collaboration is being made. I wish you a successful journey should you decide to take the plunge!
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