Going Into Buisness With A Partner(s) Is Exciting! Do It The Right Way
As you know, I’m always thinking about business, and I don’t mean just making money. Of course, I’m always thinking about that!
I think about how to be more efficient, how to be better at marketing & sales, how I can vertically & horizontally integrate my business interests, and in general, what it takes to be a better, more competent business person. I read business books all the time, fascinated by case studies of companies both small and gigantic and the leaders who have struggled and succeeded in those companies.
Recently I have had few friends and colleagues come to me to discuss problems they were having in their respective businesses. Not surprisingly, their issues had nothing really to do with sales, growth or even clients, but were universally about partnerships & business partners.
These discussion with friends and colleagues have me thinking a lot about the things I’ve done right and more importantly the things I’ve done wrong in partnerships that I’ve been involved in over the past 15-20 years.
In this Insight I want to discuss the essentials of building a successful partnership
This article is a high-level discussion—after all, entire books are written about single sections in this Insight! Also keep in mind, these words are my opinions. I’m not a lawyer nor do I have an MBA. But I think in many ways I have something more or at least equally important – experience of having both extremely successful and extremely difficult partnerships over the years.
Colorists and finishers are an independent group. Many of you are probably solo operators and freelancers – and like it that way. I have no problem with being a lone wolf—if it’s what you like. It’s an attitude and business approach that I really admire.
I also know a lot of you see the word ‘partner’, scoff and think, ‘Partners are just a pain in the ass!’
However, For Me I’ve Always een drawn to the concept of partnerships for a few reasons:
- Shared Responsibility – Your mind probably goes straight to sharing costs of equipment, paying bills, etc. And I do think those things are important, but for me shared responsibility in a partnership is more – it’s that you trust your partner(s) to have the same goals, to ‘live’ the business just like you do, and to have your back.
- Different & Complimentary Skill Sets – A great reason to partner with someone is that he or she can do things that you can’t or they do things that are very complimentary to what you do. Maybe you’re a great colorist, but not all that great at sophisticated compositing. Partnering with a compositor might be a good thing. Mixing Light is a perfect example of what I’m talking about – 3 colorists all with similar but different skills explaining color grading from different angles.
- Increased Potential – related to the above, when you are partnered with someone else that has a different way of approaching business problems or creative work, you drastically increase the potential of your business and the issues you may encounter. Diversity of thought is a huge thing with business partners as it allows you to see problems from more than one angle.
- Productivity – There are only so many hours in a day that you can actually work. Having partners is a great way to do more. And getting more done hopefully means more money, more success, and more growth for the business.
Implied in this: You should partner with people you trust (and like)! Sure there are partnerships that exist where the benefits of partnering outweigh the fact that you and your partners hate each other! That’s not a great way to do business or live life.
Work with people you like!
Planning For The Good Times: Control & Operations
As you start the conversation of thinking about partnering with someone, naturally the first line of thinking is something like:
‘How is this partnership going to work exactly?’
Prior to getting to the operating agreement stage (which I’ll discuss below) you and your partners should have many deep, and detailed discussions about running the company. Seriously, do not rush this process – don’t go into business together because it seems it could be fun (even if that’s true).
The exploration process about how the business will run can reveal a lot about your partners and about yourself. Let’s break it down this exploratory process a bit more with some key areas to include in your discussions with future partners.
What Does The Company ‘Do’ and ‘Not Do’?
These might seem like a trivial question, but it’s not. Are you a color correction company, or a postproduction company? Seems like the same thing right? Well, what if one of the partners is a colorist but also a very talented compositor?
If the company is a color correction company it would seem that compositing might fall outside of the scope of what the companies mission is, freeing that partner to bill compositing work on their own – and that could lead to many complications, misunderstandings and arguments… if this likely scenario isn’t planned for ahead of time.
You need to work your hardest to define what the company does; without defining it too broadly.
How Are Decisions Made?
Another area that requires a lot of thought is how decisions are made. What decisions require partners to participate—and how are those decisions ultimately approved or denied?
These areas are at the heart of an Operating Agreement and successful management of a company. Some partnerships require unanimous approval by the partners, for example, when adding new partners or changing the focus of what the company does. Other Operating Agreements require a simple majority. Some Agreements place these powers into a managing or executive partner (that is elected by other partners) to make decisions for a period of time.
There is no right or wrong way how you organize your decision-making, but I suggest avoiding situations where no decisions can be made or situations where control is solely in the hands of one partner.
Understanding Partnership Roles And Day-To-Day Roles
An area that I find a lot of people struggle to get their mind around is the difference between being a partner and what is required for that role vs what is required day today. For example, as a partner in a business, one of your partnership roles might be to handle all tax matters for the business but your day-to-day role is as the managing colorist ensuring that projects are graded effectively by staff.
These definitions need to be discussed with potential partners. The last thing you want to hear from another partner is ‘what exactly do you do?’
In addition, money and compensation can be thought of in this way too: As a partner you’ll need to have a plan for when/how profit distributions are made but for the day-to-day roles you may want to consider setting up payroll.
Think About Separating Operating Issues From Policy Issues
During this exploratory process of setting up your Partnership, it’s important to separate operating issues from policy issues. What’s the difference?
Bringing on a new partner? That is an operating issue.
Deciding if partners needs to wear a company uniform to work every day (think amazing company t-shirt)? That is a policy issue.
Some issues could go either way – operating or policy. It’s up to you and your partners to make those calls.
If something is borderline operation/policy think of it this way – policy issues can change easily at anytime, operating issues are core to the operation of the business and require a lot more effort (and probably money) to change.
There are more things to consider for general operation including accounting practices, financial reporting, etc. If you’re not sure what type of other things should go into an operating agreement be sure to consult with a business attorney.