BIRD WILLIAMS: You're listening to Bird Means Business Episode 88.

Hello, hello, and welcome to Bird Means Business podcast. I am your host, Bird Williams. And this episode is all about what you should consider if you're looking for a business partner. 

So you're in the entrepreneurial space, or you're preparing to become an entrepreneur, open up a business, and you're considering going into business with someone else. Or maybe you already have launched your business and you already have a business partner and you're like, "Bird, this isn't going exactly how we thought it would. We might have missed some steps." Well, no worries. I got you. You are in the right place because we're gonna break it down in this episode. 

But before we get into the episode, I want to make sure I mention this. If you're listening in real-time, we are getting ready to start the Prepare To Launch Challenge. It is a free 10-day challenge. And y'all, I'm so pumped about it. It's based off of my "Ready, Set, Launch" checklist. It's a checklist I developed right when I launched this small business strategy firm, because I was like, man, these are the 10 things I wish I would have known when we launched our first business back in 2013. I have a gym here in Houston. And yo, we were all over the place making all the mistakes. And I was like if there were 10 steps, these would be those 10 steps that I could give new entrepreneurs so that they can avoid wasting time and money, and energy in the wrong places. I've had that checklist for a long time. It's one of my freebies. But I thought how can I add more value? Let's get the community together and go through a 10-day challenge together. So that's what we're doing. 

This is what you're going to get whenever you join the challenge. Every day for 10 days you're going to receive a simple and practical task in your inbox, that will just bring you that much closer to finally launching your business. Also, you're going to get access to our Facebook group. This is where you can connect with me live each day of the challenge. I'm going to jump on and get your questions answered. 

And you can also engage with other incredible business owners and business owners-to-be. I'm telling y'all there is power in community. Actually, next week's episode is all about that. But you want to do this with other people. You don't want to do this alone. Entrepreneurship is hard, yo. Honestly, I'm right now in my closet recording this podcast. And it's been a rough couple of weeks. It's been really, really tough with all the things: a life, business. But what you have to do as an entrepreneur is continue to show up. And it's easier to do that when you have support from maybe people in your family or your spouse. But also support from other business owners. I can't tell you how many times I'll text another business owner friend of mine, and we'll go back and forth about how hard it is to hire great people or whatever the case might be. But it makes you feel seen, like you're not alone. And anyway, that was a little bit of a rant. But I really do feel strongly about how powerful community is. And I want to create that space in our Facebook group through this challenge. 

It's a 10-day challenge. I'm trying to keep it actionable and bite-sized. So we're not going to do the most. I'm going to just help equip you to take actual steps toward getting your business launched. Whether that's a month from now. Whether it's a year from now. I just want to help equip you, empower you, give you knowledge, and really momentum. Cause don't we need that sometimes? Like kind of get stuck, feel like you're in a rut? Well, this will be a great thing to really galvanize you into action. So I'm super excited to journey with you through this. 

The challenge kicks off on September 20. But you can register right now. We already have dozens of people in the group. I'm so pumped. So make sure you go register. Even if you've listened to this a few days after the episode went live, you can still jump in where we are in the challenge. And you'll get the emails and I'll do a recap at the end as well so that you can get all 10 days of the challenge. So super pumped about it. You're going to go to birdwilliams.com/challenge to sign up. And I look forward to seeing you there. 

I just want to say one more thing. This is for business owners who are going to launch their business like it hasn't happened yet. And those who already have who are like I might have missed a few steps. That is totally fine. This is a no-judgment zone. And we actually have several entrepreneurs in the group right now in the challenge, who have already launched their business. So if you need to tighten things up, you are more than welcome to join. Again, that's birdwilliams.com/challenge. 

All right, let's jump into the episode. I'm super pumped to cover this because I've actually had several strategy sessions with clients who were in a bit of a pickle with their business partner. And so I thought this would be a good one to cover on the show. So this is what we're going to talk about. First, the different types of business partners. We're also going to talk about, do you even need a business partner? Making sure you choose the right person is something we're going to cover. And one of the most important parts of all of this, the operating agreement. We're going to get into that. And then we're going to talk about communication skills and how important that is. And then I'm going to give you some alternatives to business partners if having a business partner isn't what you actually need. 

Get your notepad out, we're gonna jump right on in. Here we go.

Let's talk about the different types of business partners. Now I'm going to give you more like alternatives later in the episode. But let's just talk about what business partnership could look like if you actually have a partner. So what I mean by that is if you have someone who is actually invested in equity. There's two ways that can look. One, maybe you have a 50/50 business partner that's also working in the business with you. So you and this person have a 50/50 equity split, and you're both actually working in the business. Now you can change that split, however best serves you. So let's say there's someone who is going to be really active in the business in the day-to-day. And then there's someone else who's kind of more going to work virtually, maybe. They're still involved, but they're not having to maybe do as much. There are tons of reasons why you can change that. Maybe it's 40/60, or 30/70, or however, you want that to look. But that's one type of business partnership. 

And another one is having an investor. So you might have an active or silent investor. So let's say your investor is putting up all the money for the business. You're not having to put any money in, but you are putting in sweat equity, which is your sweat, right? You're working in it. So they're giving you the cash, but you're the actual one running the business. Those investors can be active, meaning that they have voting rights. They are going to be trying to work with you to grow the business. They're going to be much more active. Or they can be silent, where they've just given you the money, they're going to just get their return, however you structured that to look. So that's another type of business partnership. So those are going to look different and have different implications. But I wanted to kind of just put that out there from the very beginning. 

Now what I want you to ask yourself, before you get into this is do you really need a business partner? Let me give you an example. Like I mentioned my gym business that I own here in Houston, it's called The League. And me and my husband, Terry, we are 50/50 business partners in terms of equity split for The League. And we both say we could not have run this business or started this business without each other. So Terry had a background in fitness. He was training all over Houston at different studios. And I had a background in business. I was an investment banker on Wall Street before moving back to Houston. I was in New York, and I had kind of that business background. I also had a business degree. So we came together and made a fitness business. I couldn't have had a gym without him because I don't have any background with fitness training. It's funny because people think I do and I'm like, Nah. I'm trying to get in the gym and workout just like y'all, I cannot train you. I cannot give you nutrition tips. I'm in struggle mode when it comes to that sometimes. So my husband had that skill. And then I was the business side. He says all the time, I could have never jumped into Excel spreadsheets. He had wanted to have a gym and thought it would have to be years down the road because he didn't want to run a business. He didn't want to do those logistical things and planning and strategy and that sort of thing. He just wanted to train. He wanted to do programming for the workouts and that sort of thing. So when it came to The League, we both needed each other, we needed a business partner. 

If you in your business are thinking, "Man, I have the talent. I'm really great at designing these products or doing this particular type of service. But I don't know the business side of things." Maybe you want to consider having a business partner. And we can talk a little bit about alternatives, which we'll talk about at the end, sort of how that might look. 

But if you don't need a business partner, there's something to not having to give up equity. Maybe you just need to really hire a team so that you again, don't have to give up equity. And sometimes you can give small percentages of equity to a team member, maybe like 1%, 3%. You can decide on that. But maybe it looks more like someone you're hiring rather than someone that you're partnering with in the business and kind of like this 50/50 idea that makes sense. So think about whether or not you really need a business partner, and how that should look. 

Next, let's talk about choosing the right person. First and foremost, you got to choose a business partner who is someone you absolutely trust. This is so important. I would even go as far as to say someone who you trust with your personal bank account. Because whatever happens in your business is going to affect your personal bank account. So if you can't trust this person to have access to your personal bank account, and not jack things up, then I would highly consider you pausing on moving forward with that business relationship. 

You are going to really want to understand this person's values, what's important to them. Also, their goals for the business, their vision, what do they see this business becoming? Are y'all aligned there? Also their leadership styles. How do they lead? How do they interact with employees, with vendors, with clients? So it's important to really understand this person. 

I'd even go as far as to say, doing some personality tests. So there's a ton out there one that's kind of more popular, you've probably heard of it, is the enneagram. I think it's great to understand this person's enneagram, how they're wired so that you can understand how to communicate best with them. 

Another consideration in terms of choosing the right person is finding someone who is strong in an area you're weak in. One of the number one questions Terry and I get is, how in the heck did you manage to be married and stay sane, while you're in business together? And y'all it's because we stay in our own lanes. I'll give you an example. Like I said earlier, Terry focuses on the programming of the workouts, for example. I focus on all of the numbers, like all of the financial projections and things like that. He's not going to jump into Excel and say, "You know what? I really think we should consider doing it this way." I'm not going to jump into the fitness programming and say, "Oh, I think we should do sit-ups this day, or pull-ups that day." Right? That's his lane, and this is my lane. So you really want to find someone that's strong in an area that you're weak, because then there won't be as much of that bickering. We're not going to fight over programming, because I entrust that to him. And I'll give you another example about that in just a bit. 

The next thing you want to consider in terms of choosing the right person is maybe doing something like a trial run. Because if you've never worked with this person, if you just maybe have you know, met them through a friend, or through a colleague, or you really admire them because of their business expertise. So you're saying, okay, I'm going to partner with you my business, but you've never actually worked with them together. Consider testing it out with like a small project, again, to see what their work ethic is like, what their communication style is, like, how much of a team player they are, how they handle stress, all of that is super duper important. And I'll just say it's important to choose the right person because it is much harder to undo a business partnership than it is to create it, okay? So it's really easy to get into partnership with somebody, and because of legality, and equity, and all these different things, it's going to be a lot harder to get out of it if it doesn't work. It's not something that should scare you, but it's just a lot harder. So you want to make sure that you spend time and you really invest space into choosing the right person. 

Now, this might be the most important thing of all. It is going to be your operating agreement. So an operating agreement I talked about in the past, I believe it's Episode 51 with Soloto Uba. He's the Entrepreneur Lawyer. He's awesome. We talked about LLCs and trademarks. We talked about legitimizing your LLC. You don't just want a paper LLC. You want a performing LLC. So a lot of business owners will set up their business formation. An LLC is a type of business formation as his sole proprietorship, partnership, and there's others as well. But people will tend to kind of default to the LLC and say, okay, I got my LLC. I'm good. But no, you're not good. You need to actually make it performing. You need to actually operate your business like it's a business. And one of the ways to do that is having an operating agreement. So even if your business partner is yo mama, you want to have an operating agreement. I see it happen so often that people are like, "Well, it's a family member. It's someone I've known my whole life. It's fine. We're on the same page." No, you need an operating agreement. It's so important because things can look a lot different in a business relationship than in a personal relationship. 

Actually, even if you are a solopreneur, even if you decide to not go in business with someone else, you still need an operating agreement to effectuate your LLC to make it performing. Okay, so just a side note. 

In your operating agreement, there are a few things that you're going to want to touch on. And you're going to want to have an attorney draft this for you because you don't want to mess this up. It is super important. One of the things is going to be equity, how much of the business does each partner own? Like I said, when it comes to The League, for example, Terry, and I own 50% each. But depending on maybe how much money we invested initially, or like, I'll just use examples that I've worked with different clients on. Maybe it's how much money you have invested or how much you're going to be working in the business. That can affect who owns what percentage of equity. So that's something you want to lay out. 

You also want to talk about your roles. This is something you want to obviously have a conversation about, but you definitely want to even outline it in your operating agreement. How will you work together in the business? Who's going to do what? And you want to make sure that this isn't one-sided, because there will be resentment. You don't want it to be one-sided and not reflected in equity. Or one-sided and not reflected in payout. That's what we're going to talk about next. But you want to really sit down with this person and say, okay, there's sales, there's operations, there's HR, there's finance. There's all these different areas in your business. Who's going to own what, so that you can really see who's going to be doing a lot of the work. Or is it really 50/50? Again, having those conversations is important. It's also important to put it in your operating agreement. 

You're also going to put in there how and when you'll get paid. So a lot of businesses, when they start off, they'll say, okay, we're not going to pay ourselves. I think that it's important to always pay yourself something if you can. I don't want to say always. But paying yourself something is important because again, there can be resentment. Even if you are a solopreneur. Like even if you listen to this episode, and you decide not to move forward with a business partnership, and you're a solopreneur, it's so important to pay yourself something because it's easy to get resented. It's easy to get burnt out. That's a whole different conversation. I didn't even mean to go down that route. But you want to lay out how and when you get paid. If you say okay, for the first six months, we're not gonna take any money out of the business, because we've done the numbers and we realize we need money for x, y, & z, Okay, then you're gonna make that clear in your operating agreement. Of course, you could have some kind of caveat that says, that's going to be dependent on where revenues are at the time. Or you can just say, hey, when revenues get to X amount, this is how much we're going to pay ourselves. This is how it's going to be split out. And really even understanding how you're going to use funding. Let's say you get funding from investors, being in agreement as to how that money will be used, and how you're going to distribute profits is superduper important. So you want to lay that out in your operating agreement. 

Now, I want to say this too. When it comes to decision-making, you're going to disagree. It is inevitable. I don't know of a business relationship where 100% of the time, you always saw things the exact same way. So this is something that I've talked about that Terry and I do. It's something that I heard, I believe, Jasmine Star say about her and her husband's relationship in their business because she's a marriedpreneur. Her and her husband are in business together. So instead of them being 50/50, maybe they're 50/50 for equity purposes. I mean, Terry and I are, like I've explained. But when it comes to decision-making in the different areas of our business, we are not 50/50. We're 51/49. So what that means is when it comes to programming workouts for our gym business, for example. We're 51/49, meaning Terry is 51 and I am 49. He's owning that area. So if for some reason we were having a conversation, we were having to make a decision, and we were not agreeing, we have proactively from the beginning decided that Terry's decision kind of wins in that scenario. Win is probably not the best word. Because I really think with any partnership, you're on the same team. So it's really the two of you against whatever situation you're facing. I don't want to really frame it like one person is winning. The whole team is winning. The business is winning, because you're able to say, okay, we're not going to get stuck here we're not going to have this be a bottleneck. We're going to move forward with Terry's idea because he's 51% in this area. 

So I think that's especially important when you have a lot of business owners when there's more than just the two of you. I have clients who have four people in their business partnership. I have clients who are considering having seven people in their business partnership. And my advice to the group of young ladies who wanted seven business partners was to really consider whether or not everyone needs to be partners. Because again, things can get really, really tricky with more people and with decision-making. It's really hard to move things forward when you're getting seven different inputs, right? It's gonna take a long time if you haven't really nailed down who's doing what in the business. Who's 51/49, for example? Who's the person who's going to be able to say, “Okay, this is my area. And so we're going to move forward in this way.” So you really want to think about that. It's really cute and fun to think of a bunch of business partners and we're having these coffee dates and brainstorming and all of that. And that's fun. But when it comes down to really tough decisions like I know so many business owners how to make in the pandemic, for example. But it happens all the time, with equipment, and vendors, and all kinds of things. When you have a lot of people's input, it's going to make things a lot more tricky. So that’s something you want to consider. 

Something else you might consider putting in your operating agreement is something around conflicts of interest. And this is important when one of the partners in the business maybe has outside business interests, or competing business interests. You're going to really want to outline how that should look. You don't want anything to necessarily cannibalize the business's efforts. So it doesn't mean that a business partner you have has to only work on or in your business, or that might be something that's important to you depending on the nature of the business. But it's just really important to kind of outline how that looks. 

I'm trying to give an example that is not my client. Let's say that you sell juices, okay? You sell juices, and that's what your business is. And you and your friend are partnering together in this juice business, but your friend also has a business or has some kind of interest in a company that sells protein powders, okay? So it's kind of like a similar business. Maybe you can add the protein powders to the juice, right? So what happens then when vendors or when interest comes into this protein powder company that could affect whether or not they want to partner with the juice company? Does that make sense? I think y’all are following. You just want to make sure that if there's any of those kinds of conflicts of interest, that it’s really laid out how that's going to look so that you're aligned, and so that you don't have to deal with competing interests down the road. 

Another thing you want to outline is what happens if something happens to one of you. What happens to the business? What happens to that person's equity stake if they, unfortunately, pass away? I know that's super morbid, but it does happen. Or if they just want to sell their stake. I remember our lawyer when we drafted our operating agreement, Terry, and I, he was like, “Okay, so what happens if y'all get divorced?” And we were like, gasp! Like, oh, my goodness. But he was like, “No, you need to outline that in your operating agreement.” So it's important to make sure that you list out what happens with that person's equity stake if they are no longer involved in the business, okay? 

All right. So it's one thing to have it on paper, have it in your operating agreement. But what happens when you have to react to actual situations, and things get awkward? This is when communication skills are so important. Your communication skills have to be on 10. My mom used to say this, and I love it so much. My parents were very direct communicators. And she used to say, “When it hurts, say, ouch.” I love that so much. She's saying, don't let something bother you and just be silent about it. You need to communicate. It's so important. And that's especially important in a business relationship. If you start to notice things are getting tense or awkward, or you know, something's kind of rubbing you the wrong way. Maybe you're going in a wrong direction, something you just don't feel right with, it's not sitting well with your spirit, talk to your business partner. You should be able to have those kinds of open lines of communication. And sometimes I know, you know, communications, there's so many different strategies for how to manage negative communication. But one thing is to just say, “Hey, Joe, I have to talk to you about something that could be kind of uncomfortable. It could be kind of tense. Could we talk about it on Friday in our partner meeting? Or when's the best time to talk about it?” So that this person can kind of have an idea of what's coming and not be kind of just like, when you're mad in the moment saying, “Joe. What the heck were you thinking when you decided to be …”. You don't want to do that. Hey, that's a communication skill for marriage too. That's actually when I learned that. But you want to make sure that you kind of give them space to say, okay, we're going to be having this tough conversation in a few days, and to be able to really prepare for it. Again, this is your business together. You both should want the best for the business. And so communication is so important. 

Another thing I kind of mentioned was having regular partner meetings. So depending on the nature of the relationship, the partnership, if you're 50/50, and you're both working in the business, you'll likely need at least weekly partner meetings where you sit down and you hash through all of the business things. This can really help to not make it all day every day. So that you can have boundaries around work time. Hey, we're going to start working at this time and stop working at that time. Maybe one of you has a family and you want to protect your evenings. Instead of there being texting back and forth, it can be like, let's just reserve that for our partner meetings on Wednesday, or whenever it is. Okay?

Now, if you're not 50/50 business partners, both working in the business, maybe you don't need to meet every week. Maybe it's monthly. Maybe it's even quarterly if you have a silent investor. But really thinking about opportunities to communicate is really important.  

Lastly, let's talk about some alternatives to having a business partner. Like I said, maybe you don't need a business partner, maybe you just need to hire. So the first thing is having an employee. Maybe you need to hire for a specific role, as opposed to having someone be a full-fledged business partner. You could still give equity. I know that I worked for a startup when I first moved back to Houston, and I didn't get equity in the business immediately. But the idea was three years in or so I could get 1% of equity. So you can have that in your employee agreement if you really want to motivate and encourage your employees and really make them feel a part of your business in the long run. But they don't have to be business partners. 

Another thing to consider is having a consultant. Maybe there's one area of your business that you really need check-ins on that you don't feel like you can really own. You can hire a consultant to come in and check in with you. They don't need to be an employee on the payroll, but they can be a consultant that you check in with. 

And then finally, your board of advisors. Now, this is different than a board of directors. And I'm going to actually do a whole episode on this very soon. Your board of advisors is like a sounding board. These are people who are invested in your success in growth. And again, they don't have to be partners. They don't have to be business partners, but they're on your board. 

These are just some of the considerations to think about when it comes to whether or not you should have a business partner. If you have any more questions you can always feel free to shoot me an email. It's hello@birdwilliams.com. Or just hit me up on Instagram @heybirdwilliams. 

This has been so fun. Now as you're thinking through all of this, make sure you remember to register for the Prepare to Launch Challenge. One of the days of the challenge we're going to be talking about building your dream team. And if you're in the challenge, you're going to get a task in your inbox that's going to bring you just that much closer to making it happen. So you can go to birdwilliams.com/challenge to sign up. 

Alright, as always, thank you so much for tuning into Bird Means Business podcast. I don't take it lightly that you take time out of your day to tune in. And it brings me so much joy to be able to journey with you in your business building process. Thank you for subscribing on Apple Podcasts and following us on Spotify. Make sure you tell every other entrepreneur you know about Bird Means Business and about this episode so that they can think through these considerations as they're thinking about partnering with someone in their business as well.

Talk to y’all next week.