Happy Friday!
I type this email from 35,000 feet above South Texas. I’m flying to new Orleans to look at an RV park today. After buying, managing and then selling about 25 MH/RV parks a few years ago, I got back in the game last summer. In 2024 I’m committed to going even harder, by buying bigger parks and raising bigger capital. Let’s go!
It’s been a great week of getting back on track after the bootcamp. I’m feeling insanely optimistic about everything I’m working on right now, which means something bad is about to happen. Oh well, we carry on. Or as the youth of today would say, “we ball.”
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I started this newsletter by outlining a cool business idea, but I felt inspired to scrap it in favor of something else.
I want to talk about finding and being a good business partner. I think I’ll entitle this “The 5 Commandments of Healthy Business Partnerships.”
I wanted to go with 10 commandments, but this was turning into a 4,000 word email, so we’ll save the 2nd half for another day.
One day I’ll write a book about business partnerships. Not because I make a great business partner or am an expert at them, but because I’ve learned so much from my failures with them.
By my count I’ve had exactly 20 business partners. I don’t count a partner as someone I merely gave equity to, but rather someone that was a clear equity partner in the company from the founding stage onwards.
I started this list at 11, then 17 and then got to 20 people, because I’ve had so many partners that I forget many of them.
Sorry, guys!
(Written by an admitted and recovering hypocrite)
1. If your partnership is going great, but you aren’t regularly talking about hard things, it isn’t going great at all, actually.
As a 19 year old LDS missionary, I was instructed to have weekly “companionship inventory” with my companion. This is another way of saying, “Talk to your companion every Thursday morning about what’s pissing you off about them.”
Or, as the LDS missionary handbook says:
These were hard, awkward conversations, but so helpful. More often than not they went like this,
“You good?”
“Yeah bro, I’m good.”
And then you get back to knocking doors.
But sometimes they could get heated, like this.
“Dude, wash your socks. Seriously, they are disgusting. This whole apartment stinks. Also, stop sleeping in. We have work to do. I thought we were going to work harder than this?”
These conversations are so needful. It erases and/or resets the animosity and helps prevent things from getting worse. More importantly, it helps companions to have unity so they can focus on what they came to do.
Imagine if every business partner and married couple did these weekly?
2. If you talk crap about your partner to others, failure is an inevitability.
Basically all of this advice can apply to your marriage as well. I annoy my wife sometimes, and very rarely she annoys me. But we never ever ever speak ill about one another to others. Never. Ever. Without exception.
But I’m TERRIBLE at doing this with others. If literally anyone else in my life angers me, I’m likely telling that story to someone else. It’s wrong of me and unhealthy. I’m much better about it with my business partners, because I don’t want a failed partnership.
When you talk crap about your spouse or business partner, confirmation bias and self-fulfilling prophesies start to creep in. In other words, you are dooming that partnership for failure.
Let’s say I hate how Nik interviews potential hires (I don’t). So I hop on the phone with a friend and complain on and on and on about how bad Nik is at hiring.
Now I’m going to have animosity around that subject every time we approach it. Now I am going to be looking for and highlighting the negatives and ignoring the positives. It will appear worse and worse to me than it actually is, and I’ll treat him accordingly.
Whereas if I simply spoke to him about it, tactfully, the problem would resolve itself.
This, and the following advice goes with anyone in your life:
If you have a negative thought about someone, either suffocate it or talk to them about it directly. Doing anything else with the thought will do no good whatsoever.
And, conversely, if you have a positive thought about someone else, text it to them immediately. Why shouldn’t they know?
3. Don’t partner with someone because you’re friends, partner with someone because they are great at what you lack. If you happen to also be friends, even better.
I’m having flashbacks to 2010. I was sitting around the fire with my friend Andrew, and we used to always chat about business ideas.
“Andrew, I just read an article about these LSU students that opened an iPhone repair store. They are CRUSHING IT! What if we did that?”
Andrew: “Bro YES!! That sounds awesome! It’s a no brainer!? LET’S GOOO!!”
2 months later we were 50/50 partners on Phone Restore. BUT…
I alone personally guaranteed the 5 year lease
I put in 100% of the money
I also raised capital from a trusted friend
I worked full time on the biz while he kept a full time job
STUPID STUPID STUPID. Thankfully that partnership didn’t end in disaster.
We worked through it for a year and then he moved out of state and took a full time job and essentially gave me his shares. I sent him a monthly check as a way of saying thanks for his early contributions, and then a bigger one when we sold.
That one worked out, but not after some very hard conversations and the involvement of a couple wise spouses…
In fact, here’s a snippet of an email from his wife, from a whole 12 years ago.
Awkward, right? It’s cool, we’re cool now. 12 years heals all wounds, right? Heh.
This stuff may seem obvious, but it’s not. Chemistry and excitement over a shared idea DOES NOT a good partnership make. You need to check all the boxes:
A STRONG mutual trust
Long history with the person
The equity split should match the value provided and/or the money/time invested
Both spouses are 100% on board and supportive
The partner’s strengths compensate for your weaknesses
4. Don’t assume that just because you have perfect trust in someone that things won’t go wrong.
Nik and I just went through a few difficult conversations. He subscribes to this newsletter, and doesn’t know I’m writing about this today. But I’m only writing about things I know he’d be okay with me sharing. Hi, Nik!
At one point in a recent conversation we were at a dead standstill and he said,
“I am 100% positive that if we brought this argument to a group of unbiased people, they’d agree with me.”
And I said, while chuckling aggressively, “And I’m 100% sure that that same group of people would agree with ME!”
He meant and believed it wholeheartedly, and I did, too. I had actually been having that same thought for a while!
What does one do with that situation?
Neither one of us were lying, deceitful or disingenuous. We simply saw the situation completely differently. At the beginning of a partnership people always say, “Oh I have ZERO concerns about partnering with him because I trust him with my life and I know his character.”
Ok, great, but do you have the same brain? Of course not. It’s impossible to know of all the ways you may disagree in the future.
What do you do when there’s a standstill? Those standstills are what ruin friendships more often than not.
I’d dare say that you are more likely to ruin a friendship when partnering than otherwise.
5. Don’t define the relationship too early or too late.
Like my example above with Andrew, it was so stupid for that to be 50/50. In retrospect, it should have been 80/20 in my favor, and he later agreed. This is really, really hard to determine on day 1, so here’s what you do.
Draft up a Google Doc together and email it to each other. It should look something like this:
Here’s how this business looks today, but it will likely change over time.
Widget & Co Partnership Agreement
John:
Owns 50%
In charge of all marketing and sales. If it has to do with growing the company, it is John’s purview. Maybe he does it himself or maybe he hires out for it. But if he does have to hire, we both have to agree on it and it should be in the budget.
John will work full time on this and this alone.
John will invest $20K by February 1st into the shared business bank account.
Peter:
Owns 50%.
In charge of all things operations. If it has to do with how the company runs, it is Peter’s responsibility.
Peter will work full time on this and this alone.
Peter will invest $20k by February 1st into the shared business bank account.
John and Peter both agree that if any of the above 4 points change materially then the equity split will change. If John has to put in more money after February 1st and Peter is unable to match it, the equity will change to an amount they both agree upon.
John and Peter will use Matthew Smith as an unbiased mediator, should material disagreements arise.
If either one of them wants to start another business, the other one gets first right of refusal on equity, or else the equity split between them needs to change to reflect the decreased time commitment.
If both are working full time in the business, both receive pro rata distributions.
It’s not a legal document, but it’s at least in writing, and you can always refer back to it. The 30 minutes you spend writing this will be the most valuable 30 minutes of your year.
Here’s the thing: Whatever you start will almost always look very different within a few short months.
Date the business idea and marry the partner. You have to know going into it that you will pivot a few times and that one of you will learn that your roles are maybe less fun or more hard than initially expected.
So, should you partner with someone? Probably. As they say…
“Alone you can go fast, together you can go far.”
I am a fan and an advocate for partnerships, but you should not take them lightly. Few take marriage lightly, but most take partnerships lightly. Why is that? They are of near equal gravity.
Some of my life’s greatest trials stemmed from business partnerships, but my most fond memories came from them as well.
I distinctly remember sitting in a cheap Chinese hotel room with a close friend, as I learned from a lawyer that my two business partners were stealing half of my equity. He was there to support me in that moment.
Years later, that same friend and I had a partnership failure of our own that is still unresolved.
Such is life. But we spoke last month for the first time in 7 years, and it was good.
Everything will always work out, given enough time. Period. Always. End of story.
What Am I Working on Lately?
Mining Syndicate - We had a water pipe explode during the freeze this week, and fixing it is proving to be very difficult.
Texas Snax - On autopilot right now. Sales are way way down from December but up 44% from last January. Spending basically no time here lately.
Fast Tree Care - Going pretty hard on this. Ramping up our Google presence and optimizing our SMS campaigns. It’s going super super well. We’ll start selling a digital version of our bootcamp once editing is done.
RV park stuff - The park in Waco is doing fine. We had an electrical box go out and we have two vacancies, but that should be resolved soon. As mentioned above, I should be closing on a bigger park on Feb 29th if we can raise the cash in time.
Twitter has been a lot of run recently. I’ve got a 19 day streak going of days with a 100k+ view tweet. It’s a dumb goal, but it keeps me motivated to keep writing.
As always, thanks for reading!
Chris Koerner
chrisjkoerner.com