Working Together

By Bob Nieman, CLA Member posted 07-27-2018 16:35

Is a Business Partnership Right for You?

WorkingTogether.jpgAtypical. Nontraditional. A little weird.

Lisa and Daryl Johnson will agree that their business partnership – and subsequent laundry industry success – is probably all of those and more.

It began as a fairly normal husband/wife partnership with three smaller laundromats in rural Iowa. However, when the Johnsons purchased three more, larger stores in the Minneapolis/St. Paul area, their business model changed.

“We were buying three large laundromats with huge revenue,” Daryl said. “We needed someone who could run the books. I was looking for a CFO, and I looked for the best person I knew – it was my father.

“Also, I was taking on 17 new employees, and my mom had run a small-town Iowa restaurant and dealt with employees for 21 years. So, I asked her to handle that part of the operation. And that’s how my parents ended up in the business.

“I know it’s fairly nontraditional. Typically, the parents are in the business first, and the kids take over. It’s a little backward that way, but I now am in a business partnership not only with my wife, but also with my mom and dad.”

Although we’ve all heard the horror stories about the “business partner from hell,” the fact remains the more than 20 percent of all businesses in the U.S. are either partnerships or S corporations, according to the Census Bureau. Furthermore, a large number of potential investors likely have no realistic chance of getting into the vended laundry business without the help of a partner.

Spend any time as a small-business owner or would-be entrepreneur, and at some point you’re bound to consider forming a partnership. At first glance, the synergistic effect of joining forces with a like-minded individual seems like an inspired idea, but partnerships aren’t for everyone.

Before you commit to a business relationship with another entrepreneur, there are real advantages and disadvantages to consider. Think carefully prior to tying the knot.

“There are several key benefits to creating business partnerships,” said Shawn Prez, president and CEO of a grassroots and alternative marketing agency that serves small businesses. “Partnerships give you additional support, and they provide a great way to expand your company’s services and offerings without hiring additional staff and incurring greater overhead.”

The right partner can augment your skills and experience, and there is strength in numbers. Putting two heads and four hands together to compete for more walk-in business or to launch a new pickup-and-delivery service may increase your chances of success.

But, while in theory partnerships seem like a good idea, the reality is that many fail, noted Bennett Johnson, a small-business strategist and entrepreneur coach.

“With the exception of legal, medical, and sometimes financial companies, the vast majority of business partnerships fail in a bad way,” Johnson said. “People enter partnerships without much thought, but with a tremendous amount of emotion. The greatest consequences of failed partnerships are the destruction of dreams.”

Poor Reasons to Form a Partnership

According to Johnson, most business partnerships fail because people enter them for the wrong reasons. “I teach my clients who are considering partnerships to explore why they want to form an alliance with someone else,” he explained. If the reason is one or more of the following, he suggests they reconsider:

Afraid to go it alone. Lack of confidence and fear of going out on your own are not reasons to form a partnership. “Being a small-business owner can be a lonely, scary experience, but that doesn’t mean you should team up with someone else,” Johnson warned.

Lack of financing. If you don’t have sufficient capital to run your business, it can be disastrous to align yourself with another businessperson because of this. Doing so is likely to cause resentment and power struggles.

Skill set. Just because you’re “bad at sales” or “bad at bookkeeping” isn’t a good enough reason to join forces with someone who is better. These are skills you can hire, and jobs you can outsource, without all of the strings attached.

Connections. Piggybacking on someone else’s connections is a dangerous way to go. “You should be developing your own alliances,” Johnson stated.

Partnership Advantages May Tip the Scale

With that said, business consultant Nina Nixon feels strongly that, if you enter into a business partnership for the proper reasons, the many advantages of such an arrangement will outweigh most (if not all) of the disadvantages and can strengthen a business’ overall health and bottom line. Those advantages can include:

Differing strengths and experience. Partners automatically supplement each other’s skills with their own unique backgrounds and expertise. When considering pros and cons of partnership, this advantage can be extremely important, as your business will likely benefit from having multiple people with knowledge in different areas.

Diverse opinions. How many decisions could be made that much better with a partner’s input? How many mistakes could be avoided by considering other opinions and input upfront? That’s not to say that everything will be smooth with a partner. But hammering out decisions together, working through the process of finding the best solutions and the back-and-forth required to find common ground can often lead to much stronger positions than might not have been achieved otherwise. The strongest partnerships are based on honesty and feedback.

Strength in numbers. For some, facing setbacks is less formidable with a partner (or partners) than alone. Likewise, combining resources – financial and otherwise – can open up business opportunities and horizons that aren’t otherwise possible.

Partnerships attract partners. Nixon explained that, during critical times in the arc of a business’ development or growth cycle, bringing in a partner with new expertise can provide a competitive edge and increase the odds of success. An existing partnership makes it easy to keep the door open to future partners.

Are You the Business Partner Type?

Do you prefer to do things solo? Be aware that the longer you’ve worked for yourself, making decisions without consulting anyone else, the more difficult you're likely to find sharing the decision-making.

There’s also a chance that one business partner may not work as hard as the other, but will want the same rewards as the more valuable partner. If you have a low tolerance level for this type of inequity, partnership may not be for you.

Finding the Perfect Partner

A business match is much like a marriage, and just as one would normally take great care, time and consideration in the selection of a spouse, so it should be in the selection of a business partner. During your “dating” period, here are some questions to ask yourself to find out if you’re compatible:

• Do we have the same motivation, values, and work habits?
• Do we have a similar vision, ideas, and objectives about how to run the business?
• Is each of our strong points and skills complementary to one another?
• Are we both able to communicate well with one another in a pleasant, respectful, and comfortable manner?
• In your gut, do you trust this individual?

You also will need to do some research about your prospective partner. Check out the individual's background thoroughly by, for example, talking to former employers or business partners.

Bill Norteman and Jim Cowen who co-own a couple of laundries in the Chicago suburbs knew each other for several years before going into business together.

“We had similar professional backgrounds,” Norteman explained. “Therefore, we had similar thought processes about how things should be done. Our partnership was formed before we built our first laundry. As airline pilots, we faced a bleak professional future in the aftermath of September 11, 2001, so we decided to hedge our bets by forming a partnership and exploring investment opportunities. This led us to building and operating laundromats.

“We both are college-educated airline pilots, so we are accustomed to problem-solving, understanding and resolving basic mechanical and electrical issues, and dealing with people within a regulated environment – so we have similar skill sets,” he added. “But, individually, we have different levels of interest in exploiting them. Jim would rather deal with people, and I’d rather fix a broken dryer or computer.

“However, for us, it was important to make sure that we both had the same vision from the very beginning. If you each have different long-term objectives, eventually you’ll have conflict.”

As tempting as it is to go into business with a friend or relative, be aware that there’s a big difference between getting along with someone on a social basis – and getting along with that same individual amidst the daily stress and strain of running a business. Many a friendship has been lost forever to a business partnership gone bad.

“I would not go into a partnership with just anybody,” said Danny Delmarco, who is in partnership with Lloyd Webb in two vended laundries – Seneca Express Coin Laundry in Seneca, S.C., and Toccoa Express Laundry in Toccoa, Ga. “Make sure that you work well together before getting involved in a partnership. Family and/or friends may not make the best partners.

“A good business partner should be hardworking, honest, have a good business mind, and have similar goals for the business. If you both have different ideas on how to run the business, that will be a problem.”

Stephen and Fred Bean are brothers, as well as partners in Woodward Coin Laundry in Detroit.

“We each have different skills, different personalities, and different educational backgrounds – psychology and law,” Stephen said. “These differences are a distinct plus, because we each look at the business from different perspectives. We figure that, if we both think exactly the same way, then one of us isn’t necessary.

“Of course, good business partners will have common goals for the business, be willing to step up if the other partner is ill or out of town, and will have a solid understanding of the coin laundry business.”

Daryl Johnson identified the perfect partner this way: “I don’t want to be the smartest one at the table. I want someone superior in ability to my own. I’m looking for someone who is strong where I’m weak.

“In that sense, I’ve got to know myself,” he added. “I’ve got to honestly admit my faults and my shortcomings. It does me no good to partner with somebody who is just like me – that is going to be an epic failure.”

Since a partnership is typically much easier to get into than to get out, you’ll want to achieve absolute clarity from the beginning. Avoid any potential problems by making sure duties and responsibilities of each partner are detailed in a legal agreement. This agreement should include and set forth: division of labor; how much capital each will contribute; who owns what; how decisions will be made, profits will be shared, and disputes will be resolved; a buy-sell agreement; and who will be entitled to what if the partnership doesn’t work out.

Keys to a Winning Partnership

Once you’ve decided that a partnership is right for your situation and you’ve found an ideal business partner, there are certainly some best practices to keep in mind with regard to the day-to-day running of your laundry operation.

One of the keys is “complete and brutal honesty within the partnership,” according to Daryl Johnson.

“As the CEO, I have to be able to call out partners when things aren’t getting done, even if it’s my parents or spouse, which is a really weird, tough thing to do,” he said. “And they have to be able to come at me in the same way. We have to talk to each other honestly, and I have to be able to handle the frustration and criticism.”

“We’ve found the keys to success to be trust, honesty, and commitment to achieving our goals,” explained Matt Clark, who partners with Brian Harrington in Happy Life Laundromat in Cherry Valley, Ill. “Brian is mostly in charge of construction, repairs, and finance. I’m mostly in charge of sales, marketing, and operations. We both enjoy the creative design phase and coming up with unique and high-end concepts for the end user.

“It’s absolutely true that the best partners enhance each other,” he continued. “Where I fall off is where Brian picks up, and vice versa. For example, Brian isn’t strong with grammar and spelling, but I excel in that area, due to past responsibilities and my own personal quirks. However, I’m not experienced in running my own business with regard to payroll, bills, and tax issues. Brian has been running his own companies since the late ’90s. So, there are many other ways we lift each other up.”

Delmarco and Webb also rely heavily on playing off of each other’s strengths.

“You need to work together and find out each other’s strong points,” Delmarco said. “For example, one partner might be better at fixing washing machines, while the other is better at accounting and marketing the business.

“We have a plan in place, listing all of the things that need to be completed each week,” he continued. “We communicate with each other on a daily basis. We’ve worked out who collects the quarters, counts the money, fills the vending machines, checks the machines, changes the air filters, and cleans the store.

“Our skill sets definitely complement each other. I have a degree in finance, and my partner owns a HVAC company. I’m not as good at repairing the machines as he is, so we help each other out by teaching each other our strengths. This way, I can learn how to repair a machine, and he can learn the accounting and marketing side of the business. This also is helpful when we want to take vacations or if someone gets sick.”

The Bean brothers divvy up the workload based on individual strengths and weaknesses as well.

“My brother, Fred, operates the laundry on a daily basis and actually does most of the work,” Stephen explained. “I’m essentially responsible for the marketing, which takes the form of television commercials that I write and perform in.”

Common Partnership Pitfalls

Like any relationship, partnerships have their share of challenges. Some of the common problems include a varying work ethic and differing expectations.

“The goal of creating partnerships is to increase business opportunities, but if your partner is not as passionate about growing the business and succeeding as you, it may be a recipe for failure,” Prez explained. “People also work differently, and that can cause problems. For instance, some people are more productive working in the evening hours, while others believe that ‘the early bird gets the worm.’”

Failure to discuss expectations and production benchmarks also can lead to trouble, Prez warned: “One person is likely to feel as if he or she is bringing more to the table than the other, and that causes a very uncomfortable relationship that usually ends in separation.”

Another big mistake to avoid, according to Clark, is holding a grudge.

“You have to be able to accept that you and your partner have human flaws and will make mistakes,” he said. “You must be able to forgive and forget. Life’s too short!”

For Norteman, a major miscue would be to fail to document the critical aspects of the partnership.

“A huge mistake would be not writing down – in the form of an operating agreement – at a minimum the broad expectations of the partners’ contributions, both financial and operational.”

Stephen Bean warned strongly against letting job responsibilities overlap. “Also, be certain that your financial relationship is totally acceptable to both partners,” he said. “Any error in these premises will most certainly appear in the conclusion.”

Of course, from time to time, partners are going to have varying viewpoints on how the business should be run. How they handle these disagreements can go a long way toward either solidifying the partnership – or ripping it apart.

Bean joked that he’s “in charge of starting most of the arguments between my brother and me, inasmuch as I’m the older sibling and enjoy telling him what to do.”

However, disagreements between partners can turn serious quickly, and that’s no laughing matter.

“After a brief ‘discussion,’ we settle down to the facts and usually come up with a good solution,” Bean said. “Understand that we are related and that a disagreement doesn’t carry the same meaning that it does with unrelated partners.”

“When we disagree, Brian and I just talk it out, however difficult, and take short breaks to cool off if necessary,” Clark explained. “You have to lay it all out on the table and find common ground, not unlike a marriage.”

“We discuss varying opinions and are careful to listen to each other’s concerns and viewpoints, and attempt to weigh the pros and cons,” Norteman said. “It’s so important to approach problem-solving without a preconceived agenda, attitude, or outcome. Of course, that’s much easier said than done.

“Business partnerships aren’t that different from a marriage. You’ll have issues that require solutions, you’ll have difference of opinion on how best to handle those issues, and you are financially tied together. Perhaps the best advice is to leave emotion out of problem resolution.”

With regard to business disagreements, the Johnsons have a strict walk-away policy. If a discussion gets heated and they’re not coming to a resolution, they table it and walk away for at least 24 to 48 hours.

“Even in our marriage, we’re just going to sleep on it for 24 hours and try to gain a little bit of perspective,” explained Lisa Johnson. “In that time, we can look at the other person’s point of view and see the merit in their argument.”

However, if all four partners are not in agreement, the answer is no.

“We have to be 100 percent in agreement, or we don’t do it,” Daryl noted. “If any of the partners don’t agree on something, it’s important that they stand on their principles and say no.

“All in all, you need to boil your partnership down to the core principles that are absolutely essential. And never, ever deviate from them. For us, it’s family first. Our guiding principle is that, if someone wants to leave the partnership, the entire business will be sold to a ‘third party.’ There will be no one member who takes over. We’ve taken away all ability for one part of the partnership to be able to create leverage against the other by taking over the business in any way.”

Taking the Next Step…

Are you ready to move forward with your own laundry business partnership? Here are some parting tips to make your path a bit smoother:

• When considering a potential partner, put in the time and effort to get to know everything about him or her, both personally and professionally. For instance, what habits or traits does this person have that would be a benefit to the business? What habits or traits could possibly get in the way? Does the person’s personal life support business ownership? Would he or she be able to carry a fair share of the weight?

• Don’t go forward without having an attorney and accountant prepare a written partnership agreement. Sometimes going through this process and ironing out the details is enough to make you see how well you’d work with that potential partner. After all, if you can’t agree on what goes into the agreement, you’re probably not suited for each other.

• Make sure a detailed exit plan for partners and the business is included in the agreement. While you may have every intention of making your partnership work, sometimes dissolving it is the best for everyone involved. A detailed exit plan enables you to do that more easily because you both know exactly what will happen upfront.

“Above all, choose a partner based on their virtues, not the size of their bank account,” Clark suggested. “It should be someone who you would unconditionally trust to watch over your family. In the end, you will appreciate your successes and hard work even more. A wealthier partner will always have a leg up on the other one, and that can easily lead to greed, dishonesty, and bitterness between the parties. Always speak highly of and give compliments to your partner, even when they aren’t in the room with you. It strengthens the bond. After all, you are a team.”
1 comment



08-03-2018 11:53

The only ship that can't sail is a "Partnership."  The only partner you need is the one you're married to otherwise it can be a disaster.  One will get a divorce, get sick, move, kids will go off the rails, etc and there you'll be- sinking.