Business Ready For Sale

How To Have A Successful Partnership

• John Denton • Season 1 • Episode 23

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Partnerships are like aircraft. The only ones you hear about are the ones that crash. I keep telling business owners this because when I say to them that getting into a partnership or combining their business with someone else may be a way to grow their business or exit their business, they tell me “I'm not getting into a partnership, they don't work.”

Partnerships can work if you go about things the right way. I know that because I was in a very successful partnership some years ago and this podcast is an interview with the partner I had at the time. We discuss why our partnership worked and how you can make a partnership work for you.

A partnership can be a great way of growing a business and selling it. It can also be a good way to transition out of a business and sell it over time to the partner. 

You need to do some work upfront and get to know each other and choose the right partner. Then there are some fundamental things that we recommend you do to help the partnership be successful so listen to my former business partner and very good friend Peter Bangle from Investors In People as we discuss how to have a successful partnership.

Thanks for listening, keep podcasting and subscribe to get new episodes!

Speaker 1:

Well , welcome everyone to another episode in the Business Ready for Sale podcast series today. It's my great pleasure to have a very good friend and former business partner with me, Mr. Peter Bangal , from Investors and People. Good day , Peter.

Speaker 2:

Good day . John, how are you today?

Speaker 1:

I'm excellent. Excellent. Every day above ground is a good day. How's the life down the southwest of wa?

Speaker 2:

Well , uh, as you know, John, we're living the dream down here. Uh, it's a beautiful day today . Um, got up this morning, went down to the ocean with a dog, and , uh, had a run on a swim. Uh , started a day off of a bit of bit of health and fitness and , uh, yeah, couple of , uh, interviews , um, with , uh, people I'm working with in Hong Kong and us and , uh, now ready for you . So ,

Speaker 1:

<laugh> . Okay. It's great. The , the reason , um, I wanted to do this podcast on partnerships is because I get to talk to a lot of business owners these days and clients who are working towards selling their business or getting out of their business or just growing their business. And whenever I mention getting into a partnership to them as a way of achieving their goals, they freak out basically and say, no , no partnerships don't work. And just a little bit of background about how Peter and I got to be in a partnership. So I had a training and development business called Leadership Management in Australia that was part of a franchise. Peter came in from the UK and bought one of the other franchise seeds businesses, which was a very similar size to mine. I'd been in business about seven years at that time, coming up for seven years. And Peter came to me and he said, like , I've got two goals, and you can correct me if I get this wrong, Peter <laugh>, but you , you came and said, I've got two goals. I want to get my permanent residency so I can stay here and I want to exit the business in three years and sell and get out. Why don't we put our two businesses together? And because I'd been in the business for between six and seven years at that point. And I loved the business, I loved the clients, I loved what we did. We got some fantastic results, but I was looking for a change. And so Peter and I , uh, checked each other out. Um , I don't mean police clearances and all that sort of stuff. We checked each other out as personalities and whether we could work together and agreed we got the franchise or to agree to put the two franchises together and we got into a partnership. Um, anything you wanna add to that, Peter?

Speaker 2:

Well, you know, it was a very successful partnership, John , and we actually achieved our goal , um, in about two years and eight months, which was , uh, which was fantastic. And I think when I, when I look back , um, you know, I, I realized when I started that franchise that , uh, I didn't have all the skills I really needed to make it very successful. Um, and when I met with you and I watched the way you operate, you know , I haven't met you at conferences , uh, that the franchise offered and then met you in Perth and we talked a few strings . I thought, well, this gentleman knows how to run the franchise. He's, he's, he's , uh, he's the , the bee's knees at running the franchise and all the things that go along with it, which I'm not. And if he could do that and I could go out and develop our business, which is one of my strengths, I just figured we could make a bigger business than the two we had. And also we could, you know, probably make the business ready for sale. And , and , uh, that's what we did.

Speaker 1:

Yeah, we , we came up with the mantra Exit with equity in three years. Mm-Hmm . So, and , and that's the thing. If we look at why some partnerships work, we had a common goal, and that was to exit with equity in three years.

Speaker 2:

We did. And , and the great thing wa was John , I , I , I think we exceeded our expectations that if you look at the value of our business, when , when we started to, when we sold, I reckon, you know, we probably increased the value by about 10 times , uh, just by working together.

Speaker 1:

Yeah, absolutely. It was , um, and we <laugh> , even though we were different personalities and different skill sets , we had one of the things, and it came out in one of the franchisors training sessions, if you remember, we had very similar values. We did . And that's critical, I think, in a partnership.

Speaker 2:

Yeah. Very , very, very much so because, you know, the , any, any partnership is inevitably a relationship, and relationships are built on trust and mutual respect. And the under thing that underpins trust and mutual respect is, is having good values. So yeah. I I couldn't agree more.

Speaker 1:

Yeah, I remember that exercise that we did where the , I mean, I can't remember how many people were in the room, probably 60 or 70 or so, and we all did the values exercise, and then the guy running the session said, now find , go around the room and find somebody, or find other people that have got very similar values to you. And, and you and I, I ended up finding each other, which I thought was uncanny . Really ?

Speaker 2:

Yes. It was almost as if it was men . And , uh, and the , and the more we talked, not only did we realize we had the same values, but we realized we had , um, diverse , uh, skills , uh, uh, that would , uh, be , would be complimentary in a partnership.

Speaker 1:

Absolutely. It was , um, appreciating the differences, I think, and a , a business needs those different skills. When people get into partnership with people who are the same as them, that's when it can become a problem, I think. What do you say ?

Speaker 2:

Yeah, indeed , indeed . You know, I mean, when you're starting any , any , any business venture , you're making any big decisions in business or life, you really need to have a purpose and an outcome and a process. Um, and so, you know, if you , if you sit out with , uh, with , with checking out the purpose and , and , and the , uh, the outcome, you know , uh, uh, for , for us, there was an opportunity where we could get synergy through our diverse skills. Uh, you know, and we could make two plus two equal five, or in this case actually 10. Um, and, and we could , uh, work harmonious together because we would've distinct roles and responsibilities. I think that came to us very early in the, in our relationship, John .

Speaker 1:

Yeah. Yeah. Talk a bit more about roles and responsibilities. How do you, when you get into partnership with somebody, how do you work out who's doing what?

Speaker 2:

Well, it's , it's rather like, you know, if you were interviewing someone for a , for a job, you know, you , you , you look, you know, the, the , uh, capability is made up of , of knowledge and , and skill and attitude. And so you, you search into a person's background, like you would look reading a CV and see what they've done, how they've operated, what successes they've had, what, what failures they may have had , uh, and, and , and get to understand what , what made them strong and what , what made them win. And once you start to understand people's strengths, you can compare those strengths of yours. Uh , and then you can look at each other's weaknesses and , and you can recognize that if, if your strengths equal, my weaknesses and my weaknesses are are built on, on , on the strengths of , of , of you, then , um, you know, we've got a very good , uh, partnership to it together.

Speaker 1:

Yeah. I know as part of your business now, you help businesses recruit people, and , um, you know, tell us a little bit about the process you go through there.

Speaker 2:

Yeah, so look, you know , um, our business today, we we're a management consultancy. Um, uh, about half of our work is in leadership coaching. We work with major oil companies and miners , and also some small companies. And we do recruitment for a , a small to medium enterprises. And, and , uh, our recruitment process is always very, very robust. Um, there , there would always be , uh, you know , beginning with a , with a cv as most things do, and, and early meetings and questions , um, and, and, and building a relationship so that you can get to know a person, you know, quite , quite often. Um, there's the two major aspects of, of, of how recruitment works is, is someone eligible? Do they have the skills and experience and are they suitable? Uh, you know, will they fit in with the business and the people? So you are always looking at eligibility and suitability when you're recruiting people. And same for a partnership. Eligibility in experience, complimentary skills, and suitability. How do we get on together? Do we , can we, do we have similar values? Can we build trust and respect? You know, can we work , can we identify each other's strengths and, and allocate roles and responsibilities that are suitable to each other? Those are the questions you ask , uh, in a partnership, but they're the same questions that you ask when I'm recruiting is, is a person gonna fit in that company? Do I know the team well enough? Will they work with for the boss? Will the boss's method of leadership apply to that person and get the best out of them ? What are those things that , you know, are both on the suitability side and the eligibility side?

Speaker 1:

Yeah, it's , um, that suitability, I've never, that's a really nice way of putting it. Eligibility and suitability. It's getting people to, that will fit your culture. But I guess when you get into a partnership, same thing I'll talk about, I'll ask you about , um, starting the process of getting into a partnership in a sec, but I just wanna , while we're recently talked about appreciating differences and different personalities , uh, I wanna tell the story about the day that you came into the office around 10 o'clock time with a egg and bacon sonny in your hand, and then , and well , two and two cups of coffee. Do you remember? I do. And you and I was sitting on the computer 'cause that's what I loved doing. And , um, and you sat down and you said, I brought her some, some breakfast, egg and bacon soni a cup of coffee. And I thought, Hmm , okay, I wonder what's coming here. And then , uh, as we're eating away and drinking away, he said, there's something I want to talk to you about. And I thought, oh , I , here we go. We're gonna get to the bottom line now. And , uh, and then you said, now I don't want an answer and I don't want you to comment. We'll talk about it again tomorrow, but I'm gonna tell you what I've done. All right . And I'm thinking, yeah. Okay. And , um, just for the listeners information being part of a franchise, we had a suite of programs that we sold and you said, I've just sold a customer service training program to x, y , Z company. And it was quite a reasonably large Perth based company. And I freaked out 'cause we didn't have a customer service program that we sold. And , um, and I started to freak out and you said, look, I told you I don't want any response, any answer now, we'll sit down and we'll talk about it tomorrow. And , um, 'cause you knew, again, it's understanding and appreciating those differences. And I think that story makes the point that you knew what my response would be. And so you prepared me for it. You softened me up with a egg and bacon sounding and a cup of coffee. Um, but said, because you knew that I'm a Muller , I like to mold things over engineer my training. I need data and facts. So when you presented me with, I've just sold customer service training to x, y , Z company, you knew that given 24 hours, I'd probably think it through and think, oh, okay, well I could come up with a solution for that and we'd work it out. Right. And we did

Speaker 2:

That . That's , that's exactly what I , what what I thought, John . And , um, yeah. You know, when , when you, you know, when you start to understand , uh, how people work through, through, through observation and experience, you know, you get, you get to know what's gonna work and what's not gonna work. And I , I , I knew that if I, if I landed something on you and tried to push you into something, it wouldn't work at all. Um, I , I knew you would need time to think about it. And that was, that was the plan. So it's a , it worked pretty well actually. <laugh>.

Speaker 1:

Yeah , it sure did. And there were other occasions as well. I I won't mention the video of the geese.

Speaker 3:

<laugh> <laugh> .

Speaker 1:

People don't need to hear that one. They can contact me if they wanna know that story.

Speaker 2:

It is a good, it's a , it is a good story. And , uh, and uh , it is , it is a good , uh, good segue to, you know, one of the things that you know about me too, John, I do sometimes fly by the seat of my pants <laugh> .

Speaker 1:

What do , what do you mean? Sometimes

Speaker 3:

<laugh> ?

Speaker 1:

Uh , yeah, but, and the good thing is we can laugh about it now and we laughed about it at the time. Um, although, although it wasn't all, all the better roses and occasionally , um, we would yeah, get upset with each other a little bit, but we would always sit down and have a coffee and talk about it and, and then we'd laugh it off and, 'cause I remember an agreement we made up front that when we were thinking of doing something and we didn't necessarily agree on how we were gonna do it or what we were gonna do, I remember you saying, look, one time we'll go with what I think and another time we'll go with what you think and we'll, we'll just alternate it. And , um, and I think that worked very well too. But it's having those understandings upfront , isn't it? That makes the difference. It , it ,

Speaker 2:

It is . And you know, you , you , you've touched on one of the , one of the golden rules , uh, of, of successful partnerships and, and that , and that is, I, I always think 50 50 is, is , uh, is absolutely the best way to go if you can, I , if it works for your business and , and your partnership. Because equality, you know, when , when, why would you need, you know, a lot of people go, well, I want 51%, you have 49. Well , immediately when you do that in a partnership, you are , you are creating a , a hierarchy and , um, partnerships are supposed to be equal and work together and in harmony. And , uh, yes, you're right, John. We, we, we, we consider ourselves equal. We had great respect , uh, for each other. Um , our trust built and we did , uh, share things that was a crucial

Speaker 1:

Yeah, I , I see partnerships now where it's not 50 50 and , uh, it concerns me sometimes . And , uh, yeah, that 50 50, I think is , is vital.

Speaker 2:

Yeah. Even , even , even if it , it's , you know, sometimes it can't be a monetary 50 50. You understand that. And you know what, some businesses work with minority partnerships very , very well. Um , it's just, it's just the 50 50, the most important part about it is , is the trust and respect and given , given each other. If you're in a partnership, then you're doing it together and you go forward together. And, and that's, that's why it works much better.

Speaker 1:

Yeah, absolutely. It's , um, yeah . Okay. What about, I put family members , uh, in my notes to, to talk about, because family businesses are a , a strange animal in , in themselves quite often. And we, you and I had some family businesses that were really good clients, but I see sometimes there can be , um, challenges in a family business with pe getting people to work together and whether they've got a share of the business and all that sort of stuff. Have you got any thoughts on that?

Speaker 2:

Yeah, look, you know , um, the , the , the rules , uh, apply whether it's a family business or not, you know, the, the, the obvious dangers in a family business is that you, you run too high on emotion. Um, you know, there's always a place in business and in life , um, and, and in partnerships for, you know, heart and mind working together in harmony. Um, but, you know, businesses are there to make money. Businesses run on numbers. And so you, you , in , even in a family business, you have to take the emotion out and you have to look at the cold hard facts , uh, which are the numbers, and you have to make sure that the, the emotions and the relationships actually support the business and not get in the way of it .

Speaker 1:

Yeah. And remember that it is a business <laugh> , um,

Speaker 2:

Indeed , you know, you have some, have some rules about when you separate, you know, you probably need to separate business and, and , and , and family life as well. You know, if you , if you take it all home with you and it continues there, then uh, then , uh, you know, you're gonna run outta steam.

Speaker 1:

Yep , yep . That , that's for sure. Keeping that separation. So what about , um, when partnerships end? Uh , because again, it comes back to beginning with the end in mind and having a common goal. Um, the problems can arise if, if one person wants to exit the business and another one doesn't. Um, again, I mean, communication is the answer to a lot of these things, isn't it? Talking and having robust conversations.

Speaker 2:

It , it , it , it , it , it is, but, but sometimes that , that's not enough. And, and what you said earlier on, John, beginning with the end of in mind is another of , uh, the golden rules I have for business partnerships. Um, you and I started with an exit, exit plan because, you know, at the beginning of a partnership and everything in the garden is rosy. You , you , you're doing it. You know, your purpose is obviously , uh, are there to benefit you, the partners in the business, you know, whether, whether , whether the purpose is to create more opportunities, you know, more effective utilization of assets , uh, mitigate risk. There's, there's, there's a purpose. But of that , at that moment in time when you're starting, you know, things are happy , uh, if you build your exit plan when you're happy, it's much easier to execute at the end of it when things might not be so happy. 'cause sometimes things don't always go well.

Speaker 1:

Yeah, that's a good point. Yeah. The business may not have gone well for reasons external to the partnership, so then it's , um, you still gotta know how you're gonna get out of it now. Yeah. We,

Speaker 2:

We actually, we actually built our exit plan into our business plan right at the beginning, John , uh, and, and you know, we had a goal and the target and, and we knew what we needed to do to get our business ready for that moment when we could sell it

Speaker 1:

Indeed and , and sell it. We did. And , and very well, mm-Hmm . Even though we tried to go about selling it ourselves first and stuffed that up, <laugh> <laugh> and thank God , uh, a great broker on who taught me everything I know now about getting businesses ready for sale and selling them . So we got , and we got about 25% more selling it that way than we would've done if we'd sold it a sell . So

Speaker 2:

We , we , we , we did, but it was good to put our hand in and in the experts and that very man, by the way, John now lives very close to me down here.

Speaker 1:

Yes, yes, indeed. I know he is down that way somewhere, so , uh, yeah . Yeah. And

Speaker 2:

He's about a drive and a seven , nine from my house.

Speaker 1:

<laugh>. Okay. <laugh> . The , um, the other thing I , and I recommend this to business owners as well, if they're getting into a partnership, and that is to go and see a lawyer and get a partnership agreement drawn up. Now I say that with a little bit of , um, trepidation because you and I didn't do that. Um, we certainly talked everything through and did , we did write some stuff down and we, we basically had an agreement. But I still think, and I'll get your opinion on this, but I still think, and particularly talking to a lawyer about these sort of things, a , a partnership or an ownership agreement, I think in a lot of cases is a very valuable thing to do upfront when things are, are good or starting off. 'cause the only time you're gonna need it is down the track if, if the wheels fall off,

Speaker 2:

Or , or , or if you're , or if you're ready to, you know, one partner's ready to exit and the other isn't, you know , uh, you know, things can change change now . No, I agree. You , you know, having that written up at , at the beginning is good. I think where, where we , uh, needed that less was because we were in a franchise and the franchise had its own rules , uh, that we needed to follow. Uh, so, so that made it, you know, quite a lot simpler in terms of legalities. Um, uh, however, even when you use a lawyer, it should still be the partnership's plan that the lawyer makes legal. And I think that's critical. You , you'd , you're better off not telling , getting a lawyer to tell you what to do and how to do it. You better tell the lawyer what you wanna do and how you , how you wanna do it, and make sure that the , uh, the lawyer can tie up all the, the legal loopholes, so it really works for you. Well, that way your exit plan is gonna be a , a , a good robust exit plan.

Speaker 1:

Yeah. Yeah. That's really good advice. And I know a good lawyer that, that does that sort of thing. In fact, I've done a podcast with him on that very topic. Um, if you want to go and find that podcast, you can , um, listen to Steven Brown talking about ownership agreements. 'cause again, it's not necessarily because the , the partnership doesn't work, but if one partner gets ill or passes away or something like that, then what's going to happen to their part of the business? You know, it's, it's, it's a bit morbid to think about those things upfront , but it's a good idea to have thought it through and have a plan in place. Um, a again, just to protect the person that's left behind.

Speaker 2:

Yeah, absolutely.

Speaker 1:

So, okay. Um, anything else you want to add, Peter?

Speaker 2:

Well, look, you know, I , I think, I think the most important things are , are to, to go in , go in with , with an open mind. Uh , make sure that there's a , a good purpose that , that you're gonna achieve something better than you've got without the partnership. So as, as I said earlier, you know, maybe , maybe there's opportunities to grow your business faster. Maybe you, maybe there's , uh, diverse customer bases that you can, you can both access. Maybe there's assets you can utilize more effectively. May , may, maybe that there's opportunity to , uh, do a lot more because you have separate roles and responsibilities. But I think the golden rules for me, start with the end in mind. Have , have , have an exit plan. Have a robust business plan that includes the exit plan. Make sure that the person you're going to go into a partnership with , you have full trust and respect for in that, that respect has to be mutual. Um, make sure the benefits outweigh the, the downsides. Um, have good, good roles and responsibilities so that you have , uh, uh, equality. Have that 50 50 in mind and then develop a good process for your business so that it works smoothly . Those are the things I would suggest , uh, are gonna increase your chances of

Speaker 1:

Beautifully summed up. Beautifully summed up. So that's great. Thanks for that. And , uh, yeah, thanks for catching up. Always good to talk to you. How can people get in contact with you if they want to talk to you?

Speaker 2:

Oh , look , um, uh, my, my email address is peter@investorsinpeople.com au. I don't often take on new clients these days, however, any friend of yours, John , is always a friend of mine.

Speaker 1:

Alright , Peter, I appreciate that. And , um, let's , um, catch up soon and, and have a beer and a Barbie or something.

Speaker 2:

That'd be a very good idea. I think we may do that very soon.

Speaker 1:

We may indeed. And it may be just in your neck of the woods.

Speaker 2:

Splendid.

Speaker 1:

All right , Peter, thanks very much and thanks everyone for listening. And if you'd like to know more about what I do, you can go to john denton.com au and learn how I help business owners get their businesses ready for sale, because a business that's ready for sale is well worth keeping. So bye for now. Look forward to having you on another podcast soon.