Making a Partnership Work

Structured properly, a partnership can be very successful and quite rewarding for its founders. Nick Friedman and Omar Soliman met in tenth grade and became best friends. In his senior year at the University of Miami in Coral Gables, Florida, Soliman enrolled in an entrepreneurship class, where he created a business plan for College Hunks Hauling Junk, the moving and junk-hauling company that he and Friedman operated during their summer breaks from college. He submitted his plan to the Leigh Rothschild Entrepreneurship Competition, where it won first prize and $10,000. After graduating from Pomona College, Friedman accepted a job at a Washington, DC, consulting firm but quickly became disenchanted with his corporate career. At age 22, he and Soliman decided to launch College Hunks Hauling Junk and became the youngest franchisors in the United States.

Today their company, which recycles 50 percent of the material it processes, has grown into a $50 million junk removal business with more than 200 franchisees in 35 states. Friedman and Soliman are best friends, something that has strengthened their business partnership and made their company a success. However, that is not always the outcome when best friends go into business together. Friedman and Soliman offer the following lessons for making a business partnership work:

• Make certain that you have a common vision before you start. Friedman says the key to their successful partnership is that they share a common vision and common values. Before they officially launched College Hunks Hauling Junk, each of them wrote separately about where they expected their business to be in five years. They were amazed at how strong their visions for the company matched with each other. Although they have day-to-day disagreements, as is common in any partnership, the two partners never disagree on the direction of the business or the values that underpin how they conduct their business.

• The ideal partner is one whose skills, experience, talents, and abilities complement yours rather than mirror them. While their company has grown, Friedman and Soliman have developed distinctive roles that support one another. Soliman is more of the strategic thinker, while Friedman is stronger with business operations and implementation of strategy.

• Create a partnership agreementalways. No matter how strong a friendship is, partners should create a partnership agreement. Discussing and then putting in writing how partners will handle sensitive issues, such as financing, daily decision making, deadlocks in decisions, compensation, and withdrawal from the partnership, not only helps resolve disputes down the road but also allows the partners to avoid disputes.

• Create an advisory board. Friedman and Soliman are equal owners of College Hunks Hauling Junk. What happens when they disagree on an important decision? In the early stages of the business, they simply duked it out. (Friedman laughingly concedes that actual punches have been involved on occasion.) Today, the business partners consult with the advisory board they created, which includes professors, executives from large companies, and other entrepreneurs who can offer valuable insight.

In other cases, forming a partnership can be the beginning of an extended nightmare. Three entrepreneurs formed a partnership to sell male enhancement products but never created a partnership agreement. The partner who controlled the companys finances and operations distributed more than $11 million to himself from the partnership but less than $1 million to his partners. The two partners became suspicious and demanded a full accounting of the partnerships records. The managing partner refused, prompting the two partners to file an arbitration claim against him. During the arbitration hearing, the managing partner claimed that because there was no partnership agreement, no partnership existed. The two partners argued that the parties original intent was to create a partnership and that they should receive equal shares of the partnerships profits. A panel of arbitrators agreed with the two partners and ordered the managing partner to pay them $4.5 million. Of course, the business did not survive the dispute.

Avoiding ugly and costly business divorces that too often bring an end to businesses requires ongoing and active effort. Experts suggest that partners follow these guidelines to keep their partnerships going strong:

• Ask yourself, Do I really need a partner? You should take on a partner only if doing so is essential to your companys success. A potential partner should bring to the business skills, contacts, financing, knowledge, or something else you dont have.

• Take a close look at what you're getting. How well do you really know your potential partner? One of the best ways to test your compatibility is to work on small projects together before you decide to go into business with one another. Doing so allows you to judge the compatibility of your management styles, business philosophies, and values.

• Invest in the relationship, not just the deal making. Partners must constantly work to strengthen their relationships. You cannot delegate or ignore this role; otherwise, the partnership is destined to fail.

• Respect your differences but expect to work out conflicts. When potential sources of conflict exist, address them immediately. Festering wounds seldom heal themselves.

• Divide business responsibilities and duties according to each partners skills, interests, and abilities.

• Be prepared to change. Be open to new opportunities and share with your partners what you see. Partnerships must evolve to survive.

• Help your partners succeed. Work hard to see that every partner plays a role in the business that affords him or her the opportunity to be successful.

• Make sure your partners are people you admire, respect, and enjoy being around.

1. Research relationships between partners and add at least three guidelines to those listed here.

2. Develop a list of the behaviors that are almost certain to destroy a partnership.

3. Suppose that two of your friends are about to launch a business together, with nothing but a handshake. Weve been best friends since grammar school, they say. What advice would you give them?