R. Shawn McBride spoke with Kevin Wright about preparing for partners’ disagreements in business.
Kevin: Shawn, what about one of the real dilemmas for a startup company.
R. Shawn McBride: Yeah.
Kevin: Is that an owner, whether brother, sister, or family says, “Wow, we’ve got this great idea, and maybe we’ve actually got a customer that’s ready to buy.” Then you get to reality. There’s the professional services’ expertise that you need. There is your insurance broker; there’s an attorney, there’s an accountant, there’s marketing personnel. These are all big dollars. Making poor decisions on any one of those choices could have a significant impact. What advice would you give this entrepreneur? In terms of “How do I allocate the few resources I have, between the professional staff that I need?”
R. Shawn McBride: This is a hard issue, and it’s a timeless issue. Part of this is the struggle of building a business. How do you get it? I don’t think that any business that’s going through the books, they’ve done the trundle of resources at some point. How do you do everything that you need to do? Whether it’s high in resources or rent, by the client. I mentioned this a couple of years ago when you worked around the clock in the business. We didn’t have everything that we needed. We had to work 60-70 hours a week too. You meet on some emergency basis. Usually, they had iPhone coverage. That 11 o’clock at night, you get an order out. It became bigger over time.
A lot of times in these service business, too. You’ve got to build a brand. My personal side is that I’ve built a speaking side of that. There’s a lot of infrastructures you get before you start getting to the bigger stages. There are costs there. For me, I feel to develop my own business. I’ve got my attorney and legal services, which allows me to build this business. You may want to look at that. I’ve seen you Google that, I don’t know what everybody’s situation is. I’ve seen husband and wife teams do it. One of them is working, bringing in a regular steady income and getting the health care insurance and the other one’s building this machine over here.
It’s just realistic. While we can do everything we want to do, sometimes we do that to build infrastructure, and infrastructure costs money. Whether it’s tangible infrastructure or intangible infrastructure. It’s about having that solid business plan. Part of this might be for the right professional service person or service-oriented business. It is strategic alignment. Align with somebody bigger who has the money, to see the vision and takes part ownership of it. I have a business friend who got investors in their business. They had a vision; they knew where they were going, but they had to build all this infrastructure. They sold a part of the future. Financials to the real world. They sold part of the future, but then they got part of the money they need to build the machine that they needed to build. It worked for their situation. Other questions?
Kevin: My father was in business. They could have heeded your warning very well because it was a partnership that dissolved. It was started around an architect and an engineer. It was a startup. The whole idea was that it would be a licensable product. They had a very good idea about when they founded it. People were wanting to buy a license, what that would do to the value and their partnership. What they didn’t plan on was when they couldn’t find enough people who want to license it. They need to start selling to end users for a while. They did that for a while, and then when they did find people who wanted to get licenses and invest in the business, they had completely different ideas of what the business was worth at that point. They got into a major disagreement which ended up folding up the business.
R. Shawn McBride: Again, disagreement. We don’t know when it’s coming. Here we have a situation where the business had business model A, had to evolve to business model B. By the time it came back and was mature enough to go back to business model A, the partners disagreed about business model A.
R. Shawn McBride: These kinds of things, happen. They got to tell people, “We don’t know where the disagreement is coming.” I have a very unique set of clients come to my office, that talks about disagreement. They always tell me “I’ll never disagree with my business partner. We get along great.”
Kevin: I’ve got to disagree with you on this whole disagreement thing.
R. Shawn McBride: Then they show up in my office three years later. They’re like “You know, we didn’t think we would disagree, but now we do disagree.” I’m like “A little too late now.” As an attorney, I have ethics rules which require that I represent everybody. I can’t pick somebody that I like better and start representing them. I’m kind of shielded out of a lot of those. If you call me again, three years later, and say “Well you told us we would disagree, and we told you we wouldn’t disagree. Now we are disagreeing.” It unfortunately happens. I tell people to be realistic. You don’t know where the disagreement’s coming from.
Sometimes it’s a value shift. There are two partners that approach for their lives. Their values shifted quickly because of family pressures. It could be something because of their parents or children. A lot of times there’s a family thing that causes people to change their outlook on business and the future. The best we can do is be realistic, that knowing that not every partnership’s going to last forever. You can build systems to make sure that wealth and values are maintained.
Kevin: Do you disagree with part of your business is one of the things that leads to the downfall of those businesses?
R. Shawn McBride: It’s incredibly common, yes. I don’t have good statistic rates for the failure of business.
Kevin: I’m just saying from what you’ve experienced. With you there, it’s not coming through that you lead a business. You have a plan for it to be bought later on. It comes down to you’ve got people. Suddenly, everyone goes “I hate your guts today,” type of thing.
R. Shawn McBride: People swear away business partnerships. I can find accounts with people that have been burned in business partnerships. I don’t say no to them; I don’t think they’re bad. I think you just have to realize that partnership may not last forever. Capture that economic value. There are reasons why people go into partnership. They’re good at different things, they have different skillsets, and they can enhance each other. I’m all for it. Go for it. Capture that economic value. You have to be realistic about that. I did read an article about it. I was going to say, I don’t have extensive statistics, and I don’t know how they came up with their statistics. They say about 80% of business partnerships ended up failing at this frame rate. 50% of marriages fail, 80% of business partnerships fail.
I wouldn’t be surprised by that number. I think so. Marriage, you’re mating for life. You’re generally not making that statement with a partnership. You’re not going to be with your partner for life. You’re being a partner for that business. It’s not the same long-term commitment. It doesn’t have the same social meaning to it. I think partnership failure is much more common than marriage.
Kevin: A lot of something that the people made. How would you define the failure of a business? How do they measure it?
R. Shawn McBride: I don’t know how to measure that. For me, I’d define failure as working at building something and finding the economic value of it. I don’t care if the partnership persists for five or ten years. Does my client, or the person involved in the partnership, get the economic value? That’s success, in my opinion. You get paid for what you did. That’s awesome.
Kevin: We’re going to let him sit down here. You can still enjoy it and talk. We can still talk about it as a group if we want, or talk about yourself. I want everybody to thank Shawn and give him a big round of applause.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Daniela Como.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.