Re: How to go about finding partners - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on July 31, 2003 at 12:22:05:
Chris,
You’ve received some very good advice in response to your post.
I agree with Marcos that long-term, exclusive partnerships are difficult to get right. Frequently, one partner starts to think that the other party isn’t carrying his/her weight in the partnership. Eventually resentment builds and the partnership deteriorates. However, as Marcos mentioned, joint venturing (or partnering on a deal by deal basis) can be a mutually profitable and satisfying experience.
Also, as Linda Simms suggested, it’s always best to put everything in writing. I happen to be the “partner” to whom Heather refers, and normally we’d have executed a joint venture agreement. I typically use a simple two-page document that spells out who’s bringing what to the table, who’s going to contribute what during the course of the project, and how the profits are going to be split.
As Heather mentioned, we did our first deal verbally, which is extremely unusual for me. Heather has already explained why she and her husband, Eric, felt comfortable proceeding without a written agreement. Fortunately, I’ve done enough joint ventures with new investors that I’ve developed a reputation for treating my “partners” fairly. My philosophy is to operate with integrity so as to protect that reputation. As for why I felt comfortable working with Heather and Eric without a written joint venture agreement, it boiled down to a “gut feeling”. I know, not a very good reason for deviating from procedure, but I felt really good about them. We structured the deal in such a manner that if they hadn’t been honorable people, only I could have lost. This wasn’t a conscious decision, but simply the way we happened to put the deal together. Had they wanted to take advantage of me, they could have. Had I wanted to take advantage of them, I wouldn’t have been able to do so. Worse case scenario, had their first deal blown up in my face, I’d have simple lost one half of one small deal. Not really a big issue as far as I’m concerned. All I’d have lost would have been money and money is easy to replace. They, on the other hand, would have lost the friendship and support of someone who believes in them and is rooting for their success. As Heather mentioned, we’re into our second deal together and it’s progressing nicely. There will come a time in the near future when they won’t need to partner with me - or anyone else for that matter. They’ll be ready to “go it alone”.
Heather has done a very good job of explaining why “partnering” on your first few deals is good for the new investor. Now I’d like to explain why it’s good for the other half of the team - the experienced investor. The first and most obvious reason is the money. As long as the profits are split fairly and equitably, the experienced investor is going to make a reasonable profit for his/her contribution to the project. Usually, I’ll ask the new investor what he/she thinks is reasonable as far as a split is concerned. You’d be surprised at how often the “newbie” is willing to give up more of the profit than is necessary, just to gain the experience and learn how the process works. I know I’ve surprised more than one newbie by taking less of the profit than they offered. Why, you might ask, would I be willing to take less than is offered? It goes back to my philosophy of operating with integrity. If I do what is right and fair, I know I’ll get more business - if not from that individual, then from referrals.
The second reason that “partnering” is good for the experienced investor is increased business. Since the newbie is bringing the deal to the table, the experienced investor gets to participate in a deal that he/she would not otherwise have known about. I think of these deals as having “fallen into my lap”, so to speak, since the newbie has already done the marketing and/or prospecting in order to find the deal.
The third reason that “partnering” is good for the experienced investor is somewhat more nebulous. It’s the personal satisfaction one gains from helping another. Don’t get me wrong - this isn’t an altruistic enterprise. I’m definitely in it for the profit potential. This third reason is merely the “icing on the cake”. It really feels good when your “partners” thank you for helping them get their first deal done. It’s especially gratifying when they come back and say, “Let’s do it again!!” And it’s even more gratifying when they spread the word and refer other new investors to partner with you.
And finally, it’s good for the experienced investor’s self-esteem to be called upon for help. I think that the role of teacher/mentor is good for one’s ego. Just don’t let it go to your head!
BTW, where in Texas are you located? Hopefully, the Houston area!! (smile)
Best of Success!!
Jim Kennedy,
Houston, TX
“Nothing makes one feel so strong as a call for help”.
~George MacDonald~
