Lessons from my first business failure - Lesson #1 – Choose Your Partner Wisely
In 2003, at the age of 29, I left my high-tech job and bought a highly acclaimed restaurant with an old college friend. I learned four key lessons from that failure. Now, looking back at a tough time in my personal and professional life, I evolved in ways I never would have if I had taken the safe route.
Lesson #1 – Choose Your Partner Wisely
Before entering into any business partnership, it pays to discuss everything up front then write it all down. The best time to negotiate terms and responsibilities is when the relationship is hopeful, open and positive. When acrimony and distrust seep in, negotiation either stalls or is very painful. Nobody wins in this case.
Here are two critical items you should write down:
1. Roles - Who does what. Be specific. “I pay the bills, you do the hiring, I handle customers, you work with the vendors.” It’s so easy to step on each other’s toes, especially in a small business, that you need to get down to the “nitty gritty”. It saves so much time later and you’ll be glad you did.
2. Negotiate exit terms up front – You assume in a bad relationship the other person will work to end it as soon as possible, but they may not. Or, they may offer unreasonable terms to use your pain as leverage to sign a bad deal. Towards the end, when I could not wait to get out of the business, my partner would not negotiate with me. Even though neither of us wanted to be partners, he wouldn’t let me out. Ultimately, it took me using my position as the majority shareholder to add a third person to our board and threaten to fire him as the CEO before he would negotiate. Imagine working with someone every day knowing this.
Next, beware of “shadow” partners. My partner had a wife. They lived across the street from our restaurant. She was incredibly disruptive to me, the business and my relationship with my partner. Every decision became two against one. I had to deal with not one acrimonious partner, but two. For example, she forced me to use her as our accountant, even though I knew accounting well. She accused me of stealing. She had no evidence of this, but it didn’t matter to her. This made my work life unbearable, and I resented my partner for allowing her to interfere unchecked. Make sure you know who will be involved in your business. Ask the right questions up front, and it will save you much heartache in the long run.
Last, find a partner that shares your values, but does not share your skills. If your partner doesn’t have complimentary skills and interests, it’s not a good partnership. But, if you want the same things, and your skills compliment each other, the partnership has a good chance of working. For my partner, being viewed as a pre-eminent chef was the most important thing. Though he wanted to make money, his ego often clouded his judgment. For example, he insisted on using unfrozen, fresh fish. Never mind that 90% of the fish we received was previously frozen. One time, for a private party, I overruled him and ordered frozen tilapia, an inexpensive but versatile fish. After the party, multiple patrons came up to tell me how great the food was. I learned two important lessons that day. Number one, to make money the restaurant business you need to transform good ingredients into great food. Number two, my partner and I defined success very differently. To me, the party was a huge win, for him, it was a great loss. We were not a good match.