- Do you believe?
- [Jared] Do you trust?
- Ooh!
Trust is real.
Trust is real, real.
Do I hear somebody coming downstairs?
- [Jared] Yeah. - Hello!
(upbeat music)
How to bring on a business partner.
Here's the challenge.
If you want to go far, you need to go as a group.
If you want to go fast, you can go alone.
That's the quote,
but I've known people to hire people that didn't work out,
give half their business to other people
that left after six months,
thought that they could bring somebody else
into their organization to run it,
or even more common, is they have a side project
that they want to hire somebody to run,
but when they do that it's always failed.
This video's gonna teach you how
to connect with the right partner,
how to run through potentially negotiating bringing them on,
and all of the challenges that typically come up
when you bring on a partner.
We're gonna resolve that in this video.
Now, I've been blessed over the years
to have started five companies
with mostly co-founders.
So, I've always had partners in my life.
I've invested in 30-plus other companies,
so indirectly I became a partner
as an investor in that relationship.
And I've started a ton of projects.
The truth is, is I've probably got 30 domains for websites.
Many of them I've actually brought to life.
So, it always requires people.
And what I want to walk you through is
really the specific situation of,
you've got something that exists today
and you want to bring somebody else in to run with it.
'Cause I really think that's when
things change and shift as an entrepreneur, right?
You can be an employee, then you have business owner,
or you have self-employed, then you have business owner,
and then you have investor.
And it's the four quadrants from Rich Dad, Poor Dad.
That investor section
of having ownership in other companies,
really comes together when you can bring on
business partners to actually build those businesses.
I was fortunate enough awhile ago
to spend a week with Richard Branson,
and watching the way he operates his 400 companies
under the Virgin Group of companies,
and interacts with the CEOs,
'cause a couple of them came while we were hanging out.
It was super fascinating
and I just want to share with you how I've always
thought through those situations
to make sure that I found quality people,
we negotiated appropriately, and came to those terms.
So, the number one thing I want to share with you is
what's the value of the business today?
I think if you have a new entity,
so maybe you spun something off,
you've got to assess the current value.
Some people call that the valuation, right?
What is it worth today as a thing?
Maybe you have some pre-sales to customers,
maybe you have working code,
maybe it's just an idea,
but having an understanding of the value of that thing,
that entity, as it stands today
is gonna help you discuss and negotiate
how you should split up the roles and responsibility
and the ownership levels in this new thing.
So, it's very clear, you separate it, you look at it.
What are the different assets?
What's the valuation it has today?
So, that's one.
Two, is you wanna make sure that you
evaluate the market value.
And this could be salary value or value creation value
of the people that are gonna get involved
in this new business.
So, if you have an existing business
and you started this other software thing.
Happens very often.
I have clients all the time that have an agency,
build a new software product,
and wanna bring in a CEO or a GM to run that business.
And they're trying to figure out
how do I assess the different people
and the value they bring to it.
So, an easy way is just market salary.
If you were to go into the public work space,
how much of a salary would you demand,
and/or if they're an entrepreneur,
those are always the best partners to bring in,
what's your value creation per year?
In the past when you've built companies,
how much value did you create in a year?
And let's use that to just discuss the potential brink.
'Cause you have the value of the current entity,
and then you've got the value of the people
that are gonna be participating in there.
So, that gives you a sense of how to negotiate the equity.
Then, finally, you want to figure out
who are the other people that you're
gonna have to bring on your team.
So, this could be other advisors,
this could be key hires,
it could be a CTO, it could be a CMO,
it could be, it could be legal support.
It's whatever the other people,
to really make a dream team, to make this thing successful,
those should be considered upfront
when you're building this new business,
because they are going to require
some level of compensation.
Equity and/or cash.
So, that's really important to understand,
kind of directionally speaking.
The next 12 months, who are we gonna bring on this team
to make it rock.
Number four is how much money.
Capitalization.
Some of those fancy PE, private equity people,
call it capitalization.
Is the new business, the business, gonna require,
to get to ideally a point of break even.
And to me, that's a really important factor,
because money needs to come from somewhere.
If you have a team already, they're being paid a salary.
Who's paying that salary?
All those factors,
if you're bringing in somebody to lead the business,
I highly recommend that you have them contribute cash,
not just time or free labor or expertise,
but actual hard dollars into the new entity
when you form that new relationship,
because there's nothing that will get people more focused,
more serious, and show commitment
than taking their dollars and putting it,
that they've earned, into this business.
Even if they have to borrow the money,
I think it's very important.
So, how much money is the business gonna require?
How do you capitalize it?
That needs to be figured out.
And then the fourth area that I think is critical,
and you should never,
and this is true of every hire that you make,
is you should test the relationship.
The way you should do this is over a 30 to 60-day window,
is figure out what role are they gonna primarily play.
If they're gonna be the CEO, the GM of this new thing,
figure out what are some of the key projects
they're gonna have to undertake in the first 90 days.
So, maybe it's product management, maybe it's sales,
maybe it's building up the customer support team.
Whatever that direction is, in the first 90 days,
that you expect them to accomplish,
you wanna run little tests and experiments.
Maybe it's, "Hey, go talk to these 10 customers
"that are currently in our system,
"and see if you can get them to convert
"from a free account to a paid account."
Or, "Go talk to these 10 companies
"that would be ideal customers for our product or service,
"and go see if you can get them to pre-buy our product."
So, those are the things.
Or, "Talk to our team about their vision
"for what the product could be.
"Talk to the customers about their vision,
"and then come together and put a product roadmap
"or a plan together for me."
Or it could even be just, "Write a business plan.
"Here's where we're at, here's where we want to be.
"What would you do?
"Strategically lay out the steps and sequence
"that you think would be required to hit those goals."
Running a test project,
having them work with you before you work with them,
okay, I got that from Seth Godin,
is critical in all hiring.
So, highly recommend that you create that test scenario.
I mean, it's no different than dating.
I mean, at the end of the day,
you're asking somebody to get in bed with you
for a long term,
and their financial outcome in life
is gonna be dependent on you.
That entity's gonna be dependent on them
and other people that you bring in,
so, of course, you'd wanna test that out.
You'd wanna go on a few dates before you got married.
So, real quick recap.
Number one, make sure, what's the value of the entity today?
Number two, what's the market value
of the people that are getting involved?
That will help you understand the percentages.
Three is who else do you need on the team
to make this a huge success.
And four, make sure that you create a scenario
to test the interactions, the communications,
the relationships.
It's all fun and games when things are going great,
but as soon as things go down,
people start getting sharp elbows.
So, make sure that you do that.
As per usual, I want to challenge you
to live a bigger life and a bigger business,
and I'll see you next Monday.
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