Why I Don’t Believe In 50/50 Partnerships (And How To Structure A Business Partnership) | Summary and Q&A

TL;DR

In this video, Chandler Bolt explains why he does not believe in equal partnerships, particularly 50/50 partnerships, and discusses alternative approaches.

Key Insights

• 💼 Partnering out of insecurity is a common mistake. Loneliness and fear can push entrepreneurs into seeking validation and support from partners, but this often leads to giving up equity and causing frustration in the long-term.
• ⚖️ 50/50 partnerships are inherently flawed. Effort, time, and value are rarely split equally. Different skill sets and contributions should be considered, and compensation should reflect market rates.
• 💰 Paying yourself market-based wages can help avoid 50/50 partnerships. By determining fair compensation based on skills and responsibilities, you can set wages that reflect the value brought to the business.
• 🤝 Partnerships with majority control can work well. Being the advisor and investor in a partnership can still offer valuable input and benefits, while giving the majority partner decision-making power.
• 🌟 Create partnerships that align with the work, money, and value being added. Consider the sweat equity, capital, and mission-criticality of each partner's contribution to determine fair arrangements.
• 🔒 Proceed with caution in partnerships. Don't partner out of insecurity or rush into 50/50 arrangements. Have difficult conversations about effort and equity distribution before problems arise.
• 📝 Set boundaries and have an operating agreement in place. Clearly define responsibilities, expectations, and equity distributions to avoid bitterness and feelings of being taken advantage of in the future.
• 🚀 Profit-sharing can be a better alternative to equity. In businesses where the goal is not to sell, profit-sharing can offer more value to partners. This approach can create happier employees and avoid the risks and challenges of traditional partnerships.

Transcript

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Questions & Answers

Q: Why does Chandler Bolt believe that partnering out of insecurity is a mistake?

Chandler believes that partnering out of insecurity can lead to giving up equity, leaving money on the table, and being perpetually frustrated with the partnership. He suggests that insecurity should not be a reason to seek a partner, and instead, one should find validation and support from employees or other sources.

Q: What does Chandler Bolt propose as an alternative to 50/50 partnerships?

Chandler suggests methods such as agreeing to pay market-based wages once the business reaches a certain point, evaluating the contributions of each partner in terms of skill sets and value added, and setting up a partnership that reflects the work, money, and value being brought into the business.

Q: Why does Chandler Bolt believe there is no such thing as equal effort and value in a partnership?

According to Chandler, each partner brings different skills and values to the table, which are usually not equal. He argues that this imbalance should be acknowledged and dealt with, and that partnerships should be based on the contributions of each partner rather than an arbitrary split.

Q: What advice does Chandler Bolt offer on having difficult conversations about equity distribution?

Chandler advises having open and honest conversations about equity distribution before entering into a partnership. He suggests setting boundaries, discussing the contributions and motivations of each partner, and being open to readjusting the equity distribution if needed.

Q: How does Chandler Bolt recommend avoiding being taken advantage of in a partnership?

Chandler suggests having an operating agreement in place before entering into a partnership. He shares that one of his biggest mistakes was not having an operating agreement, which led to bitterness and feeling like someone was riding on his hard work. Having clear agreements and boundaries can help prevent such situations.

Summary & Key Takeaways

• Chandler Bolt shares his belief that partnering out of insecurity is a common mistake and can lead to giving up equity and being frustrated with the partnership.

• He discusses two quotes from mentors who also do not believe in partnerships and the negative experiences he has had with previous partnerships.

• Chandler argues that there is no such thing as equal effort, time spent, and value in a 50/50 partnership and suggests approaches such as setting market-based wages and evaluating the contributions of each partner.