The Game with Alex Hormozi - How To Avoid Bad Partnerships | Ep 277

Episode Date: February 16, 2021

It’s better to recognize an error early than never. Today, Alex (@AlexHormozi) breaks down the roles of each partner, and how to know whether or not it’s a smart decision to pursue the partnership depending on your situation.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(1:25) - 1st reason: No partners, no terms or agreement(3:56) - 3 pillars of a business: acquisition, product, operations(8:58) - Small businesses think and act small(11:39) - Bonus fact: Married couples in business last longerFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

The only reason for you to have a partner is because they either have money or skills that you do not have. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. What's going on, everyone? I have been known as the partnership killer. And so what I want to share to you with you today is something that comes up on, I mean, every week on coaching calls with, you know, younger entrepreneurs, younger business owners, not even younger, just other business owners. who aren't doing as much and who want more. And the question is, usually one of two things. First is, what should our roles be within our partnership? And then two, what do you think of partnerships in general?

And so what I want to do is share with you a couple hard, hard, hard earned lessons that I have. And so first, right off the bat, I think I counted, I have nine failed partnerships. And so I just want to say right before you even get going, I could be the problem with the partnerships, right? If you have that many failed partnerships, then it's probably you. You were the common theme. So I will say that first and foremost up front. That being said, I think the reason that many of those partnerships fell and they all happened, you know, almost concurrently. I just did partnership after partnership after partnership because I heard it's like, you've got to find

good partners. But what I didn't understand was how it actually needed to be structured and how it worked. And so there's a few pieces of that. The first is if you're just starting out, I think that for the most part, it's better to not have partners. And that is because usually it's like you and a buddy and you're like, hey, we like hanging out, we should go into business together. When really you're doing that for the emotional need to be satisfied to have somebody to talk to and share the experience with, but not because it's a good business decision. And the only reason for you to have a partner is because they either have money or skills that you do not have. That is it. It's the only reason. Money or skills. That's it. And so if you both are entrepreneurial

people and you're both, you know, love selling, love marketing, and you're very promotion oriented which many entrepreneurs are, right? If that's you, then if they're that way too, then one of you's not required. And you have to really face that. And so that's the first one. The second thing is that those jump into bed to be other partnerships don't have step number two, which is you don't have a contract, you don't have terms, you don't have an agreement. And the reason is because you're so afraid of like messing up the vibe, we don't operate that way, you will when it gets fucked up at the end. But I'm telling you right now, I now, even when I somebody who approaches me and says, hey, like, will you take a percentage of my company? Can you

coach me through this? Blah, blah, blah. I say, let's go through the lawyers first. All right? Because the thing is, is you get to see how this person acts under stress because it is stressful because inherently you're going to disagree on things. And so this is the perfect, like, perfect time for you to go kind of get a simulation of that. Well, it's like, well, what happens if you don't want to work and I want to work? What happens if you leave? What happens if I don't want to do this anymore. You have to go through all the scenarios and get a good lawyer, and you should really have two that represent you. If you don't have the money for that, then get somebody to just counsel you on, you know, you can Google a standard partnership agreement.

There are templates for free online, and you can pay one lawyer for one hour of time to at least say, these are the things you should look for now, you know, decide amongst yourselves. And so you can represent yourself in your partnership, you know, agreement, but you have to have the agreement and you have to spell it out in clear terms. Because if you don't have to have, you don't have that it's like it's the bedrock of good communication and expectations right like otherwise usually like most relationships end because of unmet and unspoken expectations like well i thought you were going to do this is like well i didn't know but no one even says that because they can't communicate so first is you probably shouldn't just jump together with somebody because they they're just like you

if you are going to do that then you should make sure that you have contracts in place and then finally what i want to do is kind of explain to you what the three main rules roles that exist in a business are okay three the three pillars all right i want to see if i have a tripod here here we go here's my tripod all right so there's three pillars to every business all right the first is acquisition which is the rainmaker or somebody who's going to bring in business so that's marketing and sales all right acquisition the money getter all right the second of these is the product which is what you are actually selling it's the fulfillment it's the service it's the widget, it's the whatever, somebody who knows how to deliver it.

And then third, you have the operations, which is everything else that has to happen in the company, paying payroll, paying taxes, making sure legal and contracts and IT and, you know, finance and all like the, you know, your accounting, all of that stuff, HR has to happen, right? And so these are the three legs of every business. Now, they're not necessarily equally weighted, and that's an important point, right? Like, a lot of times there are good operators that you can get for significantly less, and many times not even equity, because there are more of them, right?

Now, rain making, being able to bring in business is a very highly valued skill in the marketplace. On the flip side, having the thing, the product that you're going to sell is also very valuable. Now, this is why skill stacking is so important. If you can have multiple of these skills, then you have two or all three of the legs, right? Now, these are the roles that have to exist. It doesn't mean you have to be partners with these people, but you have to have all three of these things for your business to stand up. And so for example, within the company, I'll walk through my roles within each of the

companies that I own. And so the first is gym launch, right? So in gym launch, I am both the acquisition and the product, right? Or that was my founding role within the company. Layla, my wife, runs, ran all the operations. everything else. So like I said, IT, billing, legal, finance, HR, all of that, stuff that had to happen, she took care of, right? Super important. But because of that, we had all three legs of the stool and we were able to build a business, right? If you're missing one of the

legs, it's not going to work, right? And this is where this is really dangerous, is like a lot of the marketing people that are in this world are really good promoters. They can get people in, they can sell them. But then they have no fulfillment. They have no thing, right? And then they have no one who's organized. And so everything, like you send emails in, you try and get help and they don't respond. It's because they just don't have the other pieces. I don't think it's because they're bad intention. I think just don't have the skill. Hey guys, love that you're listening to the podcast. If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, you know, drawn out stuff. Sometimes it can help hit the brain centers

in different ways. You can check on my YouTube channel. It's absolutely free. Go check that out if that's what you are into. And if not, keep enjoying the show. And so you have to have all three. And so if you're going to bring someone in, you need them to have one of those things, right? Now, you can start a business and own all of it and just make sure that you fill the roles of those people. But as you're thinking through it, there's the role. So if you're going to bring partners in in the beginning, you want to be clear about what it is that they're bringing to the table. Now, if they're one of those three, right, then that's a clearly defined role. And then at that point, that's what you can lay out in your agreement.

And then you can argue about or negotiate whatever equity, if you're doing this in the beginning. But if you've already started at that point, then you can look at the three legs of the stool and see where am I lacking. And so for most of you guys who are listening, most people follow me are like the promotion side. So they like the acquisition side. Then what you need to do is find a strong operator. And depending on what you're selling, if you know the thing that you're selling, then you can basically be product and acquisition and have a strong second to help you fulfill on those things and basically don't go to jail. right and you know get fire taxes and all the other stuff and so when I'm thinking about partnerships and when I have you know younger guys who are coming in many many times after having

discussions with me and then talking to each other they realize that they had the exact same role they like the same things and one of them is not necessary and so they oftentimes split and that's not a bad thing right it's better to recognize an error early than to recognize an error late all right and so you may be in one of these partnerships where you're like we kind of both do the same thing we kind of just overlap on everything it's like yeah that's just two people working the same thing and so it's not like you don't want to just be like oh there here's all this work I'll do half you do half that's not a good partnership you have to figure out what are the things we're I am good at what

are the things you are good at and then we draw a line on the board and everything on that side you own and everything on this side I own and I'm responsible for because if everyone's responsible for everything no one's responsible for anything right and then nothing's gonna get done and then you can never know who to blame and someday you're like well he takes out the trash or I'll take out the trash we just kind of we're just like kind of get it done type of stupid there's no there's no big business that works way. And so even if you are small, you need to start thinking big to become big.

So you got to do the actions before you get the results. You have to have the beliefs before you get the outcomes of a bigger business to become a bigger business. And the reason most businesses stay small is because they think small and they act small. So they stay that way because the outcome of what they're doing is the result of the actions they're making which are small. Right. And so right now if you're in a partnership, if you don't have a partnership, if you're thinking about starting a business, I would definitely try and just acquire the skills myself, get going, and then the first hire I'm going to have is going to be a strong operational second. It's the first thing I'm going to do. If you are in a partnership, you need to put all the

activities that you do on a board. I do this when I do consulting stuff, but all the activities that happen in the business on a board. If you don't know what it is, you do a time study, which means you write down every 15 minutes of what you do in a week, right? Because you probably don't know because you're scattered all over the place. So if you write it all down and you both bring it to each other and you put it on a whiteboard or put it on a board, then what you can do is say, okay, these are all the things, these are all the activities that happen in our business let's divide these out and say who owns these all right and that's the very beginning of an organization because you are becoming organized you are creating roles and responsibilities

you were creating specialization of skills which is what moved humanity forward specialization is a good thing right and so the very beginning you get all of it on there and you can divide it out and you can divide it based on the skills of the person if you both have the same skills then either you need to decide okay well i'm going to become a specialist in this and you're going to become a specialist in this or we shouldn't be doing this business together and you should do a business that's just like mine or something else and you should be that role for that company

and you should find a second just like I will. And oftentimes if you can at least think that way, then you don't liquidate the most valuable thing in the whole world which is your equity. Because if your thing actually does grow, if your business actually does grow, then the biggest dilution of how much money you're going to make is that first decision when you started

when you just decided to just write off the bat to give half of everything away. All right. And I've made this mistake nine times. And it took me and, you know, I haven't had it a partner in four years. And I've made all of the money in my life post partners. And so there's also other factors you want to look at too. Like what kind of working schedule do you want to have? How much vacation time do you want to have? Are you going to work Leakins? Do you work late at night? Do you work in the mornings? Do you expect each other to be responsive? Like there's all these little things that you need to make sure you dial in because if you don't, It's just going to cause trouble later, and it may be hard conversations for you now, but believe me, it'll be much harder later when the expectations are not being met, and now you have money involved.

All right, so anyways, these are the things I think through when I'm looking at partners and partnerships, and why oftentimes I do break up many partners because they don't start them for the same, for the right reasons. And so I hope you found this valuable. If you have a partner, talk to them about it, show them this video, and keeping amazing and lots of love.

Oh, total bonus, I have noticed that works really well so many times, married couples. Married couples starting business together, they already have usually differences in skills and different dynamics. And so that usually works well. Usually one of them is the more go-getter, hunter, killer, right? You know, the acquisition side. And the other person's usually the more organized, more stable, more even-headed, like does all the ops and the back-end stuff, right? And so even just thinking about front-end and back-end is a good way to start. And that's why I love having married couples in general, because they almost always

are successful if they can just delineate those skills. And they usually already have even even without speaking they already unknowingly have made a lot of these specializations is why a lot of times are more successful they also have the interpersonal emotional sounding board to bounce things off of and also to relieve some of the stress that inevitably comes when you're when you're running a business so anyways hope you enjoyed the video hope you found this valuable you know share with your partner or potential partners and see in the next video bye