How to Find a Good General Partner
Below we are going to discuss a variety of topics on how to find a good general partner to invest in. On a high level, we will discuss the following topics.
What to look for in a good general partner
How to Vet Potential Partners
The Importance of Communication and Collaboration in a Partnership
What Happens if Things Go Wrong
How to End a Partnership Gracefully
What to Look for in a Good General Partner
When looking for a good general partner, it is important to consider their track record. How well have they performed in the past? Do they have any references from satisfied clients or partners? Reading through their case studies can also be helpful in getting a sense of their work style and how well they handle different types of projects. It is also important to make sure that their communication style and methods will mesh well with your own. After all, you will be working closely with them on a regular basis or investing your hard-earned dollars into their projects. By taking the time to do your research, you can increase your chances of finding a true and reliable partner who will help you take your business to the next level or give you a solid return on your investment.
How to Vet Potential Partners
Anyone who has ever been in a long-term relationship knows that finding the right partner can be a challenge. In addition to being compatible on a personal level, it's important to make sure that your partner is someone you can trust. After all, you will be sharing your money and life with this person, and you need to know that you can rely on them. In traditional real estate investments, the common horizon period is about 3 to 5 years, but some of these deals can go upwards of 15 to 20 years through various market cycles. Most people forget how long these deals usually last and it is important to do your homework.
One way to vet potential partners is to run a background check. This can give you peace of mind by providing information on their criminal history, financial stability, and other important factors. Another option is to hire a private investigator to look into the person's history. This is often more expensive than a background check, but it can provide more comprehensive information. Finally, another way to screen potential partners is to get referrals from friends, family members, or previous partners. If someone you trust has nothing but good things to say about the person, they are likely to be someone you can feel confident about partnering with or investing in.
The Importance of Communication and Collaboration in a Partnership
Emails, phone calls, and Zoom meetings are important tools for communication and collaboration in any partnership. By establishing regular communication channels and setting expectations early on, partners can avoid misunderstandings and maintain a productive working relationship. Emails can be used to share updates, documents, and files, while phone calls and Zoom meetings allow for more immediate questions and discussion. Collaboration is essential to the success of any partnership, and by using the tools of communication and collaboration, partners can ensure that they are working towards a common goal.
The primary form of communication are either the operating agreement or the private placement memorandum if you are passively investing in a project. These documents clearly outlay the responsibilities of the partnership in a deal. Traditionally, most individuals will negotiate the operating agreement early on and sign whatever because people are more focused on the returns a deal can offer rather than planning for a worst-case scenario. When things go wrong in a deal, everyone looks to the operating agreement to see who is responsible for potential capital calls or responsibilities in the project.
What Happens If Things Go Wrong
No business partnership is risk-free, and there are a number of potential problems that can arise. The first step to avoiding these problems is to have a clear and well-drafted Operating Agreement in place. This Agreement will outline the roles and responsibilities of each partner, as well as what happens if one of the partners wants to leave the business or if the business needs to be sold.
However, even with a good Operating Agreement in place, things can still go wrong. If one partner tries to take over the business, for example, this can cause friction and lead to dissolution of the partnership, which can be costly. Similarly, if the business begins to struggle financially, this can also put a strain on the partnership. Ultimately, it's important to be prepared for all eventualities and have a plan in place for what will happen if things go wrong. This will help to protect both your business and your personal interests.
It is better to plan for the worst and hope for the best than think everything is going to go according to plan. Remember, you don’t control external factors to the deal like interest rates, supply chain issues with materials and labor, natural disasters, fires, break ins, injuries, etc. But having a general partner who has protocol for these events and setting the expectations clearly is one way to mitigate these potential issues in a deal.
How to End a Partnership Gracefully
There are several ways a partnership ends, hopefully, it is because you sold a project and made a bunch of money. The other option is a partnership buyout or dissolution and takeover of a partnership because maybe one of the partners did not act in their best fiduciary practices. None the case, it all comes back to those operating documents that you both negotiated and signed when you either structured or invested in the project. The hard work upfront prevents the painful work on the back end if something goes wrong. Finally, always be professional and courteous throughout the process. Remember, even though things go wrong and certain partnerships weren’t the right fit; the world is still a small place, and more than likely if you work in the same market or industry those people will come back to you eventually over your lifetime.
Now that we’ve taken a comprehensive look at what it takes to find, vet, nurture and eventually end a business partnership, you should be better equipped to decide whether or not partnering is the right move for your company or investment. If you’re interested in taking things to the next level with a potential partner, we suggest clicking on either link below. Whether you’re an operator or investor we want to be a resource for you for future investment opportunities for your capital or be a future capital resource and partnership for your project.