Do You Really Need a Business Partner?

Speaker 1: [0:02] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:25] What's going on, guys? Welcome to this edition of the collecting keys Friday focus where Dan or myself, we choose a topic and we just do a little deep dive on it, something that's relevant either to us or to our business or real estate at the time. Today, you have me, Mike DeHaan, and I am recording this from Cape Town, South Africa. I'm currently on a trip with my wife. And as I'm traveling and our, you know, business continues to operate, I had something that I've been sort of resonating on, and it is business partners. While Dan is back home in Spokane holding down the ship, it made me start to think, you know, business partners, when should you have them? When should you not? What are some of the pros and cons? And there's also something that gets asked relatively regularly by new investors that we talk to because, you know, everyone not everyone. A lot of people see the relationship Dan and I have and how our business functions, and they think that's how theirs should as well. When in reality, that's not always necessarily the case. And I will say that Dan and I are somewhat unique in the way that we have a very good relationship outside of work. We have done for a long time, and it's been very easy for us to carry that into our business and not have things become weird just because we have, you know, full undying faith in each other's ability, and we have a very defined set of roles. So I was gonna dive into business partners and, you know, reasons to have a business partner, reasons to not, pros and cons of having them and not having them, and then number one tip that I have for having a business partner if you choose to do so. So we'll dive in here.

Mike DeHaan: [2:07] So first off, I'm gonna go through the negatives. The reasons to not have a business partner. And I think the number one reason to not have a business partner is because you feel like you should. A lot of people that are new to business, they always feel like they need to have a partner. And it's simply because they're scared of the process or because they see other people that have partners, and they think that that's what their business should look like, but that's probably the worst reason. You know, a lot of people will say that they want one to reduce risk, but, ultimately, you're probably creating even a little bit more risk because, you know, you now have somebody else's family involved, somebody else's finances, somebody else's decision making. And, ultimately, if you're the only person that's involved, sure, you might have a little bit less financial risk if they're bringing in 50% of the money, but you're going to have other baggage that comes along with that in terms of somebody else having influence on the decision. So if you do have to make a quick adjustment, you're not equally aligned, having a business partner is not actually gonna reduce your risk at all. And I think the last sort of reason that I see a lot of people who they wanna get a business partner is because they are working too much and they want to work less. And I think that dangerous thing with that in fact, I had a friend recently who reached out and asked me about this, is he's he wants to bring in a business partner to help him scale because he doesn't know if he can handle the workload.

Mike DeHaan: [3:30] But his business is crushing. He's making a lot of money. And I would say that's probably the worst time to bring in a business partner because you're now going to be giving giving away 50% of your business to someone who didn't help you build it. Right? And it's something that, you know, most of the time when you feel that way, you can probably hire somebody for a lot less than that business partner will cost you to come in and do that work. So, you know, people, especially newer entrepreneurs, they sort of lean on having a business partner. They don't feel like they can pay people. They don't wanna pay people. But if you feel like you're working too much and you want someone to come in and assist you, you should probably look and find an employee instead. So main cons with having a business partner, kinda just leaned on before, a, you give up half your business. Right? If you are at a position where you're making good money and you just wanna start scaling rather than giving up half your business, go and find employees that are worthwhile that you can pay, you know, a fixed rate that can help you do that. It's gonna end up being a lot cheaper, especially if you start to scale your business exponentially. You know, at the time, sure, it might cut into your bottom line. But all of a sudden, if you're making several million dollars a year, you'll wish you just had those 50 to $80,000 employees, you know, if you started to build it yourself.

Mike DeHaan: [4:39] Other cons are there can be legal issues if you don't see eye to eye. If you get you know, if you have a business partner that comes in and injects money into your business, you're not tied to that personal legal capacity. If they decide that they want out or they wanna pivot, they're gonna have a very strong legal say in how that looks, how that exit looks, you know, what they're gonna want to receive in compensation, and that can actually end your business if you're not careful. And the last sort of big con with it is depending on your relationship with your partner, if you came in as friends and there's, you know, maybe some different history and stuff behind the situation, it can threaten friendships. And there are lifelong friendships that, you know, all around the world that haven't ended because they were super good friends before. They decided to start a business. Things don't go well, and it just ends the relationship entirely. So you kinda need to be willing to risk that if you're gonna go into business with a friend. Now that's all the negative stuff out of the way. There are a lot of reasons to have business partners and a lot of pros. And so I would say one of the very great reasons to have a business partner, especially if you're early on and you don't necessarily have money to pay someone, is if you have a business partner that has an opposite skill set to you, and you guys would make a good complement to each other, and they are equally aligned. So a lot of people, you'll see them. They'll I feel like this is such like a a guy thing as well where you're like, you know, you're hanging out with your friend, drinking some beers. You come up with a business idea, and you guys are just, like, on the same page. You know, like, yeah.

Mike DeHaan: [6:10] Let's do this. So you go and you start this business. But the problem is more often than not, you kind of have those same views because you have the same skill sets, and the same things are enticing to you. And if you have that sort of setup and you go into starting a business like that, you're gonna just sort of, like, run into each other's way. You're not actually gonna compliment each other. But, know, like, when Dan and I started, I had the technical background and the ability to set up the marketing and manage all of that stuff, and Dan had the practical real estate background. So we basically came in with very opposite skill sets that allowed us to grow very, very well. And I would say that probably the biggest reason though to have a business partner and something that Dan and I personally have found very beneficial and has really helped us grow is if you find that you are someone that's motivated by helping someone else succeed. Not everyone's like this. That's okay. But then even we regularly joke that if we didn't have each other, we probably wouldn't have done as well in our business, and we wouldn't have kept going with it. Because there are a lot of ups and downs, but the one thing that has sort of pushed both of us is that we do like to see each other do well, and we wanna do well for each other. And if you're trying to have a business partner purely for personal growth and personal development, then it's probably not the best idea. So biggest pros of having a business partner outside of those reasons you have a business partner is a, it honestly is just more fun to be successful with friends. You know, if you have someone that after a big win or, you know, big losses, whatever that you can talk to truly and sincerely about it, you know, and you can celebrate things with, you can overcome things with, that is more fun to do.

Mike DeHaan: [7:48] At least in my experience, don't Everyone thinks that way, but I do think that most people will fall into that camp. Another big pro is that you will have more flexibility, like, just with your general business and day to day, especially early on by having someone else with ownership. If you're kind of at that phase where you're growing and you don't have the ability to bring on, a COO or an operator yet on staff, you're gonna be pre tied to your business. You're not gonna be able to travel and do other things. And that's sort of something that spurred me as well in the recording this podcast while I'm I'm out here on a trip is that I'm extremely fortunate that Dan's willing to put up with all the shit while I gallivant around the world. You know? And then as mutual, like, he's had a couple of kids in both of those situations. You know, stuff comes up with his kids and his family. I'm able to pick up the slack there, and he's willing to cover for me while I go and do my traveling with my wife, which is something that's very important to us. And having someone that's fully invested in the business, it's gonna be much more reliable with that than having, you know, an employee, like a basic employee, unless you have, like, a really high level employee.

Mike DeHaan: [8:50] And the last pro for having a business partner is if you have someone that has the right skill set, the right ownership, the right commitments and connections compared to most employees, they're really going to be able to 10 x your business. But keep in mind that it's going to be difficult to find that person. And more often than not, you're not even necessarily gonna know that that person's gonna be able to do that until they come in, and you kind of have to risk it and try it out. Because especially if you have something good going on, and this sort of reflects back on my friend as well that I talked to that was looking at bringing on a partner because you wanna work a little bit less. If you start doing well, people are gonna want a piece of that. People are gonna wanna, like, join your business, gonna be able to offer you money. They're gonna have a pitch for you about why you should bring them on as a partner. But you need to really analyze and underwrite them and see if that is a possibility. But if you find that person, it's gonna be able to escalate your business in ways you never imagined. I mean, I have a friend down in Texas. He was a one man operator for so long, and he was doing super well. But he always struggled with, like, the analytics and marketing side of it. And then finally, he found someone that was, like, a good pair up, and they had opposite skill sets, and they they matched up. And now their business is absolutely destroying it. I imagine they've done more deals, like, this summer than he did by himself all of last year.

Mike DeHaan: [10:12] So, you know, they had equal ownership in it. They had opposite skill sets, and they have allowed each other to 10 x their business. There are ways that can happen. Now if you do wanna have a business partner, some of these pros resonate with you. I think the most important thing to do if you're gonna have one is that this is the number one tip that I would give if you're gonna bring in a business partner. You're gonna have a business partner with whatever you're doing is that you set extremely explicit expectations of each other's roles and what you expect from each other. The biggest place that I see business partnerships start to fail is when people come in, and they are kind of trying to do the same stuff. They're trying to work on, like, the same parts of the business. I see this all the time. In fact, I think most businesses fall into this trap. Trying to work on the same thing as the other person, either both have too much ownership and they kinda fight about it, or neither one has enough ownership and stuff doesn't get done. But if you have a hard line in the sand, then it's very easy to just know that if stuff is slacking, who it's on, and if that's doing really well, who to praise. Right? So, like, for Dan and I, I completely manage the acquisitions for the most part. I manage the marketing.

Mike DeHaan: [11:23] I do everything in the back office. Dan runs our flips. He now manages our dispo. He does everything basically in the front office. Right? And that's just a hard and fast rule that that's how the business is divided, and it works out extremely well that way. So all around, lots of pros and cons to consider with having a business partner. Don't feel like it's something that you need to have as many new entrepreneurs do, but also don't shy away from it if it's something that you do think you would benefit from. Just make sure that you really, really put some thought into it and don't give away a bunch of your business for no reason, but also don't hinder yourself because, you know, you're afraid of the the downsides it. So you kinda need to decide what's best for you. Anyway, guys, thanks so much for listening to this edition of the Friday Focus. I really do appreciate you all. Please go and subscribe to this podcast and share it with anyone who might find it interesting. If you wanna follow us, you can go and check out collecting keys podcast on Instagram. You can follow me at Mike underscore invest. And if you wanna learn how to build a business like Dan and I have, go and check out the instantinvestorprogram.com. It is our group coaching and mastermind program is really starting to take off here. We've gotten a number of new members, and we're super excited about the direction that's going. So instantinvestorprogram.com, go ahead and schedule a call. I mean, we'd love to chat with you.

Mike DeHaan: [12:38] Besides that, guys, thanks so much, and talk to you week.

Speaker 1: [12:42] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.