Why You Probably Shouldn't Have a Business Partner

Mike DeHaan: [0:00] What's going on collecting keys listeners? Welcome to today's Friday Focus. If it's your first time here, my name is Mike DeHaan. I'm the guy who was living the good life in my late twenties with a high paying engineering job at Boeing, and then decided to light all that on fire and create my own destiny. I eventually found that in the form of an off market real estate business that did about 3,300,000 in revenue in 2023 and allows me to travel the world while running my virtual team and buying properties all over The United States. We are the show that teaches you how to make massive income, not just passive income with your real estate business. And on these Friday focus episodes, we talk about whatever has currently piqued their interest or has been suggested by a listener. So if you ever want to suggest a topic, hit me up on Instagram at mike underscore invest, and I would be happy to consider talking about whatever you would like to hear. But today, I'm going to address one of the most common topics that my business partner Dan and I get asked about, and that is regarding how we function as business partners. And when it comes to business partners, there are a ton of different conversations you can have around how to split responsibilities, how to align goals, how to set expectations for each other, keep each other accountable, sort of stuff.

Mike DeHaan: [1:11] And that's all well and good, but, you know, I like to take a contrarian approach to things. If you've heard me talk about business or real estate sort of things before, you know that I tend to be looking at things at a slightly different angle. And so what I'm going to dive into is why you probably shouldn't have a business partner and not exactly about how we arrange ours because honestly, it's not really relevant to most of you. And so like, when I say you probably shouldn't have one, I'm not saying like why you should consider not having one, but I'm very literally saying that you, the listener, sitting in your car, or working out at the gym, or out on a walk, or cooking dinner, or whatever the heck you're doing right now, you should probably very literally not have a business partner if you are an early phase entrepreneur. Alright? So let me talk about why. Most people, they want business partners kind of for like the wrong reason. Okay? So everyone always has a spin around how, you know, they need one because you guys have different skill sets, you come from different backgrounds, you need to divide like the work when you're first starting out. But if you're being completely honest, most new entrepreneurs, they want a business partner out of fear.

Mike DeHaan: [2:25] Right? They are afraid of failing, and they want someone else to fail with, or they want like an excuse about why something failed, and they wanna be able to, like, project them onto the other person. A little harsh, but honestly, it's very true. We see it all the time. Or they're secretly very lazy, and what they want is somebody else to do the incredible amount of work, or they wanna be able to pass off 50% of the incredible amount of the work it will take to start your business. And they want like a partner to kinda carry them on their back. And I see that a ton, especially when you have somebody that is from like a slightly higher financial position that has a quote unquote business partner that is gonna be coming in with like the hustle is what they really want is they just want someone to, you know, do all the work, and they're going to be the beneficiary of it. And the thing is with both like this fear and the slaveness sort of excuse. And if you're listening, you're probably like, well, I'm not either of these. Be honest with yourself, very, very common. These are the reasons people wanna start out with partners. They're both bad excuses, and they're really gonna inhibit your growth and your opportunity, and likely prevent you from ultimately being successful over the the long run, because you're not gonna build a lot of the habits and the grit that you need to be successful as an entrepreneur. Growing a business is all about leverage. Like a completely unleveraged business means you need to be 100% involved in anything and everything to operate the business and for you to make money. And leverage can come in a lot of different forms, be that financial leverage, getting loan, and technological leverage, right, building systems, doing automation to save time, things like that, or human leverage, hiring staff, and people that work in your business.

Mike DeHaan: [3:59] And a business partner is fundamentally just the most expensive form of leverage you can get. K? It is a financial leverage because you will forever be indebted to them for 50% of your company. And it is human leverage because it's a staff member that is basically taking 50% of your commission on everything that you sell and has 50% equity in the company. Right? And even though they're bringing in work, that is an extremely high paid person. If you think about it from a full org chart. Okay? If you think about from a compensation structure, you would never pay a teammate 50% commission and give them 3% equity. And ultimately with a business partner, that's what that person is. And sure, they can provide asymmetrical value or different things that a team member may not have. But more often than not, when a person thinks they need a business partner, what they actually need is to have a person on salary. They can just come in and do a lot of the stuff that they either don't know how to do or don't wanna do. You know, and along the same lines, if you keep that individual that you're bringing on as a team member that isn't getting 50% of your money, as opposed to a business partner, you're going to reach your financial freedom and your growth goals in your business significantly faster because you're gonna be able to more individually reinvest or to pay yourself. And I guess the major point is when most people think they want business partners, what they really want is that team member.

Mike DeHaan: [5:18] And if you're like, there's always this concern about being able to afford them. But the thing is if you really can't afford to pay someone like 60 or 80 or $90 a year, you're not willing to go overseas and like figure out some of that sort of stuff, you probably are still in the solopreneur phase, and you should be grinding things out, and you shouldn't be looking at bringing in a business partner. Because like, you need to learn how to be an entrepreneur and to make money first. Right? So it's not an unpopular opinion, but honestly, it's the truth. I'm not saying that like I'm an anti business partner, because I'm definitely not. I I think good partnerships are key to growing massive business. In fact, a lot of venture capital companies won't even invest in companies if they don't have multiple partners. I think on average, they want them to have three. But when you're a new entrepreneur, what you need to do is learn how to make money, do business, and then honestly, once you are at that phase where like, I know how to make a million dollars a year, I wanna know how to make multiple millions, I wanna grow a team and a product, That's when you look at bringing on a business partner.

Mike DeHaan: [6:15] Right? You know, you can hustle and grind your way to a million dollars a year on your own, over with one or two staff members, learn how to market, create the product, do everything else in the business. Is it easy? It's not, but it is absolutely doable. And then once you cross that threshold, you decide to move on to your next thing, then you can see if it makes sense, you're gonna business partner. And I think that so many people are just driven by this early phase, like, just sort of desire to do things with somebody else that it kinda clouds their judgment on what they should really be doing when they're trying to figure out the entrepreneur. And what'll happen is people hopefully regularly, like, look at Dan and I when I talk about stuff like this. And they say, like, well, you guys have a business partner. How can we decide to do that, you know, if you could've just hired somebody? And here's the thing. Honestly, Dan fucked up. Like, he was in a position of power when we started, And he could have he chose to bring me on as a 50% owner in our business. This made sense for us to that time. He had a much better financial position. He was much more stable. He had a lot more experience doing a lot of the tricky parts of real estate. Sure, And I was kinda like learning the systems, different things like that. But if he had come to me and offered me like 80 or $100 a year to come work with him to grow a real estate business, I would have absolutely done it back. Okay. I was kinda neck deep in figuring out my own real estate.

Mike DeHaan: [7:31] I did not have a consistent income. If he had offered me the ability to make consistent income within real estate, I would have definitely done it. And then instead of him having to now share 50% of this business, he could have gone and you know, paid me a good salary had me as like a higher tier employee, and had mostly it for himself, had a lot more flexibility. I mean, it's been mutually beneficial, but very legitimately, he could have not gone that way and that would be completely different. Okay? And all this to be said is just like be smart around how you're sort of approaching the early phases. I think it's so so easy for people that are early on to overly give away parts of their business or their upside or their revenue for reasons that don't really make sense and are honestly just coming from a place of ignorance or fear or, you know, laziness in some cases even. Like, honestly, like, if you're if you're a younger guy and you have an older gentleman who's been in the game for a while that approached you and wants to be a fifty fifty business partner, understand he is expecting outsized returns for you to be doing a heck of a lot. And if you're okay with that, that's fine. It's just that I think that so many people, they don't understand the trade offs of a business partner, and they come in and honestly because it feels like a fun thing to do, which is okay, but like, you probably don't need a business partner.

Mike DeHaan: [8:48] Alright. Well, I rattled on there a little bit off over the place. I apologize for that. But I do appreciate you guys listening. You wanna come invent to me about how your business partner isn't pulling his weight or how I'm completely wrong and I just look at things in an uncollaborative nature, go ahead and hit me up on Instagram at Mike underscore invest, and I'd be more than happy to tell you about how you your problems are your fault, and you probably shouldn't have brought on a business partner. I should have instead hired a w two operator. But no. I just I would never tell you that unless I truly thought it. But hit me up at Mike underscore Invest on Instagram. Let me know your opinions. Let me know things that go well with your partnerships. Let me know things that you wish could be done differently. And I'd be more than happy to give you my perspective if you would like to hear it. So shoot us a follow-up. We're ready to listen to your shows, and I appreciate you all. Talk to you guys next week.