Jim Link | Crain's Twin Cities

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Jim Link

Background:  

Jim Link is a frequent keynote speaker and the author of the award-winning book "Idea-Links: The New Creativity." His Stillwater-based company, Idea-Link Inc., specializes in the generation, refinement and positioning of new-product concepts.

My Mistake:

When creating a business partnership, I made a big mistake by not putting the proper legal documents in place.

For the first twenty years of my business, I remained partner-free by choice. I didn’t feel the need for a partner, nor did I want to deal with the complexity of adding one. My company was thriving, with a solid roster of corporate clients.

After I spoke at a conference, someone approached me offering to [develop into products] both my book and the proprietary processes I’d perfected. The prospect of leveraging my work to create passive income clouded my judgment, and I lunged headlong into my first partnership. Greed gets you in bad places.

The partnership ended within a year. It was strange. It was painful. It was the worst decision of my life.

Partnerships don’t [necessarily] end cleanly. They fail for a variety of reasons. Deep differences in ethics, operating philosophy, capacity for work and company vision [sometimes] are discoverable only after a partnership begins. If a partnership ends awkwardly, most often it’s [because] two well-intentioned individuals just couldn’t find a way to manage their differences.

Often there are intellectual property issues to iron out, especially if one partner created the original IP (me, in this case). Soon after we went our separate ways, my ex-partner set up a company mimicking mine, something he likely wouldn’t have attempted without a year of my training and access to my content.

While I’d like to think I was too trusting, as the saying goes, “there are three sides to every story.” I’m sure the ex-partner’s side sounds different.

What is undeniably true: Had I consulted a lawyer up front, she would have advised me to create confidentiality and non-compete agreements to protect my content and processes. She would have encouraged me to prepare for possible disagreements or dissolution. And proper vetting of my partner would have exposed differences I discovered only after it all crashed.

When it comes to joining forces, the adage 'good fences make good neighbors' becomes 'good lawyers make good partnerships.'

The Lesson:

When it comes to joining forces, the adage “good fences make good neighbors” becomes “good lawyers make good partnerships.” Since my own debacle, I’ve met other entrepreneurs who’ve raced into ill-advised partnerships without vetting their partner properly or putting the proper legal protection in place. It begs the question: Why does this happen?

The traits that make you a great entrepreneur can betray you when you’re creating a partnership. The entrepreneur’s nature is to move quickly and intuitively, with a high degree of trust and optimism. We get excited by growth prospects and have this sense that “everything will work out” or “we’ll figure things out as we go.”

Once the idea of a partnership gains momentum in our head, our excitement can overtake our logic. At the same time, we may feel hesitant to consult an attorney or introduce documents for the other to sign lest we insult them [by intimating] a lack of trust. The lesson: Do it anyway. A little discomfort up front prevents [a lot of it] at the end.

This “protect yourself” rule applies regardless of your entry position in the partnership. Whether you’re inviting someone into your business, being invited into an existing business as a new partner or forming a joint venture from scratch, you’re vulnerable to hasty decisions that can haunt you for years.

Entering a partnership can be the single best — or the single most regrettable — decision you can make. Go in with your eyes open and your t’s crossed.

Follow Jim Link on Twitter at @IdeaLinksBook.

Photo by Janet Goodwin