10 KEYS to a TERRIBLE Business Partnership Ep 426



In this episode of the podcast, Alex Hormozi, owner of acquisition.com, discusses the pitfalls of poor business partnerships and how to avoid them. He emphasizes the importance of partners having complementary skills in knowledge, money, and time to bring value to the business. Hormozi advocates for clear expectations, equitable agreements, and aligned missions, values, and interests between partners. He also warns against partnering with someone who shares the same knowledge base or has a messy personal life, as it can lead to a dysfunctional business relationship. Hormozi's insights are aimed at guiding entrepreneurs towards creating synergistic and successful partnerships.

Summary Notes

Business Relationships as Marriages

  • Business partnerships are akin to marriages, with personal lives influencing the business.
  • Extracurricular activities of partners can impact the business relationship.

"When you're in a business relationship, you're in a marriage, and their extracurricular life is going to get dragged into the business, I promise you."

Alex Hormozi emphasizes the interconnectedness of personal life and business in partnerships, suggesting that one's personal activities can affect the professional relationship.

Building Businesses and Documenting the Journey

  • The aim is to discuss strategies for selling and business growth.
  • Alex Hormozi is documenting his journey in building a billion-dollar business for educational purposes.

"Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with acquisition.com. I always wish Bezos, Musk and Buffett. Had documented their journey."

The speaker introduces the podcast's focus on business strategies and expresses a desire to provide a documented roadmap similar to what they wish industry giants like Bezos, Musk, and Buffett had done.

Inverted Thinking for Partnerships

  • Charlie Munger's concept of inverted thinking is used to understand partnerships.
  • Discussing how to create a terrible partnership to highlight what should be avoided.

"I want to give you the keys to having a terrible, terrible partnership. In reason that we're going to talk about it in this perspective is because my big hero Charlie Munger talked about inverted thinking as one of the best ways to solve problems."

Alex Hormozi introduces the topic of partnerships by referencing Charlie Munger's strategy of inverted thinking, which involves considering how to create a bad outcome in order to understand how to achieve a good one.

Alex Hormozi's Background

  • Alex Hormozi owns acquisition.com, a portfolio of companies.
  • The content aims to help listeners make money and potentially join his portfolio.

"And if you don't know, hi, my name is Alex Shamozi. I own acquisition.com. It's a portfolio of companies over $100 million a year."

Alex Hormozi introduces himself and his business, acquisition.com, setting the stage for his credibility in discussing business partnerships.

Criteria for Terrible Partnerships

  • Discussing 10 ways to ensure a disastrous business partnership.
  • The goal is to teach through negative examples.

"I will give you, let's see, 1234-5678 910 different things that you can do to guarantee absolutely atrocious, terrible partnership that you wish you could just not live anymore."

Alex Hormozi prepares to list ten specific ways to create a terrible partnership, using a satirical approach to highlight what not to do.

Knowledge Base Alignment in Partnerships

  • Partners with identical knowledge bases make one partner unnecessary.
  • Lack of complementary skills leads to no incremental benefit.

"So number one is that we're going to make sure that they have the exact same knowledge base as you."

Alex Hormozi discusses the first way to ensure a bad partnership: partnering with someone who has the same knowledge as you, which he argues is counterproductive.

Time Misalignment in Partnerships

  • Time commitment in partnerships should be complementary.
  • Misalignment in time availability can contribute to a poor partnership.

"Make sure that they have the same amount of time as you. Or disproportionate. And what I mean, there is the big three on partnerships is knowledge, money, time, right?"

Alex Hormozi explains that for a partnership to be terrible, partners should either have the same or disproportionate amounts of time to contribute, which is not ideal for a balanced partnership.

Partnership Dynamics

  • Partnerships require complementary assets, such as money, knowledge, and time.
  • A partnership where both parties do not contribute unique value is likely to fail.
  • Entering a partnership with equal value prevents imbalance and potential conflict.

"Getting into a partnership, if one of you has money and the other doesn't, then that's value that's being added to the relationship. But if you're going to partner with somebody and they don't have money that you don't have, and they don't have knowledge that you don't have, and they don't have time that you don't have, then why would you do the partnership?"

This quote emphasizes the importance of each partner bringing something unique to the table, such as money, knowledge, or time, to create a balanced and valuable partnership.

Expectations in Business Relationships

  • Clearly defined expectations between partners are crucial for a successful partnership.
  • Misaligned expectations can undermine the partnership's stability and success.
  • Discussing and agreeing upon roles and responsibilities helps avoid misunderstandings.

"So it's like, hey, what do I expect you to do? What do you expect me to do?"

This quote highlights the need for partners to communicate and set clear expectations for each other's roles within the partnership.

Importance of Formal Agreements

  • Formal agreements are essential to outline the terms of a partnership and expectations.
  • Handshake deals without written agreements can lead to disputes and are not advisable.
  • Contracts facilitate difficult conversations and ensure mutual understanding.

"And those expectations, we want to make sure, and this is number five, is that there's no agreements. We don't record it anywhere. We don't write it down. We do it on a handshake because we're old school."

This quote ironically points out that avoiding formal agreements is a poor practice that can lead to a "terrible business relationship."

The Role of Contracts

  • Contracts are not just about legal enforcement but about clarifying expectations.
  • They provide a platform for partners to discuss and resolve difficult issues.
  • The goal of a contract is to never need to use it because it ensures mutual understanding from the start.

"That is the purpose of the contract. It's not to get lawyers involved. Purpose of the contract is that we have clear expectations. That is why contracts exist. Clear expectations on agreements."

This quote explains that the primary purpose of a contract is to set clear expectations and agreements between partners, not necessarily to involve lawyers or legal action.

Promotional Announcement

  • Alex Hormozi announces the release of a lost chapter from "100 Million Dollar Offers."
  • The unreleased chapter provides valuable insights on customer segmentation to increase profits.
  • The chapter is offered for free in exchange for an email, ensuring subscribers get early access to the upcoming "100 Million Dollar Leads."

"For those of you guys who are 100 million dollar offers fans, I love you. I added in a lost chapter that has never been released. I'm releasing it now transparently. I'm doing that to build hype for 100 million dollar leads."

This quote serves as a promotional announcement for an unreleased chapter of Alex Hormozi's book, aimed at providing additional value to fans and building anticipation for his next release.

Disproportionate Resources and Lack of Clarity in Partnerships

  • Partnerships should not have equal distribution of time, money, and knowledge, or else one partner becomes unnecessary.
  • Different expectations between partners can lead to issues if not clearly communicated and agreed upon.
  • Without written agreements, there is no clarity on each partner's responsibilities.

"We got to have disproportionate time or money, right? So all those things, time, money, knowledge, we're all matched on those, which means that one of us isn't necessary."

This quote highlights the importance of each partner bringing unique resources to the table to justify their role in the partnership.

"On top of that, we have different expectations, and we didn't write it down. So there's no agreements and there's no expectations that have been communicated about what you're going to do and what I'm going to do."

The lack of written agreements and clear communication of expectations can lead to misunderstandings and conflicts in the partnership.

The Dangers of Giving Away Everything in a Partnership

  • Giving away everything and doing a disproportionate amount of work can lead to resentment.
  • A partner doing less may try to exploit the other, leading to renegotiation and conflict.
  • Anticipating equity issues and creating relationships over contractual agreements can be beneficial.

"Give away everything in the partnership and do a disproportionate amount of work at the onset, because that way you'll just definitely make sure that you can garner resentment towards the other person."

This quote sarcastically suggests that over-contributing can lead to resentment, emphasizing the need for balance.

"Give them more and you'll actually start to create a relationship rather than a negotiated contractual agreement, which at the end of the day, that's all contracts are supposed to do, is just outline the expectations between two parties."

The quote recommends creating partnerships based on relationships rather than strict contracts, as relationships can foster a more equitable and positive dynamic.

Misalignment of Mission, Values, and Vision

  • Partnerships often fail due to misaligned missions, values, and visions for the business.
  • Partners may have different ideas about the direction of the business, how to get there, and their values in dealing with others.
  • Misalignment can cause continuous strife and conflict.

"We want to make sure that we have a misaligned three things, mission, values, and vision, all right? Which means that we don't actually want to take this business to the same place."

The quote sarcastically points out that misalignment in mission, values, and vision is a recipe for failure in a partnership.

"What are the things that are important to us about how we deal with other humans, right? What are those values? And if some people have different values, becomes very difficult to do business, even if you want to accomplish it the same thing because you want to do it different ways."

This quote emphasizes the importance of shared values in how partners interact with others and conduct business, suggesting that differing values can impede collaboration even with the same goals.

Lifestyle Differences Impacting Business Partnerships

  • Partners with different lifestyles, particularly in financial habits, can negatively impact the business.
  • Personal life issues of a partner can intrude into the business, affecting its reliability.
  • Choosing a business partner should be as careful as choosing a spouse, considering their personal life and habits.

"It's very difficult to do business with somebody if you're like, you're a Dave Ramsey Saver and you live far below your means and you're doing business with somebody who lives far above their means and goes into debt all the time."

This quote warns of the potential conflicts that arise when partners have incompatible financial lifestyles, which can strain the business relationship.

"If they've got all this crazy stuff going on in their personal life, it's a great way to guarantee that stuff is going to trickle into your business."

The quote cautions that a partner's personal life issues are likely to affect the business, underscoring the need for careful consideration of a partner's personal circumstances.

Frameworks for Considering Business Partners

  • A partner should possess knowledge, money, or time that complements what you lack.
  • Partnerships should be based on bringing unique assets to the business, not just matching what is already available.

"So framework one is that they got to have knowledge, money, or time that you don't have."

This quote outlines the first framework for considering a business partner, which is that they should contribute something you lack to create a balanced and effective partnership.

Equity and Partnership Dynamics

  • The value of equity in a business partnership is emphasized.
  • Equity should be given to those who will significantly contribute to growth.
  • It is not necessary to give equity to every individual who fulfills a need within the business.
  • A partner should bring unique value to the table, such as time, money, or knowledge that the other does not have.

"Equity is the most expensive thing that you give up in a relationship. So you want to make sure, especially if you want to build something big, that you're giving away equity to people who are going to really drive the growth."

This quote highlights the importance of being selective about to whom you give equity, as it is a costly resource in a partnership. Equity should be reserved for those who will actively contribute to the business's growth.

"So on the flip side, make sure that they have time, money, and knowledge that you don't have, right? Either they got money you don't have, they got time you don't have, or they have knowledge you don't have or experience, right? So they can bring something to the table that you don't already have."

The quote reinforces the idea that a partner should possess attributes or resources that complement your own, ensuring that both parties are essential to the business.

Expectations and Agreement Documentation

  • The importance of aligning and documenting expectations in a partnership is stressed.
  • Agreements should be equitable, well-understood, and formally recorded.
  • Proper documentation and aligned expectations reduce the likelihood of a poor partnership.

"Make sure that they're equitable, make sure that they're well understood, and making sure that they're documented."

This quote stresses the need for clear, fair, and documented agreements between partners to prevent misunderstandings and ensure a successful partnership.

"You want to make sure that you set expectations, that you document them, and that you make sure that they're equitable."

The quote reiterates the importance of having documented and fair expectations, which is crucial for the stability and success of a partnership.

Mission, Values, and Similar Interests

  • A successful partnership requires alignment in mission, values, and interests.
  • Partners should be proud to associate with one another both professionally and personally.
  • Similar decision-making processes with the same information indicate a strong partnership.
  • Complementary skill sets, along with aligned goals and values, can lead to a successful partnership.

"And the next one is that you want to make sure that there's aligned mission values and similar interests. You want to deal with the types of people who see the world the same way as you have the biggest long term goals, and they want to do the process of getting from where you are to where you want to go the same way you do."

This quote emphasizes the importance of sharing a common vision and approach to achieving goals within a partnership.

"And the easiest litmus test is if you present both of you with the same data, would you make the same decision. If the answer is yes, then you'll have far less conflict in your partnership over the long haul."

The quote suggests that similar decision-making processes among partners are indicative of aligned values and goals, which can minimize conflict and contribute to a strong, lasting partnership.

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