Are you thinking about buying a business in an industry you don't know much about?
In this video, Matt Duckworth of Deal Camp talks about how to do it safely and why partnering up can be a great way to reduce risk and increase success. He shares five reasons why people partner up, as well as the Jones Family Model, which has been a source of wealth for the family for over 100 years.
The Bank Committee Test
The first big test to consider when thinking about whether or not to partner up is the Bank Committee Test. When you go to a bank to ask for a loan to fund a majority of the purchase, the loan is presented and the bankers are looking at your deal and they're kind of scrutinizing everything.
One of the big questions that comes up is "Do you have any industry experience?" Bankers understand that industry experience counts for something and it can make financing easier.
Copying vs. Inventing
Partnering up allows you to copy systems that are already tested out, rather than having to invent in the new industry. This is much more reliable, faster, easier, and less energy-consuming. You know what the outcome is going to be, so the risk on the other side of it after it's implemented is a lot lower.
In many ways, this is why people buy franchises. The playbook to success is already written.
Reducing Workload and Having More Fun
Having a partner also reduces workload and, if you get the right partner, makes the great game of business more fun. Whenever you're down, they may be able to pull you up and whenever they're down, you may be able to pull them up. This levels out some of the emotions of growing a business.
The Value of Momentum
Another reason to partner up is to consider the value of momentum. Whenever you've been in a company that has lost momentum, employees start leaving, customers become fickle, and - to put it bluntly - life just starts to suck. Having a partner can help you gain momentum and confidence, which allows you to get better people on board... and those people can be the difference between winning and losing.
Sticking to What You're Good At
The fifth reason to partner up is to stick to what you're good at. If you're good at sales or marketing and your partner is good at operations, you'll end up spending most of your time in the roles you're both best suited for. This is more enjoyable for everyone around you and you'll learn faster and be more effective because you're in your sweet spot.
The Jones Family Model
Matt Duckworth learned the Jones Family Model from a very wealthy member of the Jones family who he met when he lived in Austin, Texas. The model is simple:
- Identify a great market opportunity or industry
- Find the best people in the world who are experts in that industry opportunity
- Put up all the cash and
- Give the expert partner 50% equity in the new venture
This unlocks all of the potential trapped in a person because they don't have the capital and unlocks the latent opportunity in the market by providing the resources and team necessary to seize it.
Partnering up can be a great way to reduce risk and increase success when buying a business in an industry you don't know much about. Matt Duckworth shared five reasons why people partner up, as well as the Jones Family Model, which has been a source of wealth for the family for over 100 years. By understanding the value of momentum and sticking to what you're good at, you can make the most of your partnership and grow your business faster.