Many of you know that I don’t do partnerships. I’ve had some negative experiences in the past, and I don’t like the idea of being a part of one again. Nevertheless, this is a subject that comes up sometimes in the appraisal field. My first piece of advice when it comes to partnerships is this: always prepare for the worst-case scenario. You may say that nothing bad could possibly happen; that it’s your dad or your brother or best friend that you’re entering a partnership with. Unfortunately, no partnership is immune. I’ve seen such partnerships fall apart at the seams. When it comes to preparing for the worst-case scenario, I learned a negotiating tactic from a trainee that I love. This tactic works wonderfully when partnerships go south. You probably already know this tactic and have been using it for years, even if you haven’t heard the name before.
We all remember an instance, either as kids or as adults, when we were trying to split a commodity between two parties who both wanted it. As a kid, maybe it was a cookie. What did we do? Many of us did something like this: Have the other person split the cookie, and then we get first pick of the piece that we want. You split, I pick.
This buy and sell provision is called the Texas Shootout. If Jim and Pete were in a partnership that they needed to end, and they were using this tactic, Pete might tell Jim, “I think that my half of this business is worth $300,000.” Jim then has the option to either sell to Pete at $300,000, or pay him the same amount. I like this method because it forces people to be honest and fair, since they now have just as much to lose or gain as the other party involved. If you want a fair split, I recommend this technique.
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: