As an entrepreneur in your business, you are wired to seek and get excited about opportunities. New people, new options, a new environment, or a new place all present a wide variety of possibilities. You want to take advantage of the things that will help your business excel and leave by the wayside things that will only complicate with no reward. An opportunity that comes up not infrequently is that of forming a partnership with another appraiser. If you have strictly an individual entity, this question may never come to you in your lifetime. But if your business is growing, if you are hiring appraisers, and establishing an appraisal firm, you might have someone come to you and ask about this possibility.
At the beginning it could sound tempting, sharing ownership of all the responsibilities you juggle every day. But the reality of sharing revenue may not be worth the work if it’s not done correctly, and it can be a risky road for both people involved. You don’t want to be paired with someone who receives 50% of the revenue but doesn’t carry 50% of the weight. However, a partnership with the right benefits could be your best next step. Consider your answers to these questions to see if a partnership is really the next opportunity you want to take advantage of.
The first question you need to consider is “Why?” This is the most important question you can ask. Just because a partnership sounds good isn’t a good enough reason. You need clearly defined advantages. You need to know how it will benefit you now and in the future.
The next question to consider is “Who?” You can’t just pull any Joe off the street and expect to have a successful partnership. See if you can work with them for at least a year. Come to understand how they are wired and how they could make a positive contribution. This needs to be someone you can trust and someone you can be compatible with, so that 18 months into it you’re not at each other’s throats ready to jump ship.
Lastly, “What?” What is your partnership going to have or not have to be successful? If it’s not set up well at the beginning, it won’t be sustainable. There are a few options when it comes to the logistics of setting the terms legally, financially, and in reality. General partnerships are formed by active participants. Each side is working. Each party doesn’t even have to be in appraisal necessarily, but in bettering the business and making positive contributions. A limited partnership is one where partners work passively. They may own a portion but may not contribute much to the daily grind.
The way that you look at ownership and the way that they look at ownership could be completely different. That’s why another important action item is to consult an attorney and/or CPA; they can shed some light on the subject and help you see clear options. Putting all this in practice could go smoothly or it could present unanticipated bumps in the road. You’ll want to be active in finding long term solutions. In reality, have a “get out” clause. Decide beforehand on an agreed on out. This prevents you from getting yourself stuck in something you don’t want to do or be a part of. And your out shouldn’t have to be turning around and giving up your ownership, being left with nothing.
A partnership done right is something anyone can be open to. But before you make a short-sighted decision, make sure you know the specifics of why this would benefit you, who you can rely on to do the dirty work with you, and what you will do to put your dreams and goals into practice.
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: