For a business partnership to work, you and your partner need the same values, vision, camaraderie, and strength in different areas. If you manage to find the right people to work with, success will come in no time. But not all partnerships are as straightforward as that. It takes time and patience to trust each. It’s only growing pains; it happens to everyone. Learn how to build partnerships with Eric Anderton and his guest, Matt Stewart. Matt is co-founder and Co-CEO of National Service Group (NSG), which operates College Works Painting, Empire Community Construction, Home Genius Exteriors, and SMJJ Investments. He has been partnering with three other individuals for over 25 years. Join him as he talks about how they got through the rough times and how they communicate daily. Build strong partnerships today!
—
Watch the episode here
Listen to the podcast here
Partner Paradise: How To Build A Healthy Business Partnership With Matt Stewart
How can you build a successful partnership? I have had many conversations over the years with construction company owners who are in a partnership and it is deeply challenging that’s why I’m very excited to have you as a guest on the show, Matt Stewart. He is a Cofounder and co-CEO of the National Service Group, which operates a variety of different businesses in the home services business. I’m having him on the show because he is an expert at building a partnership. He is in a partnership with three other individuals and has been in that partnership for many years in a variety of different businesses.
There are three things that you need if you are going to have a successful partnership. Number one is you need time. Number two, patience and number three, communication. We hit on this in great detail in our discussion and we also talk about very specific things that you can do to keep an alignment in a partnership. What to look for when you are getting into a partnership.
We have a side discussion about halfway through the interview that is extremely valuable and that’s on identifying your core competency. You’ll want to make sure that you read to that. I have a link to an article from the Harvard Business Review that will be useful for you. You should check it out. It’s called The Core Competence of the Corporation.
Matthew is no-nonsense, straightforward and very engaging. I know you’ll enjoy this interview. Feel free to reach out to him. He has his own podcast. It’s called The Edge of Excellence. He’s very generous with his time. You can tell by reading this. He’s got a ton of experience in this area. If you are in a partnership, you are looking to get into a partnership or you are having challenges in a partnership, this episode is going to be tremendously helpful to you. Enjoy my discussion with Matthew.
—
Matt, welcome to the show.
Thank you so much for having me. It’s nice to be here.
I’m excited to have you on because I know that in your business experience, you have been involved in a variety of different partnerships in the different endeavors that you are involved in. In my experience working with construction companies sometimes partnerships don’t work out. Why does a partnership in business fail, do you think?
I have heard it all my life. My partners and I were told so many times that our model wouldn’t work. We are co-CEOs, four of us. That doesn’t work. That’s ridiculous and it’s not been working for many years. $1 billion of revenue or more than $1 billion of revenue. We have had our difficulties and we have come to the brink of it not working.
My partnership’s interesting. There are four of us. The one key and this is hard is that we have four people. When there are four people, there’s one person that’s saying something different, there’s an odd man out and oftentimes that person is right but oftentimes three people are thinking more clearly. Whether you have 4, 2, 3 or 5, the key to our partnership is communication. We are constantly communicating and when we have had difficulty or are on the brink, it’s usually because our meetings have slowed down. We are not having meetings anymore. We are not talking to each other. We are not hanging out and having fun together.
Ensuring alignment, ensuring that we are going in the right direction, a lot of times, people don’t have any formal meetings. We have formal meetings but then we also have the informal discussions. After 11:00 at night is when the true storm comes out. We hang out too late in the evening. We go on two trips together a year. We are constantly making sure that we are talking. A lot of partnerships, they may lose the importance of that and I tell people we have a few different businesses and in my businesses, we have partnerships.
I say, “The most important meeting you have every week is not with your subordinate. It’s with your partner that you are talking and aligning and you have those Fierce Conversations,” which is a great book by Susan Scott. People think what the other person is saying, “Go ask the other person what they are saying.”
Another one is lack of trust and we used to have a lack of trust. During the first few years of a partnership, how do you trust each other? I have been in a partnership for a number of years. It’s like brothers now. In the beginning, we second guess each other. You’ve got to get through that time and learn to let the other person make mistakes, let the other person run and not micromanage the other person. In my experience, those are probably the two keys to partnerships not working out.
Let’s go back in time because that is unusual. Four of you as copartners and co-CEOs, how did you guys all meet many years ago?
We all worked in the same student painting business and there were two people that were higher up or as second to the top and then two of us that were at the grunt level and the company fell apart. The two higher-up people decided to restart that company and got the two grunt level, me and another guy, to come in. Then the two higher-up people left to go to the mortgage business. Me and another guy tried to buy the whole business. They said no. We became an equal partnership of four based out of need. Two people needed to work somewhere else and two people needed to be entrepreneurs.
Give the audience a quick overview of the businesses that you are in.
We have four main brands. We have College Works Painting, which teaches university students to run businesses and they run these little painting companies. They learn to hire, fire, sell, manage and lead while they are in college. They have to have worked a lot in the past. As you can imagine, a high failure rate. One of the biggest painting companies in the United States and we have one of the highest customer satisfaction ratings in the United States.
From that, we spun off a company called Home Genius that works on the East Coast and does everything but painting. It does home improvement, roofs, windows, gutters and siding. We have a commercial reconstruction company that works across the United States. Garden apartments are our bread and butter. We also do the high rises. We have an engineering firm as well and we make sure the towers don’t fall and we make sure that the apartments don’t leak.
Coming back to the structure of the partnership, am I right in hearing that there are two of you that are involved in the business and then two of the partners that are not so much involved or did I hear that wrong?
Two years like 1997 and 1998. All four of us are deeply involved. The four of us, for many years, co-ran all the companies. Years ago, we split off and we each took one business.
Explain that a little bit to the audience. When you were co-running the businesses, how did you divide up responsibilities?
We divided responsibilities based on what we thought we wanted to do and what we were good at. For example, my partners came to me and said, “Matt, you suck at working with the office team.” I’m a driver, I’m not detail-oriented and I have got very little patience and at that time, I sucked at working with the office team.
You have to confront your partners and the office is coming and saying, “We don’t like Matt.” Since then, I have learned to be wonderful at working with office teams that I have run some other organizations in the past that taught me that. I took DISC tests and all that stuff and figured it out. That’s one way. “We think this is a problem.”
The other way was, “I want to work with this person or I want to work in this area.” One person wanted to work in the commercial area so he went and worked in the commercial area. I like working with young people. I work with the young people. A lot of it is what you want to do. When we divide up what we want to do, we are left with what we don’t want to do and then we divide that up or we delegate it to other people.
Let’s talk about the communication rhythm. I’d like you to describe to me when you were all working together, the communication rhythm that you got in on a weekly basis, how did that go?
It became a weekly basis because it didn’t go. I think the natural communication rhythm is, “I will call you on my way home from work.” We didn’t go to the office at the same time so we are driving all over the place. “Maybe I don’t call you for a couple of days and then maybe I haven’t seen you for a while.” Our communication rhythm was off. When the communication rhythm was off, people are getting different information from us and where the one head of the company is now fragmented and the whole company is frustrated. We realized that we need to have meetings every week. When we don’t have meetings every week, we are not aligned.
How long are those meetings?
The most important meeting you have every week is not with your subordinate; it's with your business partner. Click To TweetWe have an hour-long meeting every week.
What was the topic of discussion in those meetings?
The topic of discussion of those meetings changes. We have two retreats a year. We go away for 4 or 5 days. I come up with an agenda for the retreat. I’m the anal-retentive person that drives these weird exercises that everybody hates but they know they need to do. Having those 4 or 5-day retreats where we are working on the strategic plan, the issues, the opportunities, everybody has to do a SWOT analysis.
That’s organized every month of July and December. During the one-hour meetings, we used to have agendas and I sent an agenda or somebody else would send an agenda. Now what we do is we basically briefly go through each area of the business so each person says, “Here’s what’s going on. Here’s what I need help with.”
It’s almost like a SWOT. It’s almost like, “Here’s my opportunities and issues. What do you guys think?” That’s what we are bringing every couple of weeks and then, in addition to that, we have the overall main ongoing opportunities or issues. Maybe there’s a lawsuit that we need to talk about. Maybe there’s a key hire, CFO or credit line that we need to talk about. There’s always the one big opportunity of the week or the month and then there are the updates on the different parts of the business.
It sounds like you divided the businesses up equally, 25% each. Is that right?
Everybody owns 25% each.
How do you reach a decision when there’s disagreement? You are in that meeting and you are butting heads and I say A and you say B and I’m convinced and you are convinced. What do we do?
That’s where everybody said it would never work and you’ve got to be patient. If you are reading right now and have been in a partnership for two years, you are butting heads and don’t trust each other, have faith and be patient. If your values and your vision align, it’ll come together but I’m an arrogant guy so it’s hard to deal with me. It took a few years to get to the point where we functioned.
What do you mean by values and vision? What do you mean by that?
There are two versions of that. There’s the personal vision but where am I going? Vision as a point on the wall, where you are headed to? Personally, where do I want to be? I want to impact the world. I want to leave with no regrets. My partners align with that. I know my partner, Spencer, makes decisions that are moral decisions, not financial ones.
He’ll always look out for our employees before he looks out for our partnership. We are aligned that way and that personal vision alignment helps. There’s the business vision. We want to grow or expand the business. We want to focus on our core competency, which we learned the hard way. We have a corporate vision and personal visions that align and then values what we stand for. Integrity, honesty, contribution, learning and love.
Those are my words, my family’s words but if you compare them to my business partner’s words and they don’t write them down the way I do. You compare them to the vision and values of the company, they are all aligned, which makes the decision-making easier. If I had one narcissistic part where we are a selfless group, if there was a narcissist in our partnership, our partnership wouldn’t work out that we didn’t have the same values. If there was someone that wanted to have a $1 million business and keep it that way forever and somebody else wants a $100 million business and work hard to get there, that probably wouldn’t work out. We have the same business vision, personal vision, business values and personal values.
You talk about patience and I agree patience is crucial in any partnership but let’s say you are revisiting an issue of strategic importance or perhaps there’s an issue of hiring and firing. There’s someone in the company that you think is a cancer and your partner’s like, “We should give this guy a shot,” and you’ve got overhead invested in this person and maybe it’s affecting relationships, etc. What do you do then?
That’s your original question. When you come to a stalemate in decision-making, very rarely do we vote. There was one where it was three against me. I lost. That happens very rarely. Typically, we’ll take the time. Is it slower? Yes. It’s slower. We’ll take the time. Eventually someone’s got to say, “Just do it. That’s my favorite person in the company. Fire her. I could be wrong.”
We are not going to take all the time in the world. We are not going to have decision paralysis but people say, “How do you do it with a partner?” I say, “How do you do it without a partner?” If you are a sole proprietor, you fire that person. You make that decision. I’m so glad I have got three smart people to second guess my decisions. I will tell you, almost every pet project, every big decision that anyone’s brought forward has been adjusted and improved by the slower process. It might take an extra week or two weeks but we end up with a better decision.
I want to go back to something that you said earlier that caught my attention and that you learned the hard way about your core competency. Tell me about that.
I have a friend who is CEO of Oakley and I went to this Oakley event that he put on for me and he talked about core competency. They wanted to be a lifestyle brand and they were a sunglasses company and they were making shoes, watches and all this stuff. He came in and they were losing a bunch of money and I think they had 35 different glasses. He cut it down to four.
They were making watches and shoes. He got rid of that and he focused them on their core competency, which was a sports brand for men. He then went to a sports brand for women and they had gotten away from their core competency. I sat there in the audience and I thought, “Why don’t you tell me this before?”
This is what we did. We had a chemical company. We invented a chemical, we sold it through Home Depot. We had an internet hardware company then we sold the mortgage businesses. We had a mortgage business, real estate company and we thought our core competency was sales and we didn’t go through the exercise. Since then, I studied what core competency is. We have got a core competency of training and empowering people in the home improvement industry. That’s our core competency.
Training and empowering people in the home improvement business industry. Give us a little bit about the process that you went through to get to that core competency. How did you go through that?
When you are in a partnership, you have some fights. When you are in a partnership of all men and we are all the same DISC profile, we are all drivers, you have a lot of fights. We are all young. We have a lot of fights. We were debating and I’m the guy that brings in these weird business exercises because I’m deep into the MyEOs and YPOs of the world. I bring in these exercises and everybody.
One other guy is in it too. He loves it. The other two are like, “Matt is bringing these lame exercises again,” but I would force the discussion. Personally, whenever we have pet projects in our partnership, we’ve got to go do our homework. If Jeff has a pet project, he’s coming in with a report, studies and he’s done his homework.
I spent a lot of time discovering what core competency is and what core competency isn’t and we had lots of discussions about it. A lot of times, our discussions aren’t straightforward. It’s lobbying. It’s sabotage, maybe. I sabotage my partners by inserting these little things here and there to keep core competency at the top of their minds and other things that we do around, like keeping financial management and cashflow at the top of our minds.
I kept dropping seeds. We have got lots of seeds being dropped by lots of partners but this was my pet project because I had a for sale sign up in front of my house. We lost everything we had and then some because of this dumb chemical company, dumb software company and this horrible partnership with Home Depot and we learned by almost losing everything that we needed to focus down.
Our personality types, unfortunately sometimes we need to get stung pretty hard. When you lose everything you have times three, you wake up one day and say, “I need to not do this again.” That was our lesson. We were way off the record and you see this with entrepreneurs all the time. They are successful in their construction company so then they think they are a real estate genius.
When co-owning a business, divide the responsibilities based on what you want to do and what you're good at. Click To TweetThat’s usually step one. It’s the best economy in the history of the world. They feel like a real estate genius so why not get into junk hauling or whatever else. Why not spend more energy on what you are good at instead of going back into your twenties and starting over in a new industry? You can learn a new core competency but I’m 50 years old. Why would I? Why not leverage the competency I already have.
Go to a new market like Scott did. They are a sports sunglasses company for men. Let’s add women. Let’s not add shoes. I think that’s what a lot of entrepreneurs do especially in construction. They get success and they try something totally new when they can look at what’s one sliver away and I can expand my core competency instead of trying to start a new one. You can look it up. Look up the Prahalad and Hamel paper from Harvard Review. There’s so much paperwork on it. Many exercises and it’s worth doing and it’s hard.
What were some of the resources that you use? Can you tell the audience?
I went to the original paper Prahalad and Hamel from the Harvard Business Review, which was 1970s. I went to Google, looked up core competency and then talked to my friends who were good at it. I developed exercises, five levels of why we are good at sales. Why are we good at sales? It’s because we are good at training. Why are we good at training? It’s because we pick the right people. Why are those the right people?
We keep going down as I told you what my core competency was. Literally, in my mind, I was thinking, “I hope no one on this call that’s listening is an expert in core competency because they can challenge me on it.” We would challenge each other. We would bring other people to challenge each other. I’d go to MyEO and YPO forums. They would challenge me on it. Over the course of a long period of time, we figured out what we think our core competency is. If you went to Harvard and you worked at Bain and you are a lot smarter than me, you’ll probably figure it out faster but it took us a while.
I wouldn’t count on people who go to Harvard and Bain figuring it out faster than you. I do think that what you are talking about is so important because you described it very well that sometimes something is working and as entrepreneurs. We get restless and we want to go try something else instead of repeating the same thing again and again and figuring out why it’s working and then finding that kernel of competency like you are talking about. Taking that kernel of competency and seeing if we can execute that in different areas.
It is a kernel and it’s hard to find the kernel.
It’s very interesting because the way you’ve described it was training and empowering people in the home improvement industry. Why wasn’t it sales or execution? Why was it training and empowering?
That’s too broad. That’s what we thought it was. Sales applies to everything. As we looked at what we do and what works and we had other businesses too, home improvement because we have got the same customers. We are leveraging the customers. When we went into chemicals, now we are business to business then to the consumer, that’s a whole different customer.
Part of core competency is leveraging what you are already doing. You don’t want a whole new set of customers and salespeople. You want to leverage what you already have so that the article that you put the link to, they talk about Post-it. They put that sticky thing on little square pieces of paper. Then they made a bigger square piece of paper. They made Post-its and they took this core competency of making this sticky film and put it all over the world and now they own the world of sticky paper.
They didn’t go invent clipboards, they figured out a way to leverage that little piece and that was our problem. We were great at sales so we can sell anything. No. We are great at business-to-consumer sales but no, it’s not it. We are great at business-to-consumer sales with people that have never done it before because we are great at training them. Then we have this industry knowledge and relationships. I want to bring Sherwin-Williams to everybody and our other vendors too. I don’t want to go find all new vendors and customers. I want to leverage my little core competency and get more out of what I’m already doing.
This is very useful for people to think through. One of the reasons why people miss their core competencies is because sometimes, there are a couple of things. One is because it’s humble. As you are saying, “It’s the sticky stuff that we put on a piece of paper.” The other thing is sometimes we are unaware of what we do very well. We have built a business up and we think it’s because of X but it’s because of another reason entirely and because we do it so well, we are unaware of it. That’s why going through an exercise of considering what it is that you do can give you some insights that you can then leverage to grow your business in different areas.
I think there’s a natural humility in people. We might be perceived as extroverts and arrogant because we are entrepreneurs but there’s this natural humility that, “I’m good at this so everybody must be good at this.” I don’t even know what I’m good at because I don’t give myself credit for it. I know whoever’s reading right now is thought of as arrogant and thought of as an extrovert but think about it. You are not that arrogant and you are not that extroverted either. You are out there making it happen and you are out there talking and waving your arms like I am right now but deep down inside, you want to stay at home and you don’t think you are good at anything. That’s sad.
I tell that to my son, “Write twenty things down that you are good at.” I will do it in my company and anybody that can’t come up with five in a minute. I will sit there and, in ten seconds, throw ten of them at them. It sounds crazy but spending some time thinking about what you are good at personally and then spending some time analyzing your strengths. Whenever we do the SWOT strength, weakness, opportunity and threat, everybody focuses on the weakness and the threats. Focus on the strengths. How do you leverage your strengths further? Dig into the strengths. We always skip over the S. The S is what got you here. You work on your weaknesses. You are going to have stronger weaknesses. Work on the strengths.
What is an exercise a company can do to discover those things that they do well that they don’t even know they do well?
You can do a 360 review of the company. That’s where you go to all the stakeholders. You go to customers, suppliers, employees, coworkers, everybody all around. You can hire an organization to do it. You can make up your own survey. Probably have to do something for them to get them thinking and they will identify things that you are good at. That’s one exercise.
You can force yourself and your partners to sit down and hash it out. I love the five levels of why. Why is that a strength? Why does that matter? You can Google it and look for Corporate Strength Finder. There’s a book called StrengthsFinder 2.0. I belong to entrepreneur organizations and I will do a little plug for the Entrepreneur’s Organization. We’ve got a business of $1 million or more. We have a forum and you’ve got these people that are also in business. In my forum, all the time, they are telling me, “You are good at this,” and I’m like, “I didn’t know that.” They also tell you what you are bad at, which you need to know so there are three.
This is important and someone might be reading to this, they are a contractor and they are like, “I’m going to kick an ass, building a project and bring it in on time.” Fair enough, that’s true but for the purpose of leveraging your company successfully and emphasizing what you do well, what Matt said about the five whys, peeling back a layer or two can help you to get to the core of what it is that you do, that you are not even aware that you do well. If you get that then you can translate that into things like your marketing efforts. You can also translate that into helping you understand new markets that you should get into where you can do that same thing again, where the market is next door to what you are doing.
If you don’t and you try one of those expansions, you’ll usually create problems in what was already working out because you are so distracted because you are so unprepared and we see it all the time. When you are a contractor and you are kicking butt and all the money’s rolling in, you don’t need to worry about it but eventually, that’s going to stop happening so now’s the time to do it.
When you are up, you have the luxury of strategic planning. When you are successful, you don’t have the time when you are not. You have the luxury of identifying your core competency when things are going well. When it’s not going well, you don’t. Now I read the peak of the economy. All-time peak has been the longest peak to peak that we have ever seen. Now’s the time to do that stuff.
Let’s get back to the partnership then. Let’s say I want to start a business and there are some people who want to do it by themselves. Fair enough. I’m one of those. I’m not interested in partnership but then there are other people who maybe you are working in a construction company and you are thinking, “I’m good at landing the work but I’m not necessarily good at building the work. I’m not as good at planning the work.” As you get into a partnership, how should someone be looking at what to look for in another partner?
I’d say, if you want to do it by yourself, which isn’t my way, you can find partners that aren’t partners. You can get an advisory board, not a board of directors. They are not going to control your decisions and advisory board. You can go join YPO, Vistage, EO, one of those things. You’ll have like, “I get the advice. I get the second-guessing. I get the leverage of ideas out of my partnership and I couldn’t imagine working without it.”
In hindsight, my partnership came to me at 21 years old so I didn’t know what was going on. In hindsight, what I would look for is that they have the same values and vision. You have some camaraderie. You can have fun together. If you can, values and vision are first and second comraderies. Third, people might argue that but it’d be nice if they were strong in different areas.
My partnership is four salespeople that are good at management, drivers and non-detail-oriented. I wish one of us was great at accounting. I wish one of us was more of a conscientious compliant. We don’t have that so we then hire people that we can act with as partners. My partner Jay says they can come sit at this table.
We want people that we work with that will fill in our skill blanks and will stand up against us and push back. We want strong people that will act as partners even though they are not stockholders in the business. I would look for it. If you are looking for a partner with values and vision and camaraderie first and then maybe if you can get that different skillset. Great. If you are horrible at production, you need a production partner. If you have someone with great values that align and a vision that aligns that you’ve got camaraderie with, that will leverage your sales and growth then go hire a partner to run the production for you.
Let me go into a sticky subject for partnerships. You get into a partnership and then the spouses meet or the significant others meet. Me and Matt get along great but for whatever reason, my significant other and Matt’s wife is not happening. What happens there, Matt?
Expand and leverage the core competency that you already have instead of trying a new one. Click To TweetWhen I was very young, the day we started our business, my business partner’s wife decided that she hated me for a very good reason, which I won’t get into. She doesn’t hate me anymore. It’s been a lot of years and a lot of things have happened since then. Our wives don’t hang out. There are four of us and my wife loves the other wives but they haven’t talked to each other for years.
One of my partners lives in Maryland, one lives an hour away and one has a sweet fishing boat and 30 minutes down the street. My wife and I go to his house quite a bit and we get along but I don’t think they need to get along. We have a weird policy too. We don’t bring spouses to our retreats. We go by ourselves. Our spousal lives are completely separate.
You guys have made that conscious decision?
No. It wasn’t conscious. It happened that way. If they have got a great relationship, you can choose to integrate them and choose to bring them. In one of our companies, the spouses do go on the retreats and it’s a big part of the retreat, integrating the spouses. The other companies, it’s not. This guy made a choice to make that part of the business and it’s worked out great. We didn’t make a choice but it worked out great.
That’s a very good insight. I liked that very much because a business partnership doesn’t have to extend to every aspect of our lives but it is important and you made that point very well for camaraderie to exist, to a sufficient extent, to be able to run the business together.
I think that. I spent a lot of time in these business forums because I used to be the global chair of one of those organizations. when they are not doing the retreats, they break down when they are not having fun. When our business partnership is in the recession and we are losing our asses and we are selling our houses, we had to make time to have fun and relax together.
One of my friends has this big HVAC company and his partner came to him and said, “Charlie, why do you always stay out with these guys until 1:00 in the morning?” He said, “It’s because after 11:00, they can’t shut up and I can,” and I thought, “There you go.” 12:00 at night, sitting in New Orleans, fight with my business partner about what an ass he is and what an ass I am and then waking up in the morning and hugging it out. That’s where the truth comes out.
I have been keeping it inside and he’s been keeping it inside. We need to get out there and fish together. It’s a communication starter. It gets it flowing and whatever you are not saying, it’s not helping. How do you get those difficult conversations going? You go out and fish or you have a couple of drinks and it all comes out.
That’s fundamental because so many times in partnerships, you go and talk to an outside party and you are telling the outside party about all the things that you never say to your partner. That’s why that camaraderie and those soft opportunities to open up doors of communication are so important.
We truly like and respect each other. I called one of my partner’s kids. I haven’t talked to his kids. Maybe I have never talked to him. I called two of his kids to have them help out another friend of mine’s kids. I said, “This is Matt. Your dad’s cool partner.” I know they have talked about me and my partners have been to my house. We like spending time together.
I couldn’t imagine back to values, vision and camaraderie. I couldn’t imagine being partners with someone I didn’t like. You have to like each other. You can’t hate going to work. I look forward to talking to my partners on the phone. Not all the time. Sometimes we are pissed off at each other. Sometimes that lasts maybe as much as a year but it’s like being married. If something goes wrong in your marriage in the first six months of marriage, you married the wrong person.
If something goes wrong in your marriage after six years, this isn’t the same person. This is different. I’ve got to dig down to what was going on. If I’m having a problem with my partner, first thing I think about is, “What did I do?” I know that partner is a great person. I liked that person. I know their values and vision. Second thing is, “This isn’t right. This isn’t how it normally is.” I think that’s important that you have that camaraderie.
What if I’m in a partnership whether it’s with 1 person, 3 or whatever the case may be and I know right now it’s broken. I’m talking to you, we are having a couple of drinks and I’m asking you, “In all of your experience, years here in partnerships, what can I do first to fix the broken partnership?”
I hate to sound like a broken record about a broken partnership but it comes down to communication. Our companies, we have a fifth partner and the fifth partner is the largest shareholder. He’s been our partner forever. There was a communication issue where another person had talked badly about that person to me and this guy overheard.
It was a horrible scenario but it was what we needed to create the communication. There was a secret broken partnership that accidentally became apparent and it created communication. The other thing it did was make sure that guy knew how much I love him because I stood up for him and went to bat. I’m so glad he heard because it was an opportunity for him to sit for an hour and hear me go to bat for him over and over. He didn’t know how much I loved him.
It works both ways. Back to that humility. We are humble inside and we don’t compliment people enough so our partners don’t know how much we love them. That might be why it’s breaking. Maybe me and this other guy, I wish that we were getting along great but maybe he didn’t until he heard that and realized how much I respect, love and care for him. Complimenting and recognizing other people’s strengths before or after it breaks. My partnerships have been broken numerous times. I have FUs. I’m the chief bad guy of my partnership. I know that too.
I know I’m aggressive. I know I think I’m right all the time. I know I have got ego issues. I can recognize that but I don’t know it enough. They are confident and they are strong enough to say, “This is you this time.” We had a partnership break once where we had employees and employees sometimes come and sabotage the partnership. Employees come and sabotage and all of a sudden, they are coming after me because I have done something wrong.
I hadn’t done it wrong and they made a decision that cost us hundreds of thousands of dollars and messed up our business in a big way. There was a communication that came out of it. You are going to have these things. Whether you are doing it by yourself or you have a partnership, there are going to be decisions made that costs big dollars.
There are going to be problems created and I find that almost all the time, time and patience. You’ve got to wait it through communication discussion and if your values and vision align, it’ll all come back together. If I was in a partnership right now and I’m reading to this show and I’m thinking, “I hate my partner,” I would go figure out a way to sit down and discuss it. I would start by figuring out what I don’t hate about them and I do that all the time. I constantly think about what my partners bring to the partnership. If I ever have a problem with one of my partners, the first thing I do is think about what’s awesome about them.
I’m a negative guy. I’m a problem finder. I’m a real positive guy but for some reason, in a business, I am a problem finder. As I find problems, I try to check myself and come up with what’s great about that person. It changed my mindset. Every morning before I get out of bed, I think three wonderful things about my wife. If I don’t, I rip her to pieces all day.
Same thing with the partnership. What’s great about your partner that you are having a problem with? What do you love about them? What do they do better than you? You can figure out a way to communicate the issue you are having and come from love and come from a constructive focus of, “We need to build this partnership to build this business and solve this problem together.” If you can be ready for it’s your fault, you’ll get through it.
Let me ask you a little bit about succession planning in a partnership environment, what plans if any do you have for carrying the business on beyond your yourselves, in terms of 60 or something you say I’m done or 70, whatever the case is, how does that look for you guys?
We didn’t talk about that. When we started our partnership, we documented our partnership. We got some great advice. Act as if it’s going to blow up. Many people miss that step. Do you have an employment agreement and stockholder’s agreement? Do you have planning in the stockholder’s agreement for a divorce?
All of my partners are still married. I don’t think any of us are going to get divorced but what if? You don’t want someone’s spouse taking over 25% of your company. What are you going to do if there’s a divorce? What are you going to do if there’s a death? What are you going to do if someone is a criminal? We have all that documented. We have that from day one. I wanted to mention that. What was your question again?
It was all about the succession. Let’s say it’s not like a catastrophic event but rather it’s, “I’m done. I want to pass the business on.” Let’s say you are done, Matt but your partners aren’t done. You want to get out. What have you guys thought about as far as that’s concerned?
That’s where I was going with that. In that agreement, we have what happens if one of us gets out. We have a payout over time and multiple of earnings. All that’s in that agreement. It’s been in that agreement for many years. I think we are going to be partners forever. They all think we are going to be partners forever.
Good partnerships require the same values, vision, camaraderie, and strength in different areas. Click To TweetEven if we sell our businesses, we’ll probably be investment partners forever. As far as succession planning, we planned for the worst, we plan for this one person getting out. In our case, we are considering options that we have discussions about it. Maybe if we want to get out, we do ESOP and we have discussions about that. Since day one, we have been planning for what if we wanted to get out.
Now, we don’t. I don’t know what I would do. I love what I do. I know that men die within three years of retirement so I don’t think I have ever got to retire or 50% of them do but we have talked about it. We have talked about strategic and equity buyers. We have had equity companies come to us and try to buy us. We have talked about selling to employees. We have had employees come to us and try to buy us. We have sold divisions. Some of our divisions are partially held by the people that run them. In fact, all of them are. We have had those change hands. I’m a broken record, again. Communicating and planning.
When we get back to those retreats that we do some of those retreats, we’ll go through what-if exercises. If your business is going great, you have time to do that. If your business is not going great, you don’t have time so be patient and wait until the business is going well again. We spend time discussing it. Back to the EOs, YPOs and the Vistages. We are hearing speakers talk about it. We are having accountants come in. We are working on the business right now. We are working on the strategic plan for the business. We are working on the what-ifs. We don’t do it always. We are not perfect at it but at least once in a while, we remember to do it.
Matt, you’ve been generous with your time here. Let’s summarize here. Let’s wrap up. Three action items for building a healthy partnership.
Number one, have meetings. The most important meeting you have in the week is not with your bank, your supplier or your key employee. It’s with your partner. Two, go away together. It’s different when you go away. If you can go home at night and hang out with your significant other, it’s not the same. Lock yourself away somewhere where you are going to get down to the nitty-gritty. Three, the lame vision and value exercises that nobody wants to do work. Hire somebody to do it for you. Find something online but put in some of those exercises where you think distant long-term to ensure that you are aligned. I will give you a fourth one, be patient.
You’ve said that a number of times and I do appreciate that because patience is very important. Have meetings, go away together and I like what you said, do the lame visions and values exercises. It’s beautiful because every entrepreneur hates meetings and lame vision and values but we need to do it. How can people get in touch with you if they’d like to?
We have a podcast of our own called The Edge of Excellence. It’s more designed for your kids. It’s helping your kids figure out their careers. I’d love anyone in their twenties that’s trying to figure out what to do with their lives. Go check out The Edge of Excellence Podcast and then you can find me on LinkedIn, Matthew.K.Stewart.
I appreciate your time. You’ve been terrifically generous. Great insights. Thanks very much for joining us on the show.
Thanks so much for having me. Your English accent reminds me of my upbringing with my Americanized English mom. It was wonderful to be here on my last day of quarantine with you.
Thank you very much.
—
Thank you for reading my discussion with Matthew. One of the things that he talked about, which is very interesting is the importance of clarifying your vision and values. This is particularly true if you are in a partnership. If you are in a partnership in a construction company and you’d like an outside voice to help you with that process, reach out to me on my website ConstructionGenius.com/contact.
I have worked over the years with many different construction companies that are in partnerships so I know that dynamic. I may be able to help you as you clarify the values and vision of your company and move your company forward strategically. Reach out to me and let’s have a short conversation. We’ll figure out if or how I can help you and if I can, we can talk more about what that might look like. Thanks for reading the show. Feel free to share this interview with other people. Give us a rating or a review wherever you get your show, on Spotify or on Apple and that helps to spread the show throughout the interwebs. Thanks again for reading.
Important Links
- National Service Group
- The Core Competence of the Corporation
- The Edge of Excellence
- Matt Stewart
- Fierce Conversations
- College Works Painting
- Home Genius
- Sherwin-Williams
- StrengthsFinder 2.0
- Entrepreneur’s Organization
- ConstructionGenius.com/contact
- https://open.Spotify.com/show/0DR3gnaTqg0a1mclQQLiIl – The Edge of Excellence
- Spotify – Construction Genius
- Apple – Construction Genius
About Matt Stewart
Matt is consistently recognized for his leadership and management expertise. He has earned the Excellence in Entrepreneurship Award from the Orange County Business Journal and the OC Metro 40 Under 40, and he was an Ernst & Young Entrepreneur Of The Year Awards Finalist. He has traveled extensively across the world speaking on the topics of entrepreneurship, strategic planning, and business development. In particular, Matt is passionate about mentoring millennials and generation Z. He regularly provides his entrepreneurial insight to high-profile print and online publications.
Matt is the host of “The Edge of Excellence” Podcast, Matt has been featured in The Wall Street Journal, Entrepreneur magazine, Inc. magazine, and Fox Business News and on ABC, CBS, and more. Matt is a graduate of the University of California, Santa Barbara and lives in Laguna Niguel, California, with his wife, Jill, and their two children.
