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Business Management: Co-Partnership

October 12, 2011 by Joe McAuliffe

As a sole business owner it’s difficult, sometimes even impossible, to stay up with everything.  Buyers and sellers often demand 24/7 service and most of them don’t want to hear about vacations.  Unfortunately, for the sole practitioner this is a recipe for complete burn-out.

One solution is to partner with another agent that you like and trust.  This is a bad idea as 9 out of 10 times these partnerships fail.  Quite often they lead to hard feelings or animosity between former partners.  This type of partnership, which is usually an equal partnership, is called a horizontal partnership.  Even when equal partners are completely compatible, horizontal partnerships fail.  Given time, some outside development occurs that makes it impossible for one of the partners to work as hard as the other.  It could be a baby, a health issue, or some personal crises.  And, although the other partner is willing to gracefully absorb the extra work, eventually frustration will get the better of the gracious, over-worked agent and cause ill feelings and a break-up of the partnership.  There are two other business relationships that usually work much better.

  1. Vertical Partnership – in a vertical partnership there is a senior partner and one or multiple junior partners. The senior partner plays the dominant role and has the final say.  Responsibilities are delegated to the junior partners with the senior partner handling rain-making activities.  High priority clients are also handled by the senior partner.  Not surprisingly, compensation is weighted heavily in favor of the senior partner.  Junior partners, like staff support, can be guaranteed compensation.  This form of business relationship is very effective when one partner is a strong “closer.”  In this structure, it is advisable for the senior partner to require the junior partner to sign non-compete clauses as part of the business relationship agreement.
  2. Co-Partnerships – this type of partnership allows for much greater flexibility and is much less formal.  In a co-partnership, agents agree to partner together on specific listings, with certain buyers, or on certain projects.  For example, agents may decide to split marketing cost and commission by farming a certain area together.  Co-partners could also share the responsibility on certain listings or with certain buyers while still handling other prospects individually.  The advantage to a co-partnership is that responsibilities and compensation are confined to a limited list of well defined clients or projects.  If either agent is not satisfied with the results, no other clients are shared with the other agent.  Co-partnerships can be an excellent first step towards creating a horizontal-partnership.

Whichever relationship format you choose, it is critical to include an exit strategy.  This is a strategy that deals with the “what-if’s.”  Essentially, each agent asks themselves, “what if the relationship doesn’t work?  How will we handle pending business and future prospects?”  All too often, agents forming a relationship choose to ignore the risk, which is foolish.  By the way, if the understanding is in your head and not on paper, it doesn’t exist!  

Filed Under: Business Management, Cup O' Joe

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Managing Partner, is one of the top business consulting professionals in Florida. He has worked with Fortune Magazine, Oracle, Network Solutions, Computer Associates, and Lawyers.com. Some of MET’s current clients include Christie’s & Illustrated Properties, Coldwell Banker, Merrill Lynch, Smith Barney and Sotheby’s.
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