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Business Partnerships – Top 5 Mistakes Often Made and 3 Structures That Work

Over the years I have had a lot of partnerships, some have worked out extremely well building friendships and achieving success for everyone… others have ended in failure and disappointment. 

Many people say they like to avoid partnerships because they are always messy! This would be much less fulfilling for me since much of the satisfaction I get from the companies we run is winning together. 

It is true partnerships are often messy, but here are some of the lessons that I have learned and structures that have seemed to work for me and some of my business partnerships. Hopefully if you’re putting a partnership together or adjusting one you already have- this might help you avoid these mistakes. 

Most Importantly – There is no ONE system that is best for everyone. The key is to understand the motivations of people involved and find a solution that has everyone’s incentives aligned. 

I have had my share of painful discussions, but fortunately- I haven’t had any disagreements that I haven’t been able to solve with people. 

In the news in just the past 2 weeks and just in Canada there have been a couple examples of partnerships going off the rails publicly impacting in some cases thousands of people!

Here are 5 of the most common mistakes I have either made myself or seen others in the online world make…

  • Mistake – Not separating capital and management. This is one I see often! Two people come together and say to each other Person 1 “I have an idea” Person 2 “I have money”… boom a business is born. Person 1 is going to run the business and person 2 is going to provide the capital they each get approximately 50% of the business. The result is if the business is successful Person 1 without a management agreement and compensation structure in place will struggle to justify why he will continue working on the business he only has a partial ownership of vs deploying his efforts and now his money into another project. The solution is the person “managing” should be compensated primarily based on results.
  • Mistake – Misalignment on goals – Most commonly this shows up as a cashflow vs growth discussion. If one partner has cashflow from another venture while another is relying on that cashflow to pay the bills this can create a lot of stress. Similarly if the goals for the exit of the business are not aligned it can cause problems. 
  • Mistake – Simple Structure Everyone Understands – Over-relying on lawyers to layout the plan and then no-one except the lawyers fully understands is too common. Rarely does it come down to the words on the agreement as often things get sorted out from everyone’s understanding. The best way I have found is the partners layout the partnership structure (typically in a spreadsheet) and then get the lawyers to make it official. 
  • Mistake – Not updating the agreement as the years move on. Things change in people’s lives and there is always a need to check in on some frequency and make sure the incentives are correctly aligned. 
  • Mistake – Communication and Stewardship Execution Not Disciplined – This is one that is easy to slip! There needs to be a consistent execution discipline to managing partnerships involving communication and stewardship. 

Below are 3 of the structures that have worked most consistently for me.

Structures That have Worked:

  1. Base Salary with Revenue Share & No Equity
    1. This one is the simplest and the one I have often started with. If there is a business idea that a manager/partner needs to run with this structure is clean. Typically a below market base salary followed by a solid % of revenue. The benefit is it is simple, has one number to focus on and the emphasis is on fast growth early on. The downside is that the long term enterprise value is not the priority due to neither profit or equity being tied into the compensation. 
  2. Profit Share + Vesting Equity
    1. This has been a fit when I want incentives to be aligned with a longer (ie 5yr+) time horizon and the business is already validated. Profit sharing without any understanding on the expected profit can be tough as people may end up disappointed so this has been a better fit for either acquired businesses or growing internal ones. The benefit is this optimizes for value creation, the downside is it adds significant complexity. 
  3. Base Salary below market to Validate Idea with Equity Attached to KPIs
    1. When there is no initial revenue and it will be a number of months to build the business before potential revenue shows up how do you align incentives with a partner? The solution that has seemed to work in a couple cases has been a below market salary building up a “sweat debt” to bring salary in line with market and then an equity kicker attached to KPIs that will be triggered once the business hits break even. The up side is it has incentives nicely aligned if the business hits its goals… the downsides are it is both complex and the $ risk is squarely on the capital partners shoulders. The decision to reinvest/continue etc can be a challenge. 

Stewardship / Structure

No matter how good the partnership is setup there is a need for ongoing stewardship and management. The way this has worked well for me is the following…

  • Weekly meeting with the manager/partner to review business KPIs
  • Monthly – PnL done monthly and reviewed in detail Monthly and then discussed at the weekly
  • Quarterly – review laying out the major tasks for the next 3 months
  • Annual strategic review 

This is a work in process and I try to follow the guidance from the book Traction.

Standardized Business Stack

Having some standardization across the different businesses when it comes to the business systems has been helpful 

  • Quickbooks Online 
  • Same bookkeeper, lawyer, accountant, bank/banker
  • Google Suite (gmail, google docs etc) 
  • Not 100% Consistent but Software – Jira, GitHub, Trello, Slack, MailShake, Grashopper, ActiveCampaign, WordPress, ThriveThemes Suite of tools, Zaxaa or Chargify, Stripe/PayPal

Boring is Sexy – Business Model Analysis

I have occasionally had posts on here over the years that reflect my evolving thinking on business and business strategy.

Today’s post I want to reflect on what I have learned over the last 2 years, as I shifted much of my focus to adbank and blade – then came back to do a deep assessment on the health of the other businesses.

This was a unique opportunity for me because I got to come back to some parts of the business with what felt like cold eyes- and really review what was working and what was not working. What businesses stood the test of time, what businesses improved and which ones got their asses kicked!

What businesses Struggled, which were Stable & which Thrived?

Struggled

  • Portfolio of sites – minimal/no management and most struggled
  • My personal site (AuthorityWebsiteIncome) – Not posting for 6 months doesn’t help!
  • FBA Business without a manager

Stable

  • Boring SAAS business – listingeagle.com has continued to be stable with 0 effort in years
  • Some very evergreen hyper niche content sites were stable
  • Evergreen ecommerce business with minimal management
  • LightningRank.com – Kelley was able to keep this business stable

Thrived

  • Content Refined – With Madeleine as the manager in place and properly incentivized -Content Refined continued to thrive
  • BrandBuilders – Manager in place properly incentivized to grow the business
  • FBA Business with a Manager

What is the key Takeaway – Boring is Sexy!

The only projects that survived/thrived were ones that had a manager in place or were boring/evergreen businesses (either SAAS or content).

What does this mean for the future of my online businesses. Here is how this review impacts my plans moving forward by business type…

  • Content Sites – Boring evergreen niches or divest other sites that require more active management
  • SAAS Portfolio – Focus area for growth with proper management in place from the start
  • Productized Services – If the manager is well aligned and the customer acquisition channels are diversified this model can be very stable.
  • AuthorityWebsiteIncome – There is a need for my increased involvement – which is great as I really enjoy it!

The key takeaway is that boring is sexy when it comes to long term stable success!

This is not a unique insight and one that is supported by the most successful conglomerates for many decades.

For example…

Berkshire Hathaway

Berkshire Hathaway does not need a lot of introduction. Many people know the basics of how Warren Buffet and Charlie Munger applying a relatively unchanged set of investing principales from Omaha have outperformed pretty much everyone over the last 50+ years and grown it into a monster with them becoming 2 of the wealthiest people alive.

I have long been a fan of everything Berkshire Hathaway and Warren Buffet, I highly recommend reading The Snowball, Warren Buffet and the Interpretation of Financial Statements and Berkshire Beyond Buffet along with his annual shareholder letters.

The key takeaways we can apply to online businesses is a focus on

  • Decentralized great management with minimal overhead at main office
  • Focus on the very long term
  • Don’t be afraid to go against the crowd

Constellation Software

Constellation Software is a relatively unknown Canadian company that doesn’t make a lot of noise but has achieved phenomenal results (over 1 decade of stable 30% annualized return on invested capital). They focus on boring low churn B2B SAAS businesses.  To get a real sense of the business I recommend the 10 years of president letters (here). The CEO and CFO did a deep dive looking at the high performing conglomerates and shared the insights in the 2016 and 2017 letters which were very telling.

Key Traits:

  • Decentralized management
  • Focus on cost and a few key metrics for operating units (CEO is 6’4” and flies coach)
  • Capital allocation rigor bordering on fanaticism – not being afraid to walk away from deals that don’t meet their hurdles and not bending those hurdles for years!

3G Capital

The 3G Way, Dream Big and True Power (tougher to get through) all provide a great insight into the management system and culture behind 3G Capital.

Key Traits:

  • Fanatical focus on costs (CEO is on the road 200+ days a year and flies coach)
  • More centralized than constellation or Berkshire
  • Meritocracy with A LOT of responsibility placed on managers

Another similar company to these above many haven’t heard of is ESW Capital (great story in Forbes here) who share many of the same traits but is arguably the most centralized out of the list.

What do all these high performing companies have in common…

  • Fanatical focus on controlling/cutting costs but with above market compensation to top performers
  • Disciplined focus on a set of key metrics, the metrics are not always the same
  • Mostly decentralized with much responsibility to the business managers

Hopefully this honest assessment of what businesses struggled, which were able to stay stable and which ones thrived is useful. The similarity of the traits the businesses that thrived shared with the example companies is very telling.

I look forward to continued sharing on what is working and not working across all my projects.

Summer Content Plan Failure and How to Fix!

Summertime is around the corner. For me this usually means long weekends at the cottage, outside activities with my wife and kids- like hiking, biking and boating and also just some general vacation time. I’ve always been an outdoorsy guy so the summer is a great time to recharge and reap the benefits of our area, especially since it doesn’t last too long here in Canada!

Although the down time is really nice, it unfortunately has come at the expense of some of my businesses- especially the ones that are relatively low maintenance and are easy to fall off my radar.  I’ve had a long history of taking my foot off the gas pedal during the summer when it has come to my content sites, which for some sites has lead to irreversible traffic declines and lost revenues!

Over the years I have noticed a consistent decline starting in or around June and July which coincides with the beginning of summer. If you’ve been reading my blog for a while, you’ll know I’m a guy who is pretty data oriented and systems focused- so this predictable decline is annoying to me. What’s more annoying is that it is entirely my fault. If I had just taken a little bit of time to get in front of my content strategy and systematized the content creation process then I could have saved myself (and my sites) the hit that we ended up taking.

Take a look as some of these screenshots- none of these sites have recovered fully from these declines!

So what are my takeaways for this year? I’m going to get in front of my content creation strategy and systematize the content creation and publishing on my money sites so that I don’t even have to think about it this summer while I’m taking some time off. I’ve leveraged my team at Content Refined come up with a great plan that they will execute over the next 5 months so that it’s completely hands free for me.

Take a look at my spreadsheet for all of my money sites for the summer! I’ll quickly use one of my sites as an example to show you what I’ve done. And hey don’t steal my Keywords! 🙂 I’ll give you this sheet or free at the bottom of this article so that you can create your own plan!

Step 1:

Figure out how many articles you want published on a monthly basis. For this particular site, I have steady traffic already and am just looking to maintain. I figure 6 articles per month at 1000 words each will be sufficient in keeping the momentum I need around this size of site.

Current Traffic:

2. Conduct Keyword Research for your Niche.

The Team at Content Refined has engineered my site and separated it into the pillar topics. This is to make sure that every section of my site will get some content throughout the summer. They’ve picked the keywords and assigned the month of production to each

Step : 3 Make sure the metrics are understood and aligned with your goals!

Search Volume and competition are super important when it comes to picking keywords that will predictably rank on search engines. The gold standard that Content Refined uses is searches above 500 per month with a competition of under 30% are most likely to rank top 10!

We leverage other tools such as marketmuse to pull the average content score and the average word count that we should be targeting for each article. This way the writer assigned to each article knows how long it should be and what kind of content score we expect when we run it though marketmuse. If an article exceeds the average content score it is more likely to outrank the competition !!!

Step 4: Pick your plan!

I’ve opted to have the team at Content Refined deliver these on a monthly basis and update the spreadsheet accordingly. Alternatively I could have had these articles created all at once and then scheduled out on a weekly basis. The team is pretty flexible and can work with your budget and needs.

Now I’ve got my summer content plans ready to go and a system in place to make sure that my content creation strategy doesn’t fall off the priority list. I’m really stoked that I got in front of my content marketing goals for the summer and I think this will help avoid the trend. So what are you waiting for?

Download my spreadsheet for free: https://docs.google.com/spreadsheets/d/1DjC0ir8UqigcXwa-nJrPTt2Mz2UPG_Vqk_Psy0PWz64/edit#gid=0

To have your summer content strategy taken care of, visit https://www.contentrefined.com/summer-special/ and have a chat with them on how they can do this for your sites!

3 Actionable Steps to Take Today to Improve Your Content Plan

Hey everyone.  The Content Refined team recently released an article and a few videos about how they perform content audits for their clients.

(Jump to the video here.)

Today I’ll summarize 3 of the most important takeaways from their study that you can apply today to your site!

  1. Use SEMRush (or Google Analytics) to see what existing pages on your site are bringing in the most organic traffic and focus on improving them by adding more content to them:

This feature is great because you can clearly see which pages you need to be maintaining.  So you can take the top 5, or 10, or 50 (depending on your site) and keep them updated. Change to the current year, update with new resources, add some new content, etc.

2. MarketMuse can be used to assess your content gaps and flesh out existing content.

In this example you can see how they’ve typed in one phrase, ‘content marketing service’, and all kinds of related phrases have come up.  This can act as a high-level overview to show that if you’re talking about a content marketing service, you need to be mentioning all these other things.

I’ve been really happy with MarketMuse for functionalities like that.  You can go into more detail with it to get more actionable insights, but even the high-level stuff like this is awesome.

3. Auditing your competition’s content for ideas

Even without SEMRush and MarketMuse, you can get some good insights into your content needs by looking at your competitors.  It can be as simple as some basic research:

  • Plug their site into Google (using the ‘site:domainname.com’ format) and check how many pages they’ve got indexed
  • Check how easily navigable their site is
  • See what sorts of categories and subcategories they have for their field/niche
  • Check the articles to see how in depth they are

Chances are you’ll have some work cut out for you at the beginning.  You’ll need some long-form content about the major topics in your niche just to start out.  Then you can branch off from there.

Content audit website

Final Thoughts/Resources:

The gals at Content Refined can help you out if you have questions.

Book a call with Madeleine here: https://contentrefinedmt.youcanbook.me/

Email her at maddie@contentrefined.com

Or jump ahead and purchase a content audit here: https://jonhaver.zaxaa.com/o/9664490654241/3.

Once you sign up, either Madeleine or Laura will be in touch with you within 24 hours.

Leave your comments on quick tips for website/content audits.  Always looking to hear feedback from you guys because I know you have some awesome experience.

3 Lessons after 2.5 Years into building ContentRefined.com

Today Content Refined turns 2.5 years old and Maddie has recently shared a BIG post about the journey!

Read about the entire journey here – Content Marketing Company or my Content Refined business review.

Plus they just had a video produced to help people learn more about Content Refined…

In this post I want to share 3 lessons I have learned from my position (idea identification, initial system architecture and assembling/stewarding the team).

Background:

In the summer of 2016 Maddie joined my team with the mandate of systematizing the content creation process for my portfolio of sites. She killed it!

From that effort we decided to launch Content Refined as a content marketing company.

I documented that launch when I announced it in this post – https://authoritywebsiteincome.com/content-marketing-strategy-launch-business/

It grew incredibly well, achieving 10% week over week growth for the first few months.

There have certainly been a fair number of challenges/opportunities and in this post I hope to share from my perspective what the 3 most significant lessons were.

Lesson 1: Systems Can’t Replace People!

For everyone that reads this site they know I LOVE systems. Systematized business processes and systematic solutions to problems are core values for the business.

However, despite the engineers desire in me to build a system that doesn’t require great people to run it never happens. Great systems allow great people to execute better.

As I significantly shifted my focus in 2017 to adbank my core businesses needed to be managed and any business where there was a manager responsible for running the business did well. However any business that was solely dependent on a system went off the rails.

Maddie grew the business, Laura managed it while Maddie was on mat leave and I have had limited ongoing involvement. No system could have been built to adapt to the changed and achieved what the team has achieved!

Lesson 2: Churn is a Moral Sapingl!

Content Refined has been a great business with significant initial success and very solid longer term performance. But as with any recurring revenue business that is non-essential, churn is the enemy!

Trying to keep growth moving while fighting churn is a never ending battle and can be very unmotivating.

Sometimes even solid months feel like this…

For anyone who ever wants to dig more into recurring revenue business models this is the best article on any subject ever and it focuses on metrics – https://www.forentrepreneurs.com/saas-metrics-2/

Lesson 3: Focus on your Strengths in a Congruent way!

Congruent has been my favourite business word for awhile. Ensuring the people, value proposition and systems are all aligned congruently is critically important.

Building that congruence around the set of strengths that makes you unique and focusing on it has been where our biggest successes have come from and also, when we drifted, where our biggest failures occurred.

For Content Refined, the effort around data analysis (to determine what tools/metrics give our content the best predictive ability to perform well in Google) has been very rewarding. Trying to broaden and sell other services where our set of strengths didn’t align didn’t get off the ground in a significant way (for example, an email marketing service to existing clients).

Being accountable for results and not just words, as a content marketing company that uses data (and the thousands of articles we’ve already published) to continually refine what is working now, is what has Content Refined clients loving the service.

content refined business management

Summary

I hope my view on the 3 key lessons while stewarding the growth of Content Refined has been useful.

If you have any content marketing needs be sure to book a free call with Maddie or Laura… they often share some pretty incredible and specific to your site insights on those calls! You can book here if there is availability.