Private Money Partnering

Evaluating The Money Momma/Money Man

Chapter H (continued)

Evaluate As A Business Partner
Evaluate At Year-End

Forms:
Application For Investment
Earnest Money Agreement
The Risk Quiz

So what else do you want in your partner besides experience? You want a flexible human being on the other end. You also want somebody who has business savvy, business experience. In any business, whether an ice cream business or a paint business, there will be upturns and downturns. What do you do when things go up and down? You adapt, you create, you figure your way out of a problem.

You want a partner, whether it’s the money partner or the other partner, who is a creative problem solver. You do not want somebody who says, “OHHH, I don't know what to do.” Life is too short for that. Things will happen. Also, I happen to believe that while I have two eyes, and they are experienced eyes, that these two eyes can never see as much as four eyes when you have a problem. If the other person also has experience, and maybe it’s a totally different experience, that partner can bring something to the party that you don't have. That’s what joint venturing is about, joining with the skills and the attributes of other people and bringing things together to make something happen.

Evaluate At Year-End
Like any business, you take stock at the end of the year. Well, what in your product line or in your customer/client base worked, or didn't work, and why? Thoroughly evaluate what happened.

A few years ago I had a set of partners, two gentlemen and their company, and we invested in a house in Valley Highlands. It was about $95,000 cash to buy and we would up selling it for $140,000. We put about $9,000 into it for fix up, and the profit was to be split three ways. It was an interesting and somewhat unusual house, but every house has a buyer and it was a matter of finding the right buyer. My partner turned out to be somewhat difficult to deal with. They had approached me initially because they had heard about me. They had a vision of what real estate investments should be like, and where, which was in a much more upscale neighborhood than I usually work with, because it was where they lived and what they were used to.

After about ten months the deal was put together and closed. During that ten month period I pushed myself and approached them regularly to make sure they were involved with the decision making and risk taking, because I didn't want anything to backfire on me. I did it purposely because it was their money, and $100,000 is a lot of money, and I knew they were uncertain about the process. I know I did everything absolutely as well as I could. We did a very good job, but it was a unique and difficult house to sell, and therefore it had taken a little longer than originally anticipated. When it was all said and done and the final tally was in, they said, “Well, it was really not a bad place to park our money”. Thanks, guys. The rate of return was very decent for them, because I did all of the doing and they put up the money. The relationships were not as easy as I would have liked, but that was also instructive to me. They approached everything from a hard-nosed business standpoint. That’s OK, because you have to remember that this is business.

Even though it hadn't been fun dealing with these guys, about six months later and after the dust had settled I approached them again to see how they felt about another venture project. The particular project I brought to them wasn't what they were looking for at that time, but they were open to doing something again. We had all learned in the process. I may not be interested in doing something with them in the future, but on my return visit I got feedback, which is what I was looking for.

So every year I evaluate my money partners. One year I went back through all of the potential clients I dealt with, some of whom became money investors while others did not. What was my experience, what were the results, what did I learn from this
interaction? And how many hours did I spend to get this knowledge? With any client you of course want to keep the lines of communications open, and this is your own internal “communication audit”. Remember the joke about how you eat an elephant… one bite at a time.

The Annual Evaluation Process Taught Me:

♦ Get clients with enough money. I learned that lesson, and relearned it.
♦ Do phone screening before spending time in person
♦ Know how something is going to benefit a potential client before you go and talk to them.
♦ Be flexible
♦ Be prepared, and anticipate their questions
♦ Assume I'm going to get the money
♦ Establish my prices fairly and firmly
♦ Estimate carefully my own value
♦ Raise my price by the amount of time I have to deal with a project
♦ Support each other. Here we go in partnering
♦ Don't offer something and then pull it away
♦ Be careful to assess how flexible they can be
♦ Know what I want from people ahead of time
♦ Work only where there is a need
♦ Make sure partners have the staying power and willingness to
stay with you, since sometimes things get rough

Application For Investment in Microsoft Word format
Earnest Money Agreement
The Risk Quiz
Evaluating The Opportunity - Chapter I