Steve Schwarzman is the billionaire chairman and CEO of the Blackstone Group LP, the world’s largest private equity manager with more than $360 billion in assets and trades. His net worth is $12.5 billion.
Growth came with challenges. Schwarzman recently sat down with Bloomberg’s Jason Kelley to share how he handled the struggles of moving from a small advisory business to an industry leader.
“I was working 18-hour days, the business kept growing very rapidly, and the demands on me were astonishing. Beside the fact of living a life of perpetual over-stimulation as we were growing, I could see that I couldn’t get to everything,” shared Schwarzman.
Schwarzman revealed what he says was “probably the single best decision I’ve made”–one that helped his company remain at the forefront of their industry.
“… it became clear to me that doing mergers and private equity deals was unsustainable if I was going to grow the firm. So, I decided we needed somebody else to help at a similar level.”
Schwarzman’s best decision was hiring Tony James as president to help him run his company. He gave up some the control of Blackstone because he realized it was best for both him and the company.
“I called three people who’d known me from my few months at DLJ and had also worked with Tony, and it turned out he’d done similar things to what I had done…when I started interviewing Tony, it was like interviewing myself — except that we have a different personality type, and he’s somebody who was smarter than I was, which I sort of liked.”
One of the best decisions many business owners make is to bring a partner into their business. Unfortunately, statistics show that more than 50% of business partnerships end in divorce — a rate that James H. Krefft, Ph.D. and president of The Center for Third Age Leadership, says is more likely around 80%.
Business Insider shares these tips to increase your chances of success:
- Make it Legal.
Eager business owners may overlook the importance of a solid partnership agreement. They often engage with a potential partner to try out the fit without a formal contract. If things go south, it can turn ugly, and expose you to unnecessary risk.
- Clearly Define Roles.
Unclear roles will drive conflict. Partners generally know their strengths and weaknesses. Each may lean toward the aspect of the business that suits them best. However, problems will arise if duties are not explicitly defined.
- Create Clear Exit Strategies.
Decide what will happen if one partner leaves or passes away, if there are changes among company principles, or if the business is closed down.
Varsity Tutors CEO Chuck Cohn says, “Make sure you have a great operating agreement written by a seasoned attorney that outlines what happens to the business under all possible scenarios…It will be an expensive investment, but it will serve as the foundation for your relationship.”
- Create Conflict Resolution Strategies.
There are bound to be conflicts in a partnership. If you both have equal stakes in the company, what happens if you cannot agree? Even if one partner has more legal power, there will still be conflict if there are disagreements.
Create a reasonable, respectful method to resolve conflicts and work through disagreements. If necessary, you may need to bring in a mediator or advisor for assistance.
Mitch Gordon, founder and CEO of Go Overseas, says, “It’s vital to ensure that everyone uses conflict as a way to move the business forward, rather than create divisions in the company…When bringing in a new partner, it’s important to make sure that he will be a good cultural fit. The sooner you have an impassioned disagreement about something important, the sooner you’ll figure out if he is a good match.”
- Select Complementary Skillsets.
Andrew Schrage is Partner and Editor-in-Chief at MoneyCrashers.com, a top personal finance website.
He advises, “Make sure your partner’s skill set complements yours, but is not identical. Having two bean counters run an operation is not a recipe for success, and if two creative types make a go of it, the accounting and other more mundane aspects of the business could suffer or even be ignored.”
Bringing in a partner requires a complete mindset shift. If you’ve been going it alone for a while, you may have to strengthen your collaboration muscle. You’ll enjoy the benefit of a fresh perspective, of added bandwidth, and the ability to delegate tasks that you need to complete but don’t fall into your sweet spot. You will also, however, have increased accountability, and won’t be able to make as many on-the spot decisions.
Ultimately the decision to partner comes down to your desire to scale. No one business owner can do everything, and no one business owner can do most things well.