partnerships Archives

Joe Apfelbaum is the CEO of Ajax Union, a business-to-business digital marketing agency in Brooklyn, NY. He’s been featured in Forbes, Entrepreneur, Inc, The Wall Street Journal and more. His newest book, High Energy Purpose: How to Be All in On Your Life and Find Your Truth, is out now.

Before we dive in, I’d love to share that this is my 100th DealQuest episode! This is a huge mile marker for our show, and I’m proud to have consistently released episodes for over two years now. If you’ve been a long time listener, thank you! If you’re just joining us, welcome in!

Making a Living Helping Businesses

As a young kid, Joe watched his mother try to make a living. He knew that one day, he wanted to be successful so his own kids and family wouldn’t have to struggle so much. At the time he didn’t know you could make a living helping businesses. Now, however, he’s thrilled to be the CEO of Ajax Union, where he gets to do that every day! It’s been part of his own journey to high energy purpose.

Joe’s company works with large companies to build marketing funnels. Typically they work with the in-house marketing director to make sure that there are marketing systems and processes that will yield results. Qualified leads that convert are key, and randomized acts of marketing won’t cut it!

As Tony Robbins says, the right strategy will save you a decade. Rather than wasting time, Ajax Union helps companies market smartly.

Joe’s other company, Evyrgreen, helps influencers, coaches, consultants, and businesses make strategic use of their online time. They have a course and coaching program to help people leverage LinkedIn so they can get in and use the platform to make a difference in their businesses. This is worth checking out if you’ve wanted to uplevel your online presence in the new year!

Deal-Making History

Joe’s mother always told him, growing up, that he could never trust anyone else in his business. Although his mother worked hard as an entrepreneur, she never surpassed the million dollar mark. Joe wanted to go further, and for him to do that, for his own business, he was going to need to bring in other talent. He needed support from others in order to focus and get things done!

Early on, Joe had a business partner who turned into a close friend. They started their business together without considering anything beyond a 50/50 structure. There was no real strategy, other than building a million dollar business. Unfortunately, however, it wasn’t gaining traction. At the end of 2008, they sat down together to brainstorm. At the end of the night, they decided to offer SEO to small businesses. Although they weren’t 100% sure if it would work yet, it seemed worth trying.

They used a prepaid, recurring model in order to grow a steady income. Soon enough, they were closing 10 deals a month. When Joe approached the CEO of the company he was working for full time, he was encouraged to strike out on his own and focus on growing his business. In fact, that company even ended up signing on as his biggest client! (You can hear more about that in our interview!)

We Have to Focus to Achieve Success

At the time, Joe had multiple side hustles going on: IT management, tech, eBay sales, and other services. He had to think seriously about whether it was worth it to scrap all those side hustles and grow only the main company. His partner, however, told him it was non-negotiable if they were going to grow together.

After contemplation, Joe decided to go all in and focus. With his partner, they quickly grew to one of the fastest growing companies in America. They were making millions in revenue, but didn’t have the cash they needed to grow even more.

They didn’t have cash flow, but they had relationships with people. (Although at the time Joe didn’t really know how to move beyond transactional relationships and build real relationships for deal-making.) His partner approached a friend, who offered a hundred thousand dollars in exchange for 50% equity in the company, and the guarantee of a full time, paid position within two years.

They turned him down, but they also realized that possible partners could be interested in exchanging cash for equity. This was news! Joe and his partner were in a strong place because they were a strong pair. Rather than flying solo and appearing to be a flaky entrepreneur (which Joe says he was!), their partnership added stability and credibility to their work.

Taking on Investors

Their first investors offered money for small portions of the business, and it was thrilling. It was also clear that they absolutely had to become a five million dollar plus company if those investors were going to make their money back.

Joe was loving the growth, and avoiding the paperwork. He let his partner handle all the contracts, legal paperwork, conversations with lawyers, and more. That was a mistake. He was completely out of the loop when it came to what was happening in the business. He also didn’t realize that his own sweat equity in the business was worth something.

The biggest problem ended up being that there were no exit clauses. There was nothing; no way out, no clear end point.

Looking back, Joe considers it a miracle that they grew the business to the level they did, because they had no idea what they were doing. He thought he was the smartest person in the room, and he lacked the awareness to see what he didn’t know.

Now, he knows disastrous things can happen within partnerships without clear agreements. He absolutely recommends that ALL parties are involved in the creation, understanding of, and implementation of these agreements. The language must be clear. Everyone involved must know what the company’s future is, and what the terms are.

If you have a partner and are growing a business, you cannot think things will just “come together”. Definitely don’t disregard elements that seem too future facing. Having clarity is life-giving and creates a foundation for everything in your future. Don’t take that lightly!

Living With Your High Energy Purpose

Expectations for growth can create pressure sometimes. And when you take in significant capital, you can seriously stress your business.

Joe noted that he had no idea how to deal with their investors. He didn’t know how to communicate with them, and he didn’t know what they were allowed to do, or not do. Now, he notes that if there is a specificity problem in your business, you are responsible for that.

You have to lay down what is expected, and how things work. If you don’t know, invest in resources that will help you! Joe notes that joining EO is what made him realize he didn’t have things like core values, team huddles, and processes. Creating those things helped him shift himself as an individual and build a business that serves a much larger role than anything he could have created just flying along and focusing on making money.

These lessons have also taught Joe the integrity he needs to not only be a CEO, but to be a husband and father. As he’s learned to embrace and embody his values and integrity, he’s found how he can live with his best, high energy purpose and create a life he is proud of.

Listen in to learn more about partnerships, integrity, high energy purpose, and building a business you can be proud of!

Today we’re diving into business partnerships! Many businesses have more than one owner; you can spread the risk, add expertise, double your network, and share necessary tasks. It makes sense! Adding a partner, however, isn’t as easy as just signing someone new on. From business issues to legal structuring, we’ll talk about the important things you need to know!

Fundamental Business Partnership Considerations

Business partnerships often arise when a new company starts. They might also arise when a new partner joins an existing business owner within their company, or when multiple businesses comes together.

However your partnership starts out, there are a few fundamental “buckets” you’ll want to consider.

Bucket #1 – Decision Making & Control

Who makes the decisions on what kind of things? Who has voting rights?

There are various levels of decisions that occur in any business. There will be distinctions within the partnership for who is in charge of what. For day to day decisions, there is often minimal documentation. Partners usually have tacit agreements about areas of oversight in order to keep things moving.

Once we branch into larger areas, however, clarity becomes key. Imagine one partner is a ⅔ owner and is a ⅓ owner. Does the larger majority holder automatically control all decisions? Do they have the final say? If no agreement has otherwise been made, this will be the default setting. (Possibly with a couple of exceptions under state law.) Alternatively, you may have a supermajority or unanimity requirement. That would impede a majority owner from making decisions without a minority owner’s approval.

Questions of selling equity, hiring/firing key employees, incurring debt or acquiring other companies?

You need to be aware if one partner has more decision making power than the other. All parties within the business partnership should have clarity around the level of decision making control they have.

I provide my clients with a list of extraordinary transactions for the business partners to review as they consider business partnerships. These transactions include large decisions like bringing on new partners, spending a certain amount of money, or otherwise making larger decisions. It’s crucial for business partners to get clarity on these matters from the get go!

Additionally, you’ll want to consider equity. Will everyone in the entity have the same class of equity? It’s not uncommon to create an A Class for founders, and a B Class for others buying in later. However, there are so many equity and capital structure variations that they need to be tailored to your specific needs and desires. Keep in mind that this is something that must be decided and created, not something that automatically happens.

Bucket #2 – Economics & Cash Flow

Who holds the purse strings? How does the money flow?

Just because someone holds a certain percentage of a business does not mean they are entitled to that percentage of the split. (If three people own a company, it is not a given that compensation must be split into even thirds.)

For instance, within a business partnership there may be a consideration given for services or contributions in addition to ownership. Whether this is paid as a salary, as a guaranteed payment, or as an additional distribution, it is important to understand how each member of a business partnership will be compensated for their role in the company.

Will the compensation element be directly tied to ownership elements? Or are there other factors that may be just as important, if not more so?

It’s much better to gain cash flow and economic understandings from the outset, rather than assume that others are in agreement and find out later that there are resentments and confusion.

Bucket #3 – What ifs?

What if someone dies or becomes permanently disabled? If someone retires? What if someone wants to leave the business?

One important decision you should make within your business partnership is what will happen if a partner passes during their time as an owner.

If a partner dies and there is no written agreement, their share of the company will pass to their next beneficiary from their will. This could be a spouse, child, or relative. In an instant, your business could have a new business partner who, very likely, knows nothing about the business. For this reason, buy/sell provisions should be included in the operating or shareholders’ agreement for the business partnership protect the other living partner/partners from being forced into a business partnership in which they did not intend to be.

A buy/sell gives partners the right and ability to retain equity by purchasing it from the deceased’s estate. This is a powerful form of protection that can prevent a company from moving into the hands of an unintended party. It’s also a gift to the family, who is able to monetize their ownership and be compensated for their family member’s role. Ideally the estate or family receives fair compensation, and it’s a win/win for both parties.

In terms of being able to buy those shares back, we most often recommend a term life insurance policy that has been set up as a cross purchase. As a funding vehicle it won’t hurt the company’s cash flow, and allows partners to quickly compensate the family and retain shares via a buyback.

To hear more about how disability insurance can come into play, listen to the full episode.

Additionally, you’ll want to consider retirement expectations. Along with retirement criteria, you should discuss potential non-compete/non-solicit agreements. These would come into play if a partner leaves without retiring.

If a partner were to leave, what would happen with their clients? Is there a way to divide the business if members want to dissolve the partnership at some point? Are there buyout provisions in place?

The truth is, there are a lot of decisions to make when it comes to business partnerships. There are too many nuances to just pull a pre-formatted agreement off the internet. You can’t just use the one your friend used for their company. Like with the old Fram oil filter commercial: you can pay your attorney and other professionals now, or you can pay them much more later. That’s what happens when things weren’t done right the first time around. You end up having to clean them up or deal with a dispute.

Listen to the full episode on business partnerships here!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

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