Justin Cooke

December 6, 2012

Hindsight’s a bitch.

I struggled writing this post.  It’s much easier to look back and recognize some of the mistakes I’ve made than it is to actually go through the process of writing about them, which is exactly why I think these posts are so important to share.  Some of the best blog posts and podcast episodes we’ve put out were somewhat uncomfortable for us to publish…because they were real.

It’s much easier to talk tactics, SEO strategies, and keyword research than it is to open up about deeply personal or hurtful business situations, but that’s exactly what I want to do here.  I originally wanted to put a bunch of these lessons into one post, but I thought it might be more impactful to go into detail and instead share them through a series of posts.

If you’re looking for more regularly scheduled content, don’t worry…we’ll be back to continuing our regularly scheduled posts in no time!

Whenever I discuss this particular learning experience with other entrepreneurs (especially those with partners) I invariably see a puzzled, confused look.  I think it’s hard for them to understand the mindset that allowed this situation to develop.  That’s understandable…at face value it might not seem like it would happen to you but, well…here’s what happened.

The Mortgage BusinessBackstory: Starting Our Mortgage Business

If you’ve listened to our podcast episode describing our previous businesses, you’ll know that Joe and I started working together through our mortgage company.  Joe, myself, and a member of my family (let’s call him Mike) had been selling mortgages over the phone for a couple of years through different companies and realized we wanted to setup our own business doing the same.
Joe had been living in Brazil and we all decided to fly to and meet up in Bangkok, Thailand to hash out the details on how we’d get up and running.  Somewhere in-between Singha’s and crazy nights out, we laid what was to be the foundation of our first business venture together and we were all really excited to get started.

Unequal Distribution Of WorkImplementation: Getting Our Business Off The Ground

It wasn’t a concerted effort to start.  We decided to continue to close our loans/deals on our own and take 70% of whatever we earned individually and leave 30% to build some runway and stock away some savings for the business.  We all lived together in a large house in Southern California, which was great for staying focused and growing our new business.

We continued with this for several months and it worked out fine, but we knew that this was simply working for ourselves and not actually building a business we could scale.  As we mentioned in our post, Building Human Machines, we decided to turn our efforts towards building a team of Loan Officers that could close loans through our company.

At first, we saw a significant increase to our revenue without the profits, but over the course of a few months, this proved to be an effective strategy…our scaled approached grew beyond what we were doing personally and things were going well.

Problem: Unequal Distribution Of Work And Resentment

We began to have problems when we noticed our in-house business had all but dried up.  This would have been alright, but our third partner, Mike, was responsible for this revenue stream and had no answers as to why this was the case.  We let it slide as we were still growing the other side of the house, but trouble was brewing.

Eventually, Mike didn’t even bother making excuses for the lack of productivity any more.  We noticed he was spending an outrageous amount of time playing video games and sleeping.  (We all lived together at the time and this was extremely apparent)  He was spending upwards of 60+ hours per week playing games and less than 10 hours per week doing anything that resembled work.

A Lazy Partner

This led to a ton of resentment built up….so much so that Joe no longer felt it fair that he keep up his side of the work to support someone who was splitting the profit equally.  I quickly fell into the same camp and found myself spending less and less time on the business as well.  It didn’t help that the mortgage industry was falling apart around this time, but our lack of focus on business basically assured that we wouldn’t weather the storm.

Aftermath: Shutting Down Our Business

The worst part is that we didn’t discuss this at all early on.  The negative feelings and lack of productivity festered for months.  Finally, it came to a head in a meeting that ended with Mike leaving the business, moving out, and having nothing to do with us again.  this caused some division in the family and shook some relationships that were never truly repaired to this day.

Our confidence shaken and our business in ruin, Joe and I had to make some tough decisions.  I was mortified with the thought of having to shut down the business and wanted to continue on with what we were doing.  Joe was disillusioned with our business and didn’t see a viable future.  As it turns out…we were both right/wrong.

We half-heartedly attempted to salvage what was left of the business, but neither of us were very committed at this point and, a few months later, we were forced to shut it down.  We decided to keep the corporation intact, but shut down our operation, the corporation went dormant and we proceeded to look for jobs.

Lessons Learned

It was a pretty horrible situation for all of us towards the end.  We couldn’t pay our bills, weren’t speaking to each other, and ended with a horrible taste in our mouths that we now refer to as the downward spiral of the “who can work less” game.  This is something that comes up and we consider even in our business today.  Here are a few of the lessons we learned from this:

Downside of PartnershipsThere’s a Downside to Partnerships

Many will tell you that having partnerships are great for covering different skillsets, accountability, etc.  This can be true, of course, but there’s a darker side to partnerships that’s not often talked about – How they can be emotionally and psychologically draining, hurting your chances to succeed.

This is especially true for lifestyle businesses where, unlike some of the tech incubators that are out there, you don’t HAVE to have a co-founder to get accepted or started.  In fact, with just a little bit of hustle you can almost always hire employees, contractors, or find “accountability partners” that will cover the reasons you were looking for a partner in the first place.  If adding a partner doesn’t add 2X or more to the size of the pie, you’re going to be better off on your own, most likely.

 Play Longball with Early Hires

Your first few hires are critical, so don’t waste them picking up someone who fills a short-term need.  Look for hires that understand the vision and can wear many different hats, especially considering it’s likely the company you’re looking to grow may look significantly different a few months or years down the road.

Be Brutally Honest Early

I’m not so sure that we could have done anything different with Mike, but Joe and I avoided discussing our frustrations and downward spiral early on.  We joke about it now, but having an honest, straight-up conversation about it as it was happening likely could have saved our business…or at least allowed us to pivot to something salvageable.

Want to read more in this series?  Sign up for our email list and we’ll share more business lessons in the coming months!


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Discussion
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  1. , I am glad you guys are bouncing back and “rolling with the punches”. :)

    You guys are such an inspiration, I really owe you a lot. I have listened to every podcast at least twice, and i have created several sites now. Things are looking good so far, but still i have a lot to learn.

    I received the e-mail, when you ask us if we have any questions and I have been scratching my head a lot with the following: “How do the Adsense Flippers guys set up the hosting?”

    I have quite a few sites already, but the hosting bill is getting larger and larger, so i am starting to wonder in which direction should i move forward. Do you have one IP for each site? I guess not, but how many sites share a virtual server, how many sites share one IP? Have you guys tried a dedicated host? Have you noticed any difference if more than one site share the same virtual host?. Actually there are so many possibilities that I could keep bringing up an endless number of questions regarding this issue.

    Anyway I just wanted to thank you for all the help and guidance you’ve given me.

    best wishes!

    Ignacio

    PS Sorry if my english is not perfect. My first language is spanish.

  2. […] Business Lesson #1: Piss Poor Partnerships – 840 Pageviews […]

  3. […] Hiring family members can put you in a difficult position.  You can read more our failed partnership with a family member here. […]

  4. […] Note: This is the second part in a series.  To check out the first part regarding our partnership gone bad, check out our post on EmpireFlippers.com here. […]

  5. […] Business Lesson 1: Piss Poor Partnerships […]

  6. […] Note: This is the second part in a series.  To check out the first part regarding our partnership gone bad, check out our post on EmpireFlippers.com here. […]

  7. […] Hiring family members can put you in a difficult position.  You can read more our failed partnership with a family member here. […]

  8. darren says:

    Being in any partnership is hard. Its interesting to see that you both went on to create a stronger partnership on your own. I had a similar experience, I had even financed the thing myself, cost me 10’s of thousands $. Painful lesson. but was a great experience..

    • Interesting Darren. I wonder if we put a dollar amount on how much we lost, what would it be? Adding up all the lost time and lost opportunities while dealing with partner crap would add up I suppose.

      • darren says:

        Joe, I can tell you to the dollar $75 678 AUD. Was a fruit shop. I sat down and thought about it afterwards, I could of put myself through a Uni Degree and get a MBA for about the same amount. So for me it was worth everything I learnt. The experience has been so valuable.

        • I don’t know Darren, i think I would prefer to have the $75k! ;-)

          It probably cost Justin and I at least that much in lost productivity and missed opportunity. Our personal piggy banks were hit hard as well.

  9. Eddie says:

    Great post guys. It’s good to hear the bad experiences or the things that didn’t work our for you. Like one of the other comments above, just talking about the successes it also helps other to talk about some of the failures. Thanks again and really enjoyed this post.

  10. Ian says:

    Excellent tips guys. It seems like the San Diego office was initially a driver for success, but once a bit of success was realized, everything fell by the wayside.

    Maybe this was a critical step in your success as entrepreneurs.

    Thanks for putting this hyper-personal post out there.

  11. joey says:

    thank you for the great post

  12. Ignacio says:

    Hello Adsense Flippers, I am glad you guys are bouncing back and “rolling with the punches”. :)

    You guys are such an inspiration, I really owe you a lot. I have listened to every podcast at least twice, and i have created several sites now. Things are looking good so far, but still i have a lot to learn.

    I received the e-mail, when you ask us if we have any questions and I have been scratching my head a lot with the following: “How do the Adsense Flippers guys set up the hosting?”

    I have quite a few sites already, but the hosting bill is getting larger and larger, so i am starting to wonder in which direction should i move forward. Do you have one IP for each site? I guess not, but how many sites share a virtual server, how many sites share one IP? Have you guys tried a dedicated host? Have you noticed any difference if more than one site share the same virtual host?. Actually there are so many possibilities that I could keep bringing up an endless number of questions regarding this issue.

    Anyway I just wanted to thank you for all the help and guidance you’ve given me.

    best wishes!

    Ignacio

    PS Sorry if my english is not perfect. My first language is spanish.

    • JustinWCooke says:

      Wow, Ignacio, thank you so much! No worries about the English…I’m sure it’s better than our Spanish so we’re grateful, hehe.

      We have our team setup our hosting accounts. When we started, we had several hundred sites on one hosting account, but we later cut that down to around 50 sites per hosting account, thinking it was too risky to have them all on one account. We used shared hosting and mix them in with a bunch of sites from other people. :-) Hope that helps!

  13. Yakezie says:

    Tough one guys. Why not wake Mike up and tell him to get to work to his face rather than let things fester? I’ve found the direct approach to be the best way in the long run.

    Btw, the mortgage market is heating up again in the US if you guys want to come back!

    Sam

    • Trust me, we did. He kept making promises things would improve and they didn’t. I like the direct approach as well, but it has to be coupled with a consequence and ultimatum philosophy of “shape up or ship out by this date”. That’s the part we neglected.

      i have been hearing about the mortgage biz coming back. I wish everyone best of luck, but I want nothing to do with that business again!

  14. Hey whats wrong with sleep :-)

    seriously this is a problem ive seen myself. Of course as you guys find the work balance between two partners is often off, but over a period it should level out. When somebody is just not pulling their weight.. time to call and end. The trick i think is to do it early and quickly

    I liked this section heading

    “Be Brutally Honest Early”

    Its something i do with business partnerships and clients, myself these days. less rosy glasses more reality whilst still motivating.

  15. virtualend says:

    I think you guys should take ME on as a third partner. I really suck at video games, but I’m steadily improving with age at the sleeping thing. ;) LOL Great post Justin – as always! – Paul in Panabo

  16. This is an extremely interesting post . I appreciate your openness . We should discuss about our mistakes from time to time. I’m sooooo tired of “Praise me I sold 1 million in 3 seconds” stuff .

    The bad thing about partners is that you need them if you want to grow. Our individual abilities have a ceiling and if you want to pass that level you will have to bring people or work together towards a common goal .

  17. getimants says:

    Have been in a similar place some time ago. Some lessons that I learned:
    1. good friends doesn’t mean good business partners
    2. at the beginning roles and most important responsibilities need to be clarified
    3. if some part of the business is doing better it doesn’t mean that the person in charge of it can simply stop working

    Thank you for the courage of writing and sharing this.

    The worst part in this is that despite the valuable lessons learned you paid for this a very expensive price – the most limited resource you have – something you can never get back – time.

    • JustinWCooke says:

      Thanks for the comments and great points!

      I agree we lost some time there, for sure…but I’m not sure whether I’d want to do it over differently. One of the best things I learned during the process (I should really add this to the post) is that even if the WORST thing happens to your business…it’s not the end of the world! You get back up, dust yourself off, and move onto your next venture. It REALLY helped me get over a fear of failure…it’s not something that’s completely gone, but I’ve found myself to be much more fearless since then.

      • getimants says:

        Absolutely! The experienced shaped my view on business ventures, evaluating partners and removed the “pink glasses” from my eyes (which sometimes stops me from dreaming big, but that is another topic).

        D.Trump once said after his comeback (along the lines of) – “the medicine didn’t taste good and I wouldn’t want to do that again but apparently the patient needed it.”

        Best of luck.

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