My business partner wants to build a conglomerate. Is he nuts?

Hi Aunty B,

My business partner and I have always done related acquisitions that have added market share, revenue, customers and eventually profit to our company.

But recently he has insisted we acquire a completely unrelated business. He says it fits into our long-term strategy of creating a big business.

He is brilliant at strategy and has always been successful, while I focus on networking, sales and marketing and channels. This is causing tension in our relationship. Is he nuts? Or can’t I keep up?

Steven C,
Perth

Dear Steven,

Oh, now we know the end is nigh. He is talking about building a conglomerate! How late-1980s!

There is one rule to building conglomerates. They need top management teams who must be able to run the different businesses better than specialist managers – and better than the competition.

Rarely does this happen. Generally the old managers who know the business leave and new ones who are not expert in the business are put in charge.

Attention is distracted from the core business and the focus is on devaluing assets up or down to create profits or losses rather than building real businesses. Now I am not sure that this is your business partner’s intention. But Steven, your instincts are correct. He’s nuts.

It is very important to challenge your business partner. (I suspect he is a relative – your brother or even your father?) It is irrelevant that he has always been successful. Often later in life these gents lose the plot and can become extremely unsuccessful. Business associates and partners, used to their success, do not challenge them.

Just check out those who ran conglomerates in the late 1980s and do a “where are they now?”. I bet they regret not having a business partner like you who stood up and challenged them.

So Steven, you know what you have to do. Stick to your core business and to buying assets that make sense. As a specialist in marketing and sales, you too have a strong feel for the business and what works. And don’t be afraid to stand up to your partner/father/brother. This is business, and you have responsibilities.

Your Aunty B.