EP 14: How Guaranteed Payment Turned My Best Partner Into My Worst Nightmare

Founder Reality

How guaranteed payment turned my best partner into my worst nightmare. A five-year partnership destroyed in 12 weeks - and the expensive systems lesson every founder needs to learn.

The brutal reality of incentive misalignment:

• Had a 5-year partnership with David, splitting revenue 60/40 (he kept 60%)
• Performance-based system worked perfectly - he was engaged, responsive, calling multiple times daily
• The moment we signed a guaranteed monthly contract, complete radio silence
• From proactive partner to only caring about paycheck status in 12 weeks

The partnership that worked (until it didn't):

• David was industry veteran who could speak to home improvement contractors
• Incredibly generous 60/40 split in his favor on all revenue
• Pure performance model - no sales, no pay
• Regular calls about business development, customer issues, strategy
• He delivered results, we both made money

Warning signs I ignored:

• Angry Sunday morning emails: "WHERE ARE THE FREAKING LEADS?"
• Increasing discontent despite generous compensation
• Had tried guaranteed payments with him before in 2020-2021 - didn't work
• Became pushy about wanting monthly retainer after years of success

The switch that flipped:

• Signed guaranteed monthly agreement in May after persistent pressure
• Immediate complete behavior change - like turning off a light switch
• Zero proactive outreach, zero customer care, zero business development calls
• Only communications: "What's the status of my pay?"
• Customers couldn't reach him - he'd just say "call George or support"

The painful irony:

• We'd recently been terminated by lending partner for not delivering results
• They had performance expectations, we couldn't meet them, they cut ties immediately
• Here I was paying someone who completely checked out for 5 months
• My empathy and difficulty saying no became expensive business liability

Four systems changes I'm implementing:

1. Mandatory probation periods - Test 30-90 days before long-term arrangements
2. Delivery-based compensation - No deliverables = no payment, period
3. Regular check-ins with clear expectations - No more "figure it out as we go"
4. Trust but verify - Empathy-first leadership with verification systems

The hard truth about systems design:

• Your systems determine your results, not your intentions
• If you reward showing up, that's what you get
• If you reward results, that's what you get
• I created a system that rewarded doing nothing - got exactly that

Key insight: Real stability comes from consistently delivering value, not from having a signed contract. The fault was mine as founder - I designed incentives that pushed away from behaviors I wanted instead of toward them.

The expensive lesson: Most people rise or fall to meet the expectations and systems you create. As founders, we determine our own destiny by the systems we build. Next time, I'm designing systems where the only way to win is actually doing the work.

Red flags you're making the same mistake: Paying for promises instead of performance, guaranteed payments without proven sustained performance, ignoring past failed attempts at same arrangement, letting empathy override business judgment.

Bottom line: Guaranteed payment without accountability is a recipe for disaster. Structure agreements that align incentives with success. Your system determines your results - choose wisely.

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