In August, Kevin Jonas will embark on an international tour with his brothers as they celebrate 20 years of the Jonas Brothers. Since the band signed with its first record label in 2005, three of its albums have charted No. 1 on Billboard’s Hot 200 and the group has won two American Music Awards and received two Grammy nominations.
But less than a decade ago, while the band was broken up, Jonas almost went broke after a “bad business deal,” the 37-year-old singer and guitarist said in a recent episode of “The School of Greatness” podcast, hosted by Lewis Howes.
“I’ve seen the beginning of the success, to financial success, not knowing what money really was and understanding it, to losing almost all of it,” Jonas said.
Around nine years ago, Jonas said he “invested in a bunch of property and doing other things, and I was building at the time, and sadly it just wasn’t the right partnership.” The deal left him with only around 10% of his money remaining, he said.
Jonas said he couldn’t provide many details on what went wrong, but the experience was a life lesson he “never wanted to learn.”
He has since bounced back. In the years following the failed partnership, he worked on other ventures in media and real estate, and in 2019, the Jonas Brothers reunited. The band’s comeback single “Sucker” hit No. 1 on the Billboard Hot 100 around two weeks after its release in March 2019, and since, the band has released two studio albums, with their next set to come out in August.
“Thankfully for life in general, we had a second shot … with the band coming back together,” Jonas said.
Speaking to Jonas’ strengths on “The School of Greatness” podcast, his brother, Nick, said Jonas is “very wise financially,” and manages the bulk of the band’s day-to-day finances.
But even money-smart people can get into a bad situation if they enter into a business partnership without proper vetting, says Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies, a financial services firm in Artesia, New Mexico.
Here’s how to protect yourself from financial fallout before you get wrapped up in a business deal with the wrong partner or the wrong provisions, according to financial pros.
How to vet the right business partner
Before entering into a business partnership, it’s critical to align on long-term goals, Sebesta says.
Those goals can include business growth, how you will implement work-life balance or how involved each partner wants to be day to day. Without clear alignment, you risk conflict that could hurt the relationship, the business and your finances, he says.
Ultimately, the goal is to build on “shared values, complementary skill sets and mutual respect,” Sebesta says. That’s easiest when you have tough conversations up front, before anything is officialized in writing, he adds.
Sebesta suggests you ask questions like:
- Who will make the final decisions around hiring and spending?
- How will ownership in the business be divided between partners?
- What happens if one partner decides they want out?
Even if you can build mutual trust through those tough conversations, you should still “do your due diligence” and fact-check your legal agreements, he says.
That means hiring a legal professional to verify the terms, and their exact language, so you don’t miss any potential red flags, Sebesta says.
It’s similar to what Simon Sinek, an author and speaker on business leadership, advised on a 2024 episode of his podcast “A Bit of Optimism”: “Don’t leave anything up to assumption.”
“The motivations have to be similar and very clear expectations set early on,” Sinek said, talking specifically about entering into business with friends. “Because we will make assumptions about the other person’s commitment.”
However, once you’ve established a strong sense of trust and transparency, a little healthy conflict isn’t totally out of the norm in business partnerships, Sebesta says.
“Just like in personal relationships, you want a partner who challenges you to grow, but is also dependable when things get tough,” Sebesta says. “Trust and transparency are everything.”
‘Never risk more than you can afford to lose’
The goal is to ensure that even if your business venture fails, “you can still recover and keep your long-term financial goals on track,” Sebesta says.
There are a few safeguards that can help, he says, including adequate emergency savings, a diversified investment portfolio and the right insurance plan.
But overall, you need to ensure you’re keeping your financial foundation separate from business risks and never putting more money on the line than you can afford to lose, Sebesta says.
You can evaluate that amount and “limit your downside” by only investing a portion of your liquid net worth, Sebesta says. That refers to the amount of money you have remaining in cash or cash equivalents after deducting your liabilities, like credit card debt or personal loans.
Unless absolutely necessary, avoid promising to repay any debt from your personal assets if the business plan fails, he says. That way, if plans go awry, you won’t find yourself dipping into your personal savings or investments to cover a shortfall.
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