Home Business 10 Critical Considerations For Choosing A Business Partner

10 Critical Considerations For Choosing A Business Partner

Simi November 18, 2017

Choosing a business partner is not something that you should ever take lightly, it requires careful consideration and a number of checks before you tick the boxes and say; ”let’s do this” as you add their name to your letterhead. Business partnerships are a lot like dating. Would you marry someone that you just met? ”Hell no” I hear you say. You have to date for a while and undergo the initial chemistry test, then move beyond and see if this is a partner that you want to be in business with.

Remember once you have done those legal contracts you are stuck with them and get out of the contract is not just about personal emotional upheaval, but will have a direct impact on the business; your staff and clients and your business reputation affect the marketplace.

Take your time and really think about this – do you really need a business partner?
If your answer is yes then you need to find the best possible match and ensure that the other partner has the same values, business and management style and similar skills as yours. It would assist you greatly if you made a list of what it is you are looking for in a partner. You don’t need to make a “shopping list” just add 3 keys things you are looking for a partner and use that as a quick checklist when you are meeting possible new partners.

It’s like a restaurant menu i.e. Starters, main course, and dessert – if they don’t have the key 3 things, you need the walk away. Remember you are a triangle and you need another triangle to fit next to you – not a square! As an entrepreneur and business owner, you must follow the key points given below.

Dating for business

You have made a decision that you would like to bring in a business partner. You have made your checklist of the key requirement you need. Please stick to your key requirements; if you need someone who has great organizational and financial acumen you would not be taking a compulsive gambler on a date. Stick to your 3 point checklist and start dating.

Take the slower approach like a first date then a second; best you don’t go the speed dating route here. You need to take your time. Meet and spend time with a few possible prospects. Just get to know them on a personal level. The flow of conversation is easy and you immediately feel a connection through common business ethics and morals to see them more often.

The point of bringing a partner into your business to work together with you is to grow the business, and on timeshare in the rewards of the business. You will each have different and similar skills – remember you need someone who understands your business model and market. But they bring in elements that will develop and grow the business – not hamper it. If it does not feel right at your first meeting, then just walk away and start dating someone else.

You will already have a business network and there is no harm in dating within that pool. Often the best person we are looking for is closer to us than we think. Attend networking sessions and chat with people. If you connect with someone then invite those for a meeting away from the office to have a chat – now you can do your basic chemistry check.

Confidence and Trust

Would you take a fox into a henhouse? As you read that I actually heard you saying “oh hell no”

Effectively when you bring in a partner into your business you are bringing someone in the most precious element of your life. Also, you need to know and feel that you are able to share your inner business secrets with this person and know that you can trust them with this information.

Remember you have built your business on trust between yourself, your suppliers, your staff and your clients and bringing in a partner you need to be able to bring them into the trust circle. The basic rule here; we all have perfectly honed instincts and often we avoided following those because it won’t be accepted. Stuff that if your instincts are screaming at you around trust issues then rather walk away from your date and find someone else.

You will be bringing someone into your business and giving them access to everything that you have built. Would you just let someone into your home and tells them to make themselves comfortable if right from the outset they made you uneasy? We all know the answer to that one – Don’t do it!

The baseline here is a very simple one; do you trust that person with your personal bank account? Ultimately a partner will be someone that you have both confidence and trust in bringing them into the business. If you have this vital foundation for the partnership then you are good to go.

What about friendship?

Quick question, would you let your best friend or any friend dating your daughter? Think about that carefully now before you blurt out the answer. If you get a complete No as a response – then you have answered the question about your business and bringing a friend in as a partner.

If you want to bring a friend into your business as a partner you have to be familiar with the way they operate and live the same way you do. For example, if you have a mate and they come over for a barbeque, do they seamlessly join you and take an active role in working with you to create the perfect barbeque or do they pull up a lounger and crack open a beer and watch you work? I think the answer here is self-explanatory.

Do not bring a friend into your business because you feel sorry for them and want to give them a hand up. Do they live the same way you do? Is there home a reflection of yours and do they have skills that are needed for your business to help it grow?

If the answer is yes and you want to invite them into your business take it slow. Spend time with them in a business environment and see how it goes. Remember just because you think a friend is a good fit for your business does not mean that they want to be part of your business. Best case scenario it’s a perfect fit and the business goes from strength to strength.

Shacking up (Trial Run)

In many relationships, people date for a while and things are fantastic and everything just works and fits together. At this stage, many couples will talk about moving in together and taking the relationship to the next level.

You can do the same in business. You know you want to bring in a partner to your business. You have met and spent time with the person you feel will be a good fit. Now is the time to take it to the next level and bring them into your “home” and “live” together.

Taking time to do a trial run is perfectly acceptable. Be open and honest with the person and tell you them you think that there is a great possibility that this is going to turn a great working partnership. They may have other commitments work-wise and may not want to do this. Talk to each other and work out a plan that works for both of you; whether it’s working together in the evening or on the weekends.

If they are committed to wanting to join your business as a partner they will welcome the opportunity and work with you to make things happen. This way you are both able to spend time together to see how the partnership unfolds. Share your strengths and weaknesses with each other. Spend time scoping out the existing business and what the plan would be to expand the business and what roles each of you would fulfill in the business.

Working together or partnering together? (Partner, employee or consultant)

You may have decided that you definitely want to bring a partner into your business and you have started dating a few candidates but you still have not reached the point you can say for sure that you have met the right person.

In a group of people that you are dating there may be 1 or 2 that are top of your list. They are doing well and are open to looking at a partnership with you, but they too are not 100% sure. The old saying around business is that you have to spend money to make money. Instead of going straight into a partnership, perhaps consider hiring the person as a consultant and start from there.

This way you are both able to see how you work together and what you each bring to the party. You negotiate the terms of the consulting contract. Set up clear objectives with goals. Be realistic here. Set up and agree to timelines and terms of delivery.

Working with a consultant is going to cost you money. But it’s a good way to see if the relationship has partnership potential. The other person also has the opportunity to work with you and see if they want to continue and develop the relationship into a full partnership. Spend the money now. It’s an investment in the future of the business. If the consultancy does not work out you will only have invested in a set amount of money and time can walk away.

Skills that are needed

When you bring a partner into the business it’s for a specific reason; to grow and expand the business! You need someone to work with to achieve your business goals as you have realized that you can’t do it all on your own.

You know your skill set so don’t “date” someone that is a replica of you. You already have those skills. What you need is someone with different skills so that together you have a very strong skill set to bring to the business and market.

If you are a plumber and are trying to expand your business and spend more time actually doing the work and less time doing the admin and marketing. You would then look for a person to bring into the business that can take over and develop that side of the business. Going forward you are able to employ more plumbers to service more clients, know that your partner is handling the financial, admin and marketing side of the business.

Again when you feel you may have met the right person do a list of your skills, strengths, and weaknesses and see where the gaps are to fulfill your business goals. Then when you are making the decision on who to bring into the business (remember you can bring them in as a consultant to start with to test the waters) make a list of their skills, strengths, and weakness. Together take a look at the list and see how you can complement and help each other.

Balanced roles

You are almost at the final point of making the partnership decision. Also, check that you are both on the same page in terms of roles, responsibilities, and accountability.

Managing roles and expectations is vital. Have this discussion before you agree or sign those partnership papers. You certainly don’t want a scenario a month or two down the line where your partner says ……”that’s not my job or role in this business”.

Take the time to sit and work out the role and responsibility that each partner will have in the business. Just like any relationship you need to be open and honest here and say what you want, like, don’t like, will accept, won’t accept and who does what.

We all work better when we have a clear and defined path (yes I know that not everything can be clearly defined as things change weekly in the business arena). Having a clear outline of who is responsible for what and what the various goals of achievement are for those divisions will save you a lot of time and miscommunication in the future.

  • Define your roles and responsibilities
  • Set deadlines. Set short/medium/long term goals
  • Meet weekly to see the progress on the goal achievement.
  • If at the first meeting you both noticed that things are not on track. Evaluate the milestones set out and changed the plan together.
  • Communicate with each other daily – do not hide behind emails to get your point across.
  • Take time to work on the relationship

Whose money is it?

One of the biggest issues in relationships breaking down is that of money issues. Inherently, we have been brought up to not talk openly about money as it’s considered rude. But times have changed and if you are not able to discuss money openly then the relationship is going to break down.

Harboring issues around money lead to an unhealthy expression of anger.

  • Again, set the parameters and structure of the money in the business. When a partner comes into the business they come with skills and money or they just come with skills.
  • You have to define how the partnership agreement is going to be executed.
  • Have the tough discussion around money?
  • How will the money side of the business work?
  • Who is responsible for bringing it in and who is responsible for paying it out?
  • Who will earn what and when needs to be set out clearly. Do not leave this section of the partnership agreement till last.
  • Have this defined before you sign any agreement.
  • Have a plan in place that if the partnership does not work out how the divorce will play out. Like in a marriage contract you can have a prenuptial agreement that clearly defines how the money and assets will be split if the partnership is dissolved.
  • All money coming into the business belongs to the business and not the partners.
  • Agree on how the money will be spent i.e. rental, staff, suppliers, partner salaries and profits.
  • Have a financial plan in place that you both agree to and stick to the plan.

The legalities of a partnership

You have dated and found the one. At first, you were not sure so you “consulted” with them for a few months. All went well. You work well together. You are having different skills that are both vital to the business to grow and flourish.

You have had the opportunity to work together and have had the money conversation. The decision is made and you both agree that going into a partnership is the right thing to do.

  • Sit together and outline on paper how the partnership is going to work.
  • Who does what – clearly define your partnership roles
  • How much money do you each bring to the table (if the partner coming is has to bring finance and skill to the partnership)
  • Who is accountable for what
  • Set up the business objectives and plans
  • Create realistic goals with timelines to achieve them
  • Scope out what will happen if the partnership does not work out; what will happen to the business if the partnership dissolves. Get everything you need to down on paper. When we have clarity before the break-up as to how the business will continue or be dissolved, we are able to operate going forward from a place of trust.

When you have scoped out in writing how the partnership will operate and have an agreement in place. During this time together any issues that you have need to be sorted out before you draw up the partnership agreement.

Right, now you have the agreement written up. Make an appointment with a lawyer (please choose one that is proficient in company law) and go and see them with your document of what you both agree to in terms of the partnership. Allow them to actually draw up the agreement ensuring that all the legal issues around ownership and operating a business is done according to the legal requirements of your country. Yes, it’s going to cost a bit of money. But spend the money and get it done properly and legally. Do not skip this stage.

Moving forward…..

Bringing a partner into your business is an emotionally tough time for both parties. You are bringing together two people with different personalities and skill sets. But you have agreed that you can partner together.

It’s okay to express your emotions. Talk about it to each other. Be open and express your anxieties and fears – they have them too. The more you talk and share the easier the relationship will be. If you can talk to each other and know that you are safe and secure in your sharing, you will know that when business times get tough – and they will, that you have a partner who has your back and you theirs.

Together you are a united team. When clients see a strong partner relationship based on trust and sharing they will take heed from this and place their business in your hands to help them grow their business as you have given them a platform to work on that is based on trust, loyalty, and respect. Effectively you are blending two families together. If you have all the ground rules and boundaries scoped out before you move in together the transition from being solo to a partnership will be that much easier.

The key to any relationship is communication. Exciting times lie ahead for your partnership and your business. Take time to move forward. Give and take a little. Share with each other. Remember it does not all have to be serious stuff – take time out once in a while and go play and laugh together. It builds team spirit and keeps you motivated.