As a serial entrepreneur, I’ve had my share of good and bad business partners. One experience in particular started out pretty good because this person had lots of industry knowledge and connections. We literally could walk into just about any account and the prospect would buy our services. It was great, at least for a while. Then personality conflicts started and it was no longer fun or productive and it quickly went downhill from there.
It is very essential that you know your business partner very well. whether your business would be garage door service repair in Arizona or garage door manufacturing in Kansas, it is always important to know who are you going to pair up with.
Finding the suitable business partner for you is as critical as your decision in investing. You have to contemplate and decide carefully. Below are some of the most important factors you have to consider in choosing your business partner.
This is first on the list for a reason. Bottom line, do you trust this individual with your personal bank account. If the answer is “no,” think twice. As partners, every dollar you spend proportionately affects your personal check book.
If the person is a good friend, make sure that their goals, values and responsibilities are aligned to yours. Don’t assume just because you get along as friends that they are. Take a look at their personal life and how stable it is. Personal problems are difficult and can easily complicate their professional life. If there is any doubt, don’t do it.
- Trial run.
Select a person you have experience with at work, at a nonprofit or on a project. You should know if they are a team player and how they react in difficult situations. If you have no experience with a potential partner at all, do a trial run for a specified period of time before finalizing the partnership.
- Partner, employee or consultant.
Don’t partner with someone just because you can’t afford to hire them. It is better to hire them as a consultant than to give away a part of your company or to find out later that he/she is not a good partner for you.
- Varied strengths.
Make sure you and your partner’s strengths are in different areas. If you have two people who are good at sales and no one who is good at executing on an operational level, it will be more challenging than you think. It is much better to bring someone in who will compliment your strengths. In order to grow profitably, keep some balance.
- Balanced responsibilities.
Both parties need to agree up front what their responsibilities are in the company and stick to them. If one person keeps trying to take over and do everything or ends up doing very little, then the partnership will start to unravel and feelings of resentment will fester.
Just like in marriage, money is always one of the major problems in a business partnership. Therefore, agree in the beginning how you will use the funding you raise and how the profits will be distributed.
Decide on a formula to determine the value of the company should one partner decide to leave to avoid disagreements. Buy/Sell agreements are incredibly useful for discussing all possibilities and how they will be handled before they become a reality.
Why is all of this so important? Because a great business can be severely damaged by a bad partnership and never reach its full potential. Starting a business and/or a partnership is an emotional experience. When doing your due diligence, set your emotions aside and make sure everything lines up and has the potential at staying aligned.