8 Critical Considerations for Choosing the Right Business Partner

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.

  1. Trust.

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.

  1. Friendship.

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. Money.

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.

  1. Valuation/contracts.

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.


TOP FIVE STEPS TO BUILDING A SUCCESSFUL REFERENCE CLIENT

One of the hardest aspects of introducing new products and services is gaining adoption and credibility to sell more.  If you are in a tough market space such as healthcare, local government or education for example how do you establish your product and grow it sufficiently to market it?  How does your organization know if it’s the right development investment?

You need your reference client to sell for you.

  1. MAKE A DECISION – DECIDE TO REFERENCE CLIENT AND MARKET TEST

It is not advisable to simply think your CTO will come up with the next widget and simply take it to market.  Too many businesses have gone to the wall or plateaued because the first great idea that launched you or your business is now being copied or at least you have some competition.  You made headway the first time, and took a march on everyone else, but eventually you get caught. Because that is commerce.  It’s a cycle.  Don’t therefore, assume you can simply come up with some new service line or product again and repeat the exercise.  Your market’s demands will have matured (partly because of what you launched initially and had success with).  Your competitors will be doing the same to innovate and add value.  Your no longer alone.  You may have to accept marginal gains.  Marginal gains that keep adding value to customers and growth potential to your business.  This is about sustaining your future.

 

  1. GETTING THE RIGHT CLIENT
    There is rarely a ‘right’ client, however it’s in the relationships between your sales/account managers and clients that you will find the receptive clients.  Think about those clients you have who are asking for more features or service benefits and who sometimes offer statements such as “what if your product could” or “your first product was great and we are pleased with it.  It made us think about what else we could do”.  Those types of statements are signs of a client who may be open to a different kind of working relationship.  Be mindful to listen to the comments of your sales/client managers.  Get them in a room and explore with them the ideas you have for new service lines and products.  Listen to them.  They will know what clients are asking for (if they are any good, and not simply chasing margin sales). A client that may work with you uses your current offerings extensively, making use of all of the current features of your service or product and has renewed contracts and/or license without tough negotiation.  They are a good adopter. From your perspective, what is the current state of your new offering?  It would be wise to consider the gains you need when assessing the right client.  You have a list of potential good adopter clients from your sales/client management team.  Now you need to decide your criteria.

 

  1. GET A GOOD TEAM

It is better to provide a dedicated sales/client manager to lead this exercise.  Reference client development is a sales and business development exercise rather than a delivery project. Have your delivery experts on the reference client project but don’t let them lead it.  They are usually focused on adoption and used to sign-off delivery to move on to another deployment.  Your sales/client manager lead is looking for that piece plus the measure of value add provided, a measure of the benefits the client is gaining.  Your product owner who has developed the prototype service or product is interested also.  They want to know if the product/service is received well, what may need to be redesigned, the behaviour of the client with the service or product etc.  Below is a high level list of who should be involved and what role they might play.

 

  1. CREATE THE APPROPRIATE LEGAL FRAMEWORK

Create a binding agreement that speaks clearly to the intellectual property of the development.  You may need to collaborate legally so therefore beware of the type of legal agreement you draft.  A collaboration agreement is meant to have shared inputs and outputs so this may not be an appropriate agreement to implement.  If you are developing a UK public sector organisation such as NHS Trust, local authority or school for example the rules on collaboration need a good review from a lawyer to protect trade rules and fairness.  It is hard for such organisations to exploit IP anyway so its less of an issue as the highest interest to a public sector body is largely kudos and reputation build.

With a commercial supplier there is greater freedom legally but of course that comes with more risks.  Protection of IP is more important for you in this case.

  1. SUCCESS

Be clear on what success looks like for the products and services.  There is nothing worse than someone internally developing a product function or service definition that is based solely on the internal.  It must have reference client approval.  It would be wise to also speak internally to this.  Both your reference client and your organisation want success.  Defining what that is as objectives in the proposal is a good way of being open with your client.  For example your objectives could be as follows.