In some instances, a business you want to start can only be achieved if you partner with someone else.
It can be because you need more capital to augment your resources, or you need someone with capital while you provide the knowhow and skillset. Sometimes, the right partner can round up all the necessary elements needed for the business to succeed (e.g. you’re good in programming but needs someone who does marketing well).
Then of course, the question is: how do you select the right business partner?
Some start out as friends and decide to work on the business together — bringing either stellar results or disaster that even breaks up the friendship. Others come in when they are in a relationship, such as a husband-wife partnerships. Still there are some that enter into a partnership because one heard what the other plans to do and wants to get into the action.
They say that two heads are better than one — but only if those two heads are right for each other (otherwise, it will be a nightmare to work with the wrong partner). The worst thing you can do is to enter into a partnership without any preparations, only the best of intentions and eagerness to start the business with a partner.
Here are some factors to consider when choosing a business partner:
- Start the partnership right by having the legal documentation prepared, including what happens when one partner wants out. The legal documentation including buy-sell agreement, partnership agreements or even incorporation agreements should clearly spell out your roles and responsibilities, address the question of what happens when one or both wants to pursue other opportunities or even leave the partnership. You can also set the parameters on critical decisions such as bringing in a third partner or raising financing for the business.
- Choose someone whose work habits and attitudes complement with yours. In fact, experts advice that you actually ask your potential partner for a resume including references — and call those references. It may be awkward considering you’d want to start the partnership on the right foot, and the potential partner may see this as a sign that you do not trust him/her. But would you rather know that this person cannot work well with anyone BEFORE you start the partnership, or only after you’ve started and you constantly clash with the person?
- Discuss the exit strategies — at the start. Before you start, sit down with your partner and discuss how you want to get out of the business. Are you looking to leave the business in 5 years? Do you want to transfer ownership or sell the business to another person? Or are you looking to find venture capitalists and help bring the business to a successful IPO?
- Agree to disagree. At some point, there will be disagreements — from simple decisions such as office decor to big decisions such as acquisition deals. You need to learn how to deal with the disagreements at the onset. You can agree to proceed forward only if you both agree, or discuss mechanisms on how to resolve disagreements.
- Find a partner who can push you yet provide the perfect balance for you. It is better to have a partner with that provides complementary skills, instead of someone who mirrors you and have your same skillsets as you. Find someone who shares your strategic vision to avoid conflict down the road. Since you will be working with this person closely almost every day, find someone who you’d actually enjoy having around.
Also check out the article “The Seven Cs : Partnership Danger Signs” for more information on how to choose the right partner for you.