10 Steps To Choosing The Right Business Partner

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    Going into business with someone is a major decision. Much like marriage, the two (or more) of you will need to make joint decisions, share work and pay, resolve conflicts and, most importantly, develop a vision into reality. It’s one thing to idealize a concept, and it’s another to put it into practice. If you’re thinking about starting a small business with a partner or a team, you may want to think of them as extensions of yourself and your goals. Therefore, it’s best to really know what you’re looking for, make your expectations clear and see who fits the plate.

     

    Unlike marriage, there probably isn’t a romantic spark involved, but you may be tempted to jump into partnership with someone based on surface level factors that may feel almost similar to romantic chemistry – a similar vision or personality that just clicks, or a gut feeling that tells you, “yes.” While your initial personal chemistry is definitely important, it takes a while to really get to know a person. Hold onto that “yes” feeling while you do some important background research. Then, if you do reach a conclusion to go forward with this person, your “yes” feeling will be amplified into a strong foundation of confidence much more likely to bring you true success.

     

    The bottom line is, when choosing a business partner for a small business start up, you’ll want to make sure to really sit down and think through the qualities that will make or break your team. Here is a checklist of factors to consider when choosing a business partner, and, because we’re all go-getters here, real actionable steps you can take to get you closer to your goal.

     

    1. Evaluate qualifications without emotion

     

    It’s often tempting to want to go into business with a friend, a romantic partner or a family member because in matters of the heart, they’ve proven themselves true time and time again, and it might sound like a really fun idea to create a business with them. While that sort of partnership may work out, it will be due to more than just your emotional involvement with each other. Emotions are auxiliary in business, and even have the potential to ruin it; what is more important is evaluating the partnership based on how well you work together, what skill sets you bring to the table and whether your qualifications are a good match for success.

     

    • Bottom Line: Don’t choose a partner based on their relationship to you; choose a partner because you think he or she has the experience, the drive, the skills and the vision to successfully implement your business plan at your side.

     

    • Action Item: If you are evaluating a personal relationship, consider making a list of tangible, real world qualifications the person has to offer, and notice anytime an emotional reason comes into play, like, “It would hurt her feelings not to involve her.” Instead, take note of things like, “Has 5 years of managerial experience.”

     

    2. Define vision and values

     

    Every small business first started out as an idea. If you’re the type of person who wants to embark on the tumultuous yet rewarding journey of building a business from scratch, you’ve got vision and you’ve got lots of it! Now you need to find someone whose vision very closely aligns with your own. Rather than just looking at the seed of the idea, you’ll need to understand whether you are both seeing the same thing when it’s full-grown. This doesn’t mean you don’t allow room for improvement or adaptability, but it’s helpful to have a clear idea of what the goal is.

     

    Stating exactly what you hope to build can prevent misunderstandings down the road. If you want to start a bakery, for instance, and they do, too, you’ll want to dig a little deeper. Maybe you have an idea of eventually making it all organic, but that’s not at all important to them. It’s best to figure out whether your vision and your values align long before you’re about to nix all your old ingredients – because that’s what you thought you both had in mind the whole time. Think long-term.

     

    • Bottom Line: If your partner’s vision is too dissimilar or you want different long-term goals, it may be best not to start on that journey. You want to be on a close enough track that opportunities later on won’t cause a rupture. Take everything into consideration. You can never be too clear or explicit.

     

    • Action Item: Make a list of the top 5-10 values you think should be driving your business. Ask your potential partner to do the same. Write an outline of what you hope to accomplish with your business, potential growth you can see down the line, and any forks in the road you’re absolutely not willing to go down. Compare.

     

    3. Look for complementary skill sets

     

    You don’t need another you! While it could be tempting to choose someone a lot like you to go into business with, the most successful ventures strategically use the opposite strengths of its leading members. Two creatives may talk up a storm, but who’s going to crunch the numbers? Two accountants may be extremely efficient, but who can see the big picture? Your business will operate best when well-rounded; one person may be the enthusiastic type who brings the business in and brainstorms new growth, and the other may function best behind the scenes organizing the paperwork and setting goals. Whatever the balance may be, there should be balance. A brain needs both a left and right hemisphere, which are each responsible for important tasks, in order to function as a whole. So does your business.

     

    • Bottom line: Choose a partner whose skills, experience and natural abilities don’t just mirror your own, but complement them in a way that makes you stronger as a team. Where you falter, they pick up the slack, and vice versa.

     

    • Action Item: Make a list of your particular strengths and weaknesses in terms of what you need for your business. Ask the potential partner to do the same and compare.

     

    4. Assess communication styles

     

    So, this is the part where chemistry between the two of you actually does matter. If you get along with the person, enjoy their personality and aren’t immediately appalled by their manners, that’s a great start to establishing a functional interpersonal relationship where communication is key. But it’s not the end. While someone who is charismatic may be deceptively easy to get along with, once a conflict arises, their stubbornness might rare its ugly head. If a partner refuses to listen, to talk out problems or to compromise enough to reach an agreement, your business will suffer. Unfortunately, these hidden dilemmas aren’t often apparent right away. But if you see any red flags, like the person always has to be right, or is passive aggressive, be sure to take note and ask yourself whether that would be an energy drain on your business.

     

    • Bottom Line: Everyone has a different way of interacting with the world, but you need a partner you can communicate well with in order to move forward, take action and resolve problems. A partnership inherently implies equal say, so if someone is unwilling or ineffective at communicating, you probably won’t fare well in business together.

     

    • Action Item: When getting to know each other, pay special attention to matters of conflicting interest and notice the person’s response to conflict. Perhaps even bring up a friend’s conflict over lunch and ask them what they think. In the meantime, it would never hurt to ask yourself what you can personally do to improve your conflict resolution skills.

     

    5. Do a trial run

     

    Aha! So he or she looks great on paper, and you’ve had enough conversations so that you feel your vision and attitudes line up pretty nicely. However, there’s only really one way to know whether you’ll work well with someone. And that’s to actually test how you work with them. Since signing onto a business partnership is a big commitment and responsibility, you may want to work on a project or two together before you make the leap. For example, throw a small business fundraiser or do a pro bono project for a charity. It would be good practice to see how smoothly you can truly operate. It may strengthen your confidence in each other before “tying the knot” and you might even help each other out with some work that had to be done anyway. It doesn’t have to be offensive and you don’t have to think about it like you’ve giving each other a grade. Just do the work and see how it goes.

     

    • Bottom Line: It’s good business sense to suggest working on a project together before signing an agreement. Rather than attempting to judge each other harshly, you’re just testing each other out to see if what you think is a great alignment of skills actually translates into real world, practical application.

     

    • Action Item: Propose that your potential partner help you out with a project you’re working on, or even suggest a small project the two of you can complete together. Go at it like you would if you were in business together, and see how it turns out.

     

    6. Share financial responsibility

     

    Of course, a business relies on its revenue and profits in order to stay afloat and to grow. If you want to make sure you and your partner are each pulling your share of the weight, and to prevent against fraud or embezzlement, make sure you’re sharing financial responsibility for the success of the company. If you’re funding 90% and they’re only funding 10%, there’s a lot greater chance they might decide to swindle you and run off. Plus, if this person has financial problems in their personal life, that’s a huge red flag they are not adept at managing finances and may sink your ship later on down the road.

     

    Try and get investment as close to 50/50 as possible, and lay ground rules for how to approach borrowing capital, increasing expenses and using company funds. It’s not a great deal to have one person doing all the work and earning all the money, and the other person using it all to take clients out to lunch on the other person’s dime. Establish financial liability in writing.

     

    • Bottom Line: Too many small business partnerships have failed because one person decided to be irresponsible with the money. Prevent anything like that from happening by sharing financial responsibility and keeping immaculate records.

     

    • Action Item: Write up a balance sheet of the funding your business will need and assess your potential partner’s capability of meeting your contribution.

     

    7. Do a background check

     

    Speaking of money, how do you know this person is legally and financially trustworthy? Especially if it is someone you haven’t known for very long, you will definitely want to do a background check. It may seem callous at first, but in business, you need to get into the mindset of protecting yourself and your assets. It’s not personal. They may seem like a great person, but all too often the most perfect-sounding, charismatic people are the crooks. If you feel like you don’t need to do a background check, do one anyway. You can even ask the person for references, and check them, as if you were conducting a job interview.

     

    You can also check their social media and LinkedIn accounts to see how they present themselves online. If this is someone who is going to be representing your company, you will want to rest assured that they are not totally unprofessional even in their personal life. On LinkedIn, check their recommendations to see if they are valid. You can even conduct a Google search with their name and search terms like “arrest records,” fraud,” or “scam.” Anything newsworthy with their name should show up. Finally, conduct an official background check through a service like Instant Checkmate to look for things like arrest records, fraud or embezzlement.

     

    • Bottom Line: Don’t take anyone, especially a potential business partner, at face value. Don’t feel bad about checking into their personal, professional and legal history. It may save you grief in the long run.

     

    • Action Item: Do your due diligence and set aside time to conduct a thorough background check on your potential partner. Don’t put it off! If they don’t have anything to hide, they won’t mind.

     

    8.  Put everything in writing

     

    Once you verify the person’s legitimacy and you’ve spent enough time together to feel confident about pursuing a small business in arms, you’re more than excited to begin. However, it’s all great and dandy to handshake, but if it’s not in writing, you’ve got nothing. Too many partnerships find themselves on a slippery slope because they didn’t think they needed to write up documents to account for future thorns.

     

    First of all, seeking legal advice to decide on what type of partnership and business structure you’ll identify as for tax purposes is not only smart but necessary. Additionally, no engaged couple loves sitting down to sign a prenuptial agreement, and no bright-eyed new business wants to talk about what happens if they go under, or if one of them needs to leave the company. But assessing these potential roadblocks with a lawyer ahead of time can prevent future catastrophe. No one can predict the future, and it’s better to have some sort of safety net in place in the case of unexpected disaster. It’s always better to be realistic in business, and this is a part of protecting your assets.

     

    • Bottom Line: Put all business agreements between you and your partner in writing and keep those documents well marked and organized.

     

    • Action Item: Consult with a lawyer about how to prepare and protect your business. Put everything in writing, in clear and concise language, and have each partner sign.

     

    9. Assign roles and stick with them

     

    So, what now? You’re on your way to success, but where to begin? Even in a partnership between two people, it’s very important to have clearly defined roles so that you can each feel great about fulfilling your end of the bargain. Because it is a bargain. You give some, and you take some. By setting out what you expect from one another, and what your particular responsibilities are, you can better approach your work and go forward with ease. For example, one person may be the primary financial advisor and the other one responsible for all social media correspondence. The list of duties will vary between businesses, but figure out what needs to be done, then decide who gets to do it. Because you’ve already finessed out each other’s strengths and weaknesses, it shouldn’t be too hard to see where the weight falls.

     

    • Bottom Line: The reason why you enter a partnership in the first place is to split up work and offer each other clarity, so clearly assigning primary responsibilities allows each party to perform to the best of their ability.

     

    • Action Item: Come up with titles for each person and a list of responsibilities to go with that title. For example, Creative Director and Executive Manager.

     

    10.   Have a plan for resolving conflict

     

    Even with the best intentions, the most thorough research and the most compatible personalities, conflicts are inevitable. It’s a part of life, as well as business, so it would be a smart idea to have a plan for resolving dilemmas that just seem too big to handle on your own. Say you and your partner just can’t agree on how to manage your funds to grow your business; consider having a small business consultant on hand to mediate. Similarly, you will probably want to have a lawyer, a CPA and maybe even a third party teambuilding professional on hand to help you resolve disputes or answer questions beyond your expertise. It’s a lot better than looking at each other helplessly.

     

    • Bottom Line: It’s best to work out your differences and approach obstacles jointly and smoothly the majority of the time, but be prepared to bring in a third party to help you kick down any stubborn roadblocks in your way.

     

    • Action Item: Before the crisis arises, plan a time to sit down with your partner and make sure you are both in agreement about the possibility of bringing in a third party to help resolve disputes. Agree together on who to choose and how to go about it.

     

    Nancy Woo is a freelance writer with a degree in sociology. You can follow her on Twitter @fancifulnance.