by E.J. Dealy
Finding a suitable business partner is a lot like finding a suitable significant other. Discovering common interests, similar goals and future expectations are great launching points for any partnership – business or personal –however, as with a partner in a relationship, there’s a lot more to consider than shared interests and the ability to get along.
With that in mind, here are four key questions to ask yourself before entering into a business partnership.
Do I really even need a business partner?
If you’ve got the time, skills and money to build a successful business on your own, then go for it. It’s when a particular party is lacking one of the above — particularly financial resources — that it’s time to consider embarking upon a business partnership. However, don’t automatically assume that because you lack the time or talent that a partnership is your only answer. Instead, think about hiring the “prospective partner” as an employee or independent contractor. Why split the benefits of your idea if you don’t have to?
Have you worked together before?
If your prospective partner is someone you have, or previously had, a good work repartee with, then you already have an idea of what to expect. Before you dive right into a partnership with someone you don’t know –or someone you do know but have never worked with — consider taking on a small project together to get a feel for each other’s work ethic, strengths and weaknesses. Don’t let friendship blind your vision for a successful partnership. Doing so can be the business equivalent of moving in with your best friend during college: it may seem like a great idea, and sometimes it is, but once the lease or housing agreement has been signed, there’s no easy escape when things turn sour.
Does your partner think just like you?
The answer should be “no.” Sure, it’s vital to a business partnership to agree upon your endeavors, but you need to be able to see the business from varying perspectives. Your skill sets should complement each other’s without too much overlap. If you’re the creative genius, then it’s probably best to have a strategic-thinking partner. Or, if you’re the big picture, sky is the limit type, your partner should be more grounded and detail oriented. The key to business success isn’t in the black or white regions of partnership, but within the grey area the two create.
Have you documented the partnership?
No one ever wants to be taken advantage of, but the cold truth is it happens. A lot. If you’re in the initial stages of forming a partnership, begin documenting everything – starting with drafting up an agreement with help from a lawyer and accountant. No matter how well you know the person, do not assume they can’t/won’t break your trust. Don’t make the naïve mistake that sinks so many partnerships before they set sail. Obtain a written agreement that addresses compensation, exit clauses and roles and duties. In addition, calculate percentages of business ownership, document investments and shares, where the financials are coming from, and how you’ll both be paid and when. Doing so will help you sleep peacefully with both eyes closed.
E.J. Dealy is CEO of The Company Corporation, which helps entrepreneurs and small business owners with forming an LLC, S Corp, or C Corp. The Company Corporation does not provide legal, financial, or tax advice.