Before you walk down the business aisle with a partner, trade your enthusiasm and high expectations for some reality checks, at least momentarily. Failure to do so may lead to a messy business divorce and/or ultimate failure of the business.
Entrepreneurs tend to be driven people with a one-track enthusiasm to realize their dreams. When they catch hold of that next great business idea, they become intoxicated with an avid determination to beat the odds, go to market, launch their business, etc. That’s a good thing. But making a hasty decision when deciding to enter a partnership may spell doom for the business even before it begins.
So, before you say I do, here are four considerations to help you choose the right business partner(s):
1. Know Why You Want A Partner
Having a partner for partner sake isn’t worth it. Before committing to share your dreams, days, failures and successes with someone else, understand why you are doing it in the first place. If you’re seeking partners to raise capital, then be prepared to give up some control to a partner who may not necessarily care about your dreams as much as protecting their investment. If you can’t live with that, find other sources of funds, such as a loan.
Sometimes the need for a partner may be due to a needed complimentary skill. For example, a visionary may need an operator. That said, just don’t partner up, because you can’t afford to hire the help you need. If there isn’t long-term synergy, you may be better off hiring employees/consultants rather than cementing a long-term business relationship. You may need a partner for a plethora of reasons. Know the real reasons and articulate them.
2. Have the Hard Conversations Early On
Have those hard conversations. Have them early. Have them frequently. Most partnerships end up failing because the partners avoided having critical conversations from the start. Set emotions aside. Issues of control, responsibilities, expectations, how decisions are made, risks and profit sharing must be comprehensively discussed. This addresses the risk of incongruent assumptions.
After committing significant time, effort and money into a venture, it would be devastating to find out that you and your partner were never on the same page to begin with. Embracing hard conversations early on will prevent problems in the future.
3. Document Your Agreements
Partnerships usually start off on a high note with good intentions. But undocumented good intentions lead to confusion. It could serve as the backdrop for an ugly breakup. So, after exhaustively discussing key issues of control, money, etc., document it.
Also, avoid falling into the pitfall of using form agreements. No two ventures/partnerships are the same, and operating agreements, bylaws, shareholder agreements, etc., must be customized to fit the arrangement.
4. Have an Exit Strategy
What happens when partners “stops feeling it,” “check out,” or just cant stand each other? It happens. Plan for it. Let’s face it, even the best made partnerships on paper, may just not work out for a bevy of reasons. No one likes messy endings. Address this scenario early on. Have a set process in place. And yes, you guessed it. Document it!
The right partnership can lead to great things for businesses. These considerations are important to ensure that bad partnerships don’t occur in the first place or reduce the likelihood of great partnerships going sour.