Teaming up with someone to build a business can be one of the biggest decisions you ever make. All too often, people enter partnerships with a hazy, idealistic vision (or worse, no vision at all) and simply choose their business partner based on friendship or financial need. Please remember this: no matter how big or small your business is, there are major legal issues at hand whenever you enter into a partnership agreement. Even if you’re teaming up with your very best friend, you need to get clear about the numbers, your roles, how profits will be shared and how the business will be run. And you need to get it all on paper, signed and notarized.
I am not saying you should be pessimistic or distrusting. It’s simply a matter of everyone concerned being thoughtful and practical up front, because we all know crazy things can happen, and you want to be prepared. Having said all that, there will always be unforeseen issues and it’s a heck of a lot easier to navigate the messy parts of running a business if you have the right partner by your side. Here are some key things to look for:
- Do they share your values? This is the most crucial matter to consider, because it affects absolutely everything you do in business, from which suppliers you use to how you treat your staff, how you share profits, how much you invest in growth and innovation, how hard you work each day, and so much more. Be very honest and upfront about the things that matter most to you, and make sure your potential partners do the same. You don’t want to find out later that your partner thinks it’s a waste of money to buy organic ingredients, if that is of critical importance to you!
- Do they compliment your strengths and weaknesses? We tend to attract friends that are very similar to us, and if you go into business with these friends, it might become apparent that neither of you is particularly good at balancing budgets, managing staff or being strategic with marketing. Of course you can learn to do these things, but if neither of you is excited about learning how to manage finances, you’re going to have a tough time making your business profitable.
- Can they afford the investment needed? If your partner is bringing money to the table, are you sure they can really afford it? How would you feel if the business failed and they lost everything? Of course, I want you to believe that your business will be wildly successful, but I also want you prepared for the worst. And if your partner is going to be concerned about every penny spent because they feel they can’t afford to invest profits in growing the business, it’s going to be tough to make your business the best it can be.
- Do they have enough time to build a business? If a key aspect of your partnership includes them being hands-on during the start up or as an ongoing part of daily operations, you need to know you can count on them to be there. If they have a day job, another business, school, kids, travel plans and other things that can get in the way, you need to be OK with picking up the slack.
- Do you enjoy spending time with them? Even if your partner is just making a financial investment in your business and they want to be a silent partner, you’re still going to be accountable to them, and at the very least you’ll be meeting with them occasionally to discuss the business. If you dread the thought of going for lunch together, don’t go into business together.
I’ve had generally wonderful experiences with my business partners, and I’ve been able to learn so much from my partnership experiences. I definitely believe that two heads can be better than one–when they’re the right heads.