How To Select A Good Business Partner For Your Startup? | Entrepreneurship and Startups
Why Do I Need A Business Partner For My Startup?
What is it you lack that you need from a partner? Is it money, enormous work capacity, brains, structure, network, creativity or sales experience? Try to map out what it really is you need to succeed with your startup before you approach potential business partners.
Are you willing to give up control over your business and are you able to deal with somebody else always having opinions about the work you do?
If your potential partner has the same characteristics as you – why would you need him?
Why would you give away a piece of your company if you can get that input free of charge or can afford to hire somebody?
How will your relationship work out when put to the test in though times?
A good piece of advice is, as Rhonda Abrams, president of the small-business-book publisher The Planning said:
“Date before you marry.”
What Questions Does The Potential Business Partner Have For Me?
If a potential employee doesn't ask any questions in a job interview, you might be less likely to hire him because of a perceived lack of interest. The same applies to a potential business partner, who should want to know about your character, reliability and expectations before entering any partnership.
Does The Business Partner Have Any Damaging Luggage?
Make a background check before you go into a partnership. There might be things there that you are not aware of. Do the person really have the knowledge he or she states, has the person had any entanglements with the law or with previous business partners?
Vet Your Potential Business Partner To Avoid Damages To Your Startup
Would you invest in a company without a proper due diligence? Probably not, so why take in a partner without looking into that persons past? Banks, investors, suppliers and clients might run for cover if they discover that your business partner has a questionable background.
You need to find out before anybody else does or your mistake can cost you dearly and even ruin your business.
Does The Potential Business Partner Have A Good Business Network
What network does your potential partner have? What is his standing in the local community? Are the contacts he brags about real or just persons he shook hands with?
A good way to find out is to speak to others in your community or sphere of business and randomly mention your potential partners name. Surely the person you speak with will react if they know him.
You can also speak with former employees or employers of the person. Always better to speak to former than current associates. The current ones might want to get rid of the person and see you and your business as a perfect dump.
Do You Share Ambitions With Your Business Partner?
Is your potential partner's commitment to the business as strong as yours? Do you share the same work ethic? What if you are willing to work dreadful hours but your potential business partner expect to be home at 5pm? What if your potential partner has a newborn baby at home and another one coming, that might have a profound impact on the time he can commit and also change the potential partners priorities in life altogether. Family men are very admirable but not always the best business partners.
You also need to make sure you share a vision of where the company is going and what needs to be done to get there. Most likely you are both interested in becoming superrich but do you agree on how to get there? Not sharing the objectives can put you toe to toe faster than you think.
These are reasons why you need to be extremely straight forward if you are about to form a partnership. There are so many examples of people who say they are committed, and they might think they are, but when put to the test they quickly run out of steam but when they do they will still hold a share in your company that they are not likely to give up easily.
There are plenty of friends who start businesses together but at some point thereafter their partnership is over and the friendship lost forever.
Endurance And Resilience Is Vital In A Business Partnership
All businesses go through tough times and you need to be able to deal with them and so does your partner.
What if your company is short of cash and needs to bootstrap for a longer period? How long can you and your partner go without taking out a salary? What if your partner just bought a huge house and has to meet interest rate payments every month? Or maybe your potential partner has a family that sits on enough money to give you a soft and long credit line? Try to find out before you start.
What if you have to work extreme hours over a longer period of time? Does your partner have the physical and mental capacity to do so or will he hit the wall too early? Everybody has their breaking point but where is it? You can of course not find this out in advance but you should take it into consideration.
Write A Proper Contract With Your Business Partner
Whatever you agree on with a potential business partner it has to be put on paper and signed in front of witnesses. You need to state what your financial commitments are, what other resources you might add to the venture and – maybe most important – under what circumstances and how you will break up.
It is not very optimistic to go into a partnership with a plan for a breakup but it is nevertheless important. Should you have a passivity clause, a clause stating that your partner has to sell his shares if he stops working? Do you need to have a clause prohibiting the partner to sell, give or in any other way hand his shares over to a third party without you being offered to buy the shares first?
Better to sit down together and map these things out and create a good and thought through agreement when you are still rested and in a good mood than dealing with it when disaster is upon you and the last thing you need is lawyer costs and coming court procedures.
Having a solid business partner is a great thing but as with everything else in life nothing should be taken for granted and we all have dreadful memories of standing in front of the class in school presenting homework we never did. This time around not doing your homework can cost you dearly.
Founder of Fryday, an international network of professionals
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