When you’re building your business, one of the first decisions you must make is choosing whether to travel the path alone or start looking for a business partner. Some entrepreneurs are determined to make it on their own, while others see the value a partnership can provide.
This is no easy decision and it’s no wonder that one of the most common questions I’m asked is, “Should I have a business partner when launching my company?” While I can’t answer this question for you, as everyone’s business and working style is unique in its own way, I have learned that there are four important factors to consider if you decide to venture forward with looking for a business partner.
Key Traits When Looking For Business Partnership
Share a Common Vision
The absolute first necessity is having a shared vision with your business partner from day one. I can’t tell you enough how important it is that both of you are headed in the same direction from the very first day you are in business together. If you aren’t on the same page, you are guaranteed to run into problems down the road.
When looking for a business partner, if you are having trouble convincing someone of your vision, that person will likely never completely share your passion and that can become problematic. Find someone who is as excited as you are about your business journey.
Second, it’s important that your partner’s temperament complements yours. Say for example that you are very high energy. It makes sense for you to start looking for a business partner who is more relaxed. Two dreamers will have difficulty getting work done, but two realists may never dream up something daring and unique. Ultimately, you want your energies to balance each other.
Complementary Skill Sets
Just like your temperament, you want a business partner who isn’t identical in skills and brings something different to the table. If you are a great salesperson, you may want a business partner who is a great developer or analyst. The key is to not have an overlapping skill set, which brings me to the fourth and final factor.
Finally, you want a business partner whose network doesn’t overlap with your own. Just as with having your own unique skill sets, you want greater access. You want to be able to leverage with your partner a network that introduces you to as many different people as possible who can help you launch and grow your business.
The more people – and the more people in different industries – with whom you can interact, the greater chance you have of making valuable connections and, possibly, investors and other team members.
As you think about looking for a business partner, remember the four key elements: share a common vision, make sure your temperaments complement each other and that you have non-duplicative skill sets and non-overlapping networks. If you can find a business partner that fits, you will be on the right track to having a successful business team.
As a small-business owner, you are all excited about getting started in business and most likely are considering forming a partnership. The right partner can augment your skills and experience and may increase your chances of landing the new business and jump-starting your success.
By Aaron Young, CEO of Laughlin & Associates
3 Questions Keys To Identify When Creating A Business Partnership
Before you commit to a business relationship there are real advantages and disadvantages to consider before entering a partnership.
- Identify Why You Want to Become Partners
First of all, in the early days, everybody’s excited and everybody wants to make the project work. As potential business partners, you want to lock arms and be best friends. This is where I see start-up owners make premature agreements. Potential partners agree to do a 50-50 split or bringing on multiple partners and splitting the ownership – and profits, in thirds. The danger here is that you are not considering the long-term implications of these partnerships and what the division of this company under these terms will mean down the road.
- Develop an Entry and an Exit Strategy
If you are the one launching the company and inviting a potential partnership, first of all, you need to think about how much you are willing to give up in the profits. For example, if your company was worth 10 million dollars right now, how much would you be willing to give up for that partner?
On the flip side, you need to discover what your potential partner is going to bring to the business at the launching of the company. What are they going to bring in to you now in the early days that’s going to be worth a third of that 10 million dollar company down the road? The first thing to think about is how much stock do you really want to give up for what you’re getting right now?
The next thing is, if you decide to go into that partnership, figure out how you can get out of the partnership. You need to have a buy/sell agreement and exit strategy. This means a written statement in your corporate book that says: “This is how we unwind the relationship so that we can go away in a friendly way.” It’s just math. It’s not a fight.
- Define Your Roles
It is important to clearly define roles when you are bringing in multiple business partners into your operation. There is a difference between owning stock, being an owner and being an employee doing a certain job inside the company.
Even though you and two other people may have the same ownership, you need to clearly define what your individual roles mean and consider issues about what jobs you each are taking on and the salary for those positions. If you go in and you say, “We’re all just going to be equal,” this can cause complications. Invariably in partnerships, somebody ends up doing more and somebody ends up doing less.
One of the partners is totally committed to this project and another has three or four projects that are dividing their time. Remember, ownership is one thing, but make sure you’re paying a salary commensurate with the job and with the hours and the time and the values being brought by that individual.
It is important to complete this strategic planning prior to forming a partnership, keeping in mind the long-term company vision.