Choosing who your business partner(s) will be is the single most important decision you will make in your business — and potentially in your life. It is arguably more important than who you will marry, as you will likely spend more hours with your business partner and their actions have a massive impact on your work-life balance, work schedule, personal life, income, stress levels, happiness and your overall daily life.
With that said, here is my advice and tips on choosing a business partner.
Choose your business partner(s) carefully and wisely and never from a place of desperation. There are hundreds of potential partners and investors out there for you (assuming you have a good business idea and that you personally have value and skills to offer) so don’t get “married” to the first person you meet. Too many entrepreneurs jump at the first opportunity, because they do not see the other options in front of them.
Take your time before agreeing to partner with anyone. Do your due diligence. Speak with several of the people who they have worked with in the past and in the case of an investor partner, talk with several of the founders that they have invested in before. Find out the good, the bad and the ugly in order to make an informed decision.
Your business partners should compliment your own skill sets. They should be people who bring different other areas of expertise, interests and experiences than you in the areas of: marketing, sales, operations, finance, human resources, technology, operations and fulfilment, to name a few. Do not team up with people who have the same skills set as you or people who will be your submissive “yes” person. You need leader partners who will hold you to a higher standard and challenge you. Once you team up, you collectively raise the overall quality of the business, together you are a better team and the business is further ahead by the union.
In the case of a day-to-day working partner, before agreeing to being legally bound to each other do a short three to four week test project together. For example, if your new partner will become the CFO of your company, hire them to do a financial project first or in the case of a CTO, give them a back or front end development project to do so that you can see how you interact together and how you get along. You will experience their work ethic, your rapport with each other and the quality of their work before you agree to being business partners and getting legally intertwined.
In writing, outline very clear job descriptions, titles and areas of responsibility with your partners and agree to how many hours everyone will work in the business each week. Have the equity ownership percentage, votes and board seats contingent on the new partners ACTUALLY doing what they have agreed to do. By creating an Earn-In structure you will avoid many problems down the road when your “all-star” partner turns out to be a major dud or is MIA.
Make sure that you build an exit strategy mechanism into your agreements that allow you to end the partnership smoothly without damaging the business or causing stress and drama. Most partnerships do not work out, so be prepared for the day when one of the partners wants to leave the business, or you want them to leave as soon as possible. The agreements between you should provide opportunities to buy and sell shares and not tether you both to each other for the entire life of the business.