The advantages of having a Business Partner and how to choose one
Is having a business partner a good idea?
It is common for new business owners to start off in partnership with a friend, acquaintance or a family member. Whether it is structured as a partnership or a company, there is no doubt there are advantages to having a business partner.
But like many of the decisions you make before starting a business, there can be pitfalls.
Making an error of judgement when selecting a business partner can have a significant impact on your chances of success.
The whole point of having a partner is to reduce the risk of the hidden causes of business failures.
What are the advantages of having a business partner?
Having a business partner can be a great way to help start a business or grow an existing business.
Some benefits of having a business partner include:-
- Enhanced skill set – Business partners bring a wider set of skills than you may have on your own.
- More ‘hands on deck’ – speed up the development of the business.
- Time – partners can provide more time resource to help run the business.
- Additional financial resources – Partners can contribute money to get the business growing.
- Risk sharing – Business is about risk, and partners help to spread that risk.
- Help with decision making – As the saying goes “Two heads are better than one.”
The long term success of a partnership is largely determined by how well aligned you are in several key areas.
How do you assess if someone is a suitable business partner for you?
The term “alignment” describes the level of agreement between individuals on a particular view, belief or goal.
When choosing to go into business with another person(s), it is a great idea to discuss your level of alignment in the following areas:-
- Vision – is your vision and aspirations for the business similar?
- Do you agree in the business purpose?
- Values (honesty) – Do you trust each other well enough and have confidence that you will work well together in all the challenges you might face.
- Work ethic and energy – How well matched are your work ethic, values and alignment on business culture?
- Level of commitment to the short, medium and long term – Are you able to commit for a significant period of time?
- Financial – Do you agree on the level of financial commitment and contributions to start, grow or buy a business?
- Skills (diversity) – How well do your skills complement one another?
- Physical health and wellbeing – Are the partners healthy enough to contribute fully for the foreseeable future?
- External responsibilities – Seek to understand what other responsibilities might clash with your commitment to the business.
- Risk tolerance – What is each parties’ attitude to the risk?
- Demeanour (introvert, extrovert, etc.) – How will your personalities work together? Might there be clashes?
Tips to help you check your alignment with a potential business partner.
Before you enter into any form of partnership, spend some time to thoroughly discuss the following areas.
1. Be clear about where you want to take the business
The passage of time will expose differences in your appetite to grow the business so its good to explore this now.
2. Design and commit to a plan
Including the steps to get from where you are to where you’re going.
Start with business model design first and then move into the business planning process.
It is a great idea to get some professional help for this part of the process.
3. Work out the $
How will you share costs and profits?
Do you have a similar attitude to money ?
Will profits be taken out or retained in the business for growth?
4. Who is going to do what?
The objective is to ensure everyone is clear about what is expected of them.
Make sure that whatever is decided, it is written down.
5. Design and agree a process to work through any issues that arise from the start.
Dispute resolution is important to consider up front.
Unfortunately, it is unlikely that you will always agree with each other on every matter.
How will you resolve a dispute?
One option can be to employ a Mentor, Business coach or other advisor who may be able to spot trouble before it becomes a major problem.
Have a regular and scheduled touch base to review how the partners and partnership are going.
6. Think about contingencies
What happens if someone gets sick and needs time away from the business?
How about an extended period away for some other reason?
What happens if someone wants to leave the business?
These are complicated questions to answer, especially if you are new to business ownership.
When considering these issues, it is really important that you speak with a Lawyer. A good commercial lawyer will not only help you work through the issues but will also create the necessary legal documents.
Then, should any of the above situations occur, the process to deal with them is far easier to navigate for all involved.
Do family and friends make good business partners?
If the partner is a family member or close friend, it’s important to protect and nurture that relationship by separating, as best you can, your private and business lives.
DO NOT ASSUME that, just because your business partner is a family member or friend, you will always be able to resolve issues amicably.
Apply the same approach to choosing your business partners irrespective of who they are!
This is a good episode about How starting a business can affect your family.
Check out our free Entrepreneur Personality Quiz for more great tips.
The information contained in this podcast is general and does not take into account your situation. The content does not constitute business, legal or financial advice and should not be used as such. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a business adviser, financial adviser or lawyer in your jurisdiction. To find out more, please go to www.ShouldIOwnABusiness.com.