Business relationships and partnerships often start out great: everyone’s excited, motivated and optimistic, but end in disaster: lawsuits, broken friendships and destroyed businesses. Taking on a business partner is a huge decision and commitment that shouldn’t be taken lightly. If you’re thinking about bringing on a partner it’s good to ask yourself a few questions just to make sure it’s a good idea.
- Do I really need a business partner? Before starting the process of adding a business partner, thoroughly assess where you are? Have you truly gone as far as you could go, do you need to hire an employee or maybe a contractor to lighten the loan? Really think about whether or not you need to add business partners.
- What do I need from a business partner? Business partners should bring something to the company that you don’t have and cannot do on your own. They should have a high value skill or talent that has been proven through experience. Think about it like this: if you’re going to give up equity (money) in your company, you should be saving that equity somewhere else within the business.
- What is their current financial situation? How much debt do they owe and what is their plan to resolve it. Financial strains will shape how people make decisions. Also, ask what they expect to gain or earn from the business and when? They should be realistic. Startups often take several months to over a year or two before turning a profit.
- What is their current home life/lifestyle like? Similar to money, trouble in someone’s home will affect how they make decisions and their ability to commit to the business. Look for things like their wife is currently pregnant, do their parents or in-laws live with them, are they caregivers? All of these things play a role.
- How much time do they plan to dedicate to the business? Time doesn’t have to be equally invested, it just has to be agreed upon so that no one feels like they’re contributing more than the other.
- What’s their standing in the community? Everyone seems good at first: verify, verify, verify. Ask around about who they are, how they handle themselves— you can never know too much.
- Will they put everything in writing? Oral agreements are a dangerous way to run a business. Everything should be in writing: how equity is given, how problems are resolved, what happens if someone disappears, how to dissolve the business, how to terminate the partnership. If a potential partner has a problem with putting anything in writing: Run.
- How do they handle tough situations? Bad times will come, it’s inevitable. The question is, will you still do what is right, even when you don’t feel like it? Even when it’s not outwardly beneficial? Ask past vendors, employers, employees and look into past records. There’s no excuse for breaking or bending the law.
- How committed are they to the business? Business partners should be equally as committed to the business as you are. They don’t have to be equally enthusiastic, but they do have to be equally committed. The business has to be a top priority.
- Do they have any questions for you or about the business? You want someone that’s interested in your business, not just invested in the possible monetary gain from being a part of the business. They should have questions about the trajectory, goals and vision of the business. Discovery naturally brings about curiosity. A good business partner would have researched to see what value they can bring to the business and have questions about how their potential fit.
Taking on business partners should be a lengthy, well-thought-out process as it will play a key role in shaping how your business looks in the next 5 years. Choose carefully.
