When you’re first starting a business, it’s much like the start of a relationship. Everything is sunshine and roses, and you’re filled with anticipation about what lies ahead.
And then reality sets in.
You face challenges, as every business owner does. You have to make difficult decisions about where your business is headed and how you’ll get there. And, just like in a relationship, you have to face those challenges and make the tough decisions together with your partner.
Though it may be challenging to think about in the beginning, the two of you are going to go through a lot together. Choosing the right partner can make the difference between a healthy, thriving business and one that fails prematurely.
If you prefer the former option, take these non-negotiable steps when deiciding who you’ll partner up with.
Get everything in writing—professionally
This step may feel awkward and may even seem like overkill, especially if you’re just exploring the idea of a potential business with a pal. But take a lesson from Kathryn Minshew and get a business agreement in writing—drafted by a lawyer.
Minshew is the founder of The Muse, a highly successful career-centric website for women. But before she struck it rich with her current venture, she lost her entire life savings to a failed business partnership with a group of so-called friends.
As Minshew describes it, she and a few colleagues decided to found a media company. Because the group knew each other well and none of them were too worried about squabbles down the road, they simply etched out a casual agreement on a few pieces of notebook paper.
A few months down the road, though, that notebook paper agreement didn’t amount to much. The group ran into a serious disagreement about the path the growing company would take. Two of the co-founders ended up strong-arming the other two out of ownership, and Minshew was left with nothing.
No matter how close you are with your prospective partner, learn from her misstep and put a formal agreement in writing with the help of a qualified legal professional.
Clarify each person’s roles
If one of you is a numbers guy and the other is a complete creative, it may seem like a no-brainer what each person will be doing for the business. The waters can get muddy, though, as the operation starts to grow.
Avoid confusion and the problems it can prompt by clarifying each person’s roles ahead of time, both as they stand today and how they will evolve as the business grows.
Some things to think about: what will each person’s day to day responsibilities look like? What are the benchmarks for success in each role? Who will be the point person for future employees? Will each person handle decisions in certain areas (HR, finance, marketing) or will all decisions be made jointly? …and so on.
Have the tough conversations
Once again, it goes back to thinking of your partnership like a relationship.
When you’re considering getting married to someone, you have to talk about the tough subjects like money, kids, and the like. In a business, money is just as much of a topic that must be discussed ahead of time (kids, thankfully, not so much!).
You’ll want to talk about business values: what’s most important to each partner? What is each person’s style of doing business, and if they’re different, how will you reconcile them?
Also, talk about each person’s short and long term goals, both as individuals and for the business. This is key, because while one person might be committed to being actively involved for the next decade, the other might eventually want to take less of an active role or sell the business completely in a few years.
Executive team consultant Kristine Kern has an excellent list of questions to talk over with a potential business partner before signing on the dotted line.
Choose someone with complementary skills
Once you’ve come up with a great business idea, it can be tempting to want to go in on it with a friend.
Sadly, in many cases, friends don’t make the best business partners. In a study by Harvard Business School of technology startups, the ones founded by groups of friends were the most unstable, with turnover rates nearing 30%. And of course, we all remember how it went down for Mark Zuckerberg and his (former) friend Eduardo Saverin.
While these examples don't prove it's impossible for two people to be friends and business partners, it indicates you should be careful not to choose a partner based on friendship alone. A great partner will have a skill set that complements rather than competes with yours. If your skills are too similar, you may run into a constant struggle of wondering who’s the top dog.
Seek out someone whose skill set complements yours in the right places. For example, if you’re a big-picture thinker, you might want a partner who will function as the chief of operations and take care of the details, and vice versa.
Hire them instead
At the end of the day, you don’t have to have a business partner.
If you’ve found someone you think you might love working with, but aren’t sure whether you want to be married to them for the life of your business, you can always hire them as an employee or consultant instead.
This not only removes any elements of a power struggle, it also allows you to “test the waters” before giving them a significant stake in your business. If all goes well, you can always make a stellar employee a partner down the road.
Selecting a partner (or deciding not to) is one of the most important decisions you’ll make when starting your business. By facing the tough questions and conversations up front, you’ll save a lot of heartache and potential financial losses down the road.
Do you have a business partner? Comment below and tell us how you knew he or she was the right fit!
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