Other than finding your ideal life partner, as in your wife or husband, your business partner is the second most critically important choice you will ever make. It’s not that you can’t get yourself out of a bad situation should one develop with your business partner, but along the way he or she can do a lot of damage to your finances and your reputation. That’s why the two most important words are: choose carefully! (Image Credit: Wayhomestudio/Freepik)
Since most people don’t want to start with a total stranger, look around your family and circle of friends to see if anyone jumps out at you as a potential business partner. Yes, you want them to be reliable, trustworthy, honest, and good at what they do. But you also want someone who can challenge you to do your best and excel beyond the level you’re currently at.
Honest and Trustworthy
If you don’t find a potential partner in your family or circle of friends, ask for referrals. You can talk to your colleagues, professional affiliations like your lawyer or accountant, people you’ve worked with and respect as well as former classmates. Before committing to anyone, be sure you do some background investigations – just to be safe.
Nuwber lets you do a background check on a person using advanced online tools. Just by entering the person’s name, email address and phone number, you’ll get a peek at their true identity, along with some relevant important data like police records, social media profiles and other pertinent info. If they have a clean record and don’t show up with any negatives or personal baggage, you’re on your way.
Experience and Vision
One of the keys to a successful business partnership is sharing experience in your field. You don’t want a clone of yourself; rather, you want to be able to broaden your experience and expertise by hooking up with someone who has different experience and knowledge.
Look at your LinkedIn network to see if there are any good matchups with the people you’ve added. Their profile will show their philosophy towards business and list their previous experience. You want to find someone with complementary skill sets that will help boost your knowledge and expertise. Finding a business partner who excels in areas you don’t, like new client acquisitions, for example, will make your job easier and allow you to focus on areas where you do your best.
Make sure you and your prospective business partner share the same vision. Do you want to be large and have lots of employees, or do you want to remain small with only a few additional employees? It’s critical to get these things sorted out before you become partners, because if you have a disagreement about your vision for the partnership in several years, it’s too late to explore compromises.
Before doing anything that puts your finances together with your partner’s, be sure you have a valid partnership agreement that’s signed and legally binding. If you don’t want to go to the expense of hiring a lawyer, you can search online for partnership agreement advice, along with how-to guides for writing your own agreement. You can also download all types of partnership agreement templates that you can customize to meet your particular needs.
Be sure your partnership agreement includes the percentages of ownership of each partner, how the profits will be split and defines the responsibilities of each partner. Also, you’ll want to have the agreement contain explanations of how disagreements will be addressed and what happens if the partnership needs to be dissolved. Always have an exit strategy.
Other areas to include are how long the partnership will last, who makes key decisions and who has the legal authority to bind the partnership to signing on for debt. This is a critical area; you don’t want to have both partners with the ability to borrow money – only one, usually with the other partner’s consent. Or, you may decide you don’t need another’s consent because one of you has extensive knowledge in financing and funding. Deciding before you form the partnership is critical!
Have a Buy-Sell Agreement
Sadly, people leave, and people die. But what happens to their share of the business if they pass away unexpectedly? You probably don’t want your partner’s wife/husband to be your next business partner. Instead, you want to have a buy-sell agreement in place so that you can purchase their share of the business from your partner’s spouse and find a partner more suited to your needs.
Here’s a word of caution: never count on oral agreements. Have everything in writing. Oral agreements end up in court, costing thousands of dollars to resolve. Your buy-sell agreement is just as important as your partnership agreement, so be sure it’s done correctly.
By having everything in place before you open your door and start working together, you’ll rest easy and be able to focus 100% on running and growing your business.