Now starting multiple businesses myself I know the importance of working with your partner or by yourself they both have have ups and downs to them. Today I am going to help you pick the right business partner.

Before you start looking for a business partner, the first thing you must ask yourself is why you want to have a partner.

This is true if your business has yet to be launched or is already operating. Good reasons to take on a partner…

• A teammate with whom to share the daily stresses, decisions and annoying details.
• Someone to share the financial risks involved in the business.
• Someone with skills that you don’t have to establish a firm management foundation for the business.

The most common fit is between a person strong in the internal details of running a business and a strong “outsider” who runs sales and marketing operations.

There are reasons which — on their own — do not justify going into business with a partner…

• You’re lonely.
• You need capital.
• You want someone to lighten your workload.
• You hope to make useful new business contacts.

THE SELECTION PROCESS

If, after careful thought, you conclude that taking on a partner is the way to go, your first rule of thumb is: Don’t choose a partner who is like you. A truly effective partner is someone whose abilities and skills complement your own and who can expand what you can do as a team.

If you’re both engineers or have financial skills, for example, who will manage the sales and marketing?

Key exception:

Both partners must share the same business goals. You’re each going to put in considerable money, time and effort. You need to agree on where you’re trying to go… short-term and long-term.

If a partner’s idea of business is to get rich quickly and that doesn’t jibe with your ethics, it’s better to find out now — before formalizing any kind of partnership agreement.

Don’t be too quick to make a decision about taking a partner. You should discuss everything in great detail. It will take a while to truly know and understand the person you may be working with. The wrong partner is worse than no partner at all.

Difficult as it may be to discuss certain things about your life — such as health or personal problems — nothing should be off-limits in a partnership discussion.

Example:

Two seemingly perfect partners had money to invest in a gourmet food business and different areas of expertise and shared common goals. Despite having a great idea and working well together, their partnership dissolved because one partner became distracted by a divorce. This partner had failed to mention the divorce in prepartnership discussions.

Caution:

Old friends or family members do not necessarily make a good partners. They may be known entities, but being so close for so many years may make you too casual about formalizing the business arrangement. You may leave critical details about responsibility and accountability unmentioned in the planning process.

Similar difficulties arise when husbands and wives go into business together, although there are certainly many outstanding examples of success.

Success in these arrangements comes down to how well the partners’ skills complement each other… and if they can separate their marital and business roles.

THE FORMAL AGREEMENT

A well-thought-out and formally executed partnership agreement is a must for a successful partnership.

Get the help of a good attorney who will write the contract in clear English.

Ideally, both partners should have independent legal representation in drafting and/or reviewing the agreement.

A good partnership agreement has…

• A full description of each partner’s responsibilities in operating the business — who has responsibility for hiring… firing… taxes… purchasing, etc.
• Clear language about each partner’s initial financial contribution and how profit/loss will be divided.
• Provisions for the timing of withdrawal of partnership profits.
• Clear “buy/ sell” provisions in the event that one partner wants out. Spell out how the value of the business will be determined in this situation and how a buyout will be executed.
• Provisions for continuing the business in the event of death, disability or withdrawal of one of the partners.
• A prohibition against either partner becoming involved in a competing business.

A TIEBREAKER

In a two-person partnership, it is essential to add to the agreement a plan for resolving disputes.

Problem:

A 50-50 partnership creates stalemates when disagreements arise.

Solution:

Consider having each partner take 49% and giving the remaining 2% to a mutually trusted outsider. This person can then cast the deciding vote and avoid a deadlock.

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