Choosing the right business partner
Written by Bulelwa Mdanyana
26 September 2012
If you are in the process of starting a business and you are considering partnership, it is crucial to do some homework before you embarking on that journey. A business partnership is one of the most crucial relationships you will ever have and can make or break a business. This is a lesson that many entrepreneurs learn the hard way, but taking some time out to follow a few guidelines can save you the financial ruin and collapse that can come from a failed partnership.
Business partners can bring some much needed money into a business but a few things must be considered before signing on the dotted line and cashing the cheque.
Look for someone with similar values
Do not let the excitement of running your own company get in the way of making good decisions for your business. When choosing business partners it is important to first ask yourself why you are embarking on this business venture. What do you value and what do you want to accomplish?
When selecting partners you should establish their values and reasons for wanting to join in. Someone who just wants to make money may not be the best choice. Discuss what style of leadership your team will use – is it going to be democratic or authoritative? You also need to examine your goals, priorities and accountabilities – establish who is going to be responsible for what and when? If your values are too different this may lead to clashes in the long run, especially when important decisions have to be made.
Make your expectations clear
You need to establish upfront what your business partner’s expectations are – what do they expect from you as a partner? These expectations must be communicated clearly and must be agreed upon by all partners. Expectations could include, how much time do you plan to put into your new venture? How much time do you expect your business partner to put in?
If you fail to cover such topics with your business partners, you may find yourself disappointed with the amount of time they're contributing to your business success. Find out if your business partners have any other commitments that could interfere with their ability to meet the obligations they're agreeing to take on? For instance, are they studying, do they have a full time job, do they have family commitments etc?
You must also discuss what tasks you expect your prospective partners to work on. Communicate this with them clearly and get their views and feedback. Decide who is going to handle what, you may need someone to handle one particular area of your business, e.g. marketing, bookkeeping etc.
Establish each other’s strengths and weaknesses
The right business partners will enhance the business and ease your life by sharing the workload, and complementing your strengths and abilities. When choosing your business partners, it is important to evaluate based on expertise and personality. If for example, you are not good at marketing or presenting, look for that proficiency in your partner and let them take care of that aspect while you focus on your strengths.
What else does your partner bring to the table?
Besides money and complementary skills, it is also important to get a partner who also brings some other value to the table. Depending on your business this could be anything from useful contacts and an extensive business network to added credibility. If you are not an expert in a particular industry, a business partner with a solid track record will bring clients to the door.
Put the partnership agreement on paper
Once you have agreed on every aspect of the partnership, it is now time to put it on paper. Documenting your agreement is of the utmost importance. This enables you and your prospective business partners to agree on the terms of your partnership. What will your respective ownership interests be? How will disputes be settled? What decisions can your business partners make without the other's consent, e.g. Withdrawing funds and signing contracts. When going into a partnership it is also critical to have an exit strategy and know exactly how you will walk away.
You can never guarantee that a business partnership will work; however, using a strategic and focussed approach will ensure that the business partnership does not fail because of simple fundamentals