Collaboration is a wonderful thing. And so are supporters and friends. It’s great to have someone to buck you up when you’re down, someone to talk through your problems with, or to take care of the stuff you can’t do. And, there’s no denying it: Being an entrepreneur is a tough road that requires a lot of different skills.
But all that doesn’t mean you should jump into a partnership. A mentor, advisor, or peer support group can substitute for a partner in many cases. Partnership is a long-term relationship, with serious financial implications. Hiring the wrong person is bad enough for your business. Tying your financial future to the wrong star can be disastrous.
Know what you need
Take some time to figure out what tasks need to be done and how many of them you can do yourself. You may not know the answers until you’ve been in business awhile. As one group of entrepreneurs found out, they could design a great product but didn’t know enough about marketing. They thought they knew but they were wrong. A little real-life experience made them realize what they lacked and where to get it.
If your small business team lacks something — marketing, sales, design — you may be able to fill the gap with an employee or consultant instead of giving away part of your business.
Get serious, get personal
A bad partnership starts with assumptions, according to Nina Kaufman, who has written the book on choosing partners wisely. Don’t assume you have the same goals and vision for the company. Talk about your goals.
- Are you both looking to build a mega-business no matter how many hours it takes from your personal life or does one of you want a 9-to-5 job?
- How do you define success?
- How much do each expect to take out of the business?
- How long can you each hang it there until the business takes off?
Then there’s the personal, which is the hardest part, Kaufman says. Do a credit check, no matter how trustworthy your prospective partner is. If there’s a bankruptcy in the history, you want to know. It may not be a deal-breaker but it will affect how you go about getting financing.
Plan for the worst-case scenario
People die, their interests change, their situations change. Plan an exit strategy. One day, you’ll need it.
- How will the value of the business be determined if one partner buys out the other?
- What happens to intellectual property, customer lists, and debt if the business fails?
- Will you have a non-compete clause?
You get the idea.
Does it sound like I oppose partnerships? I don’t. I just oppose ill-conceived, messy partnerships. Avoid them. Go into a partnership with your eyes wide open. Then it can be a glorious, supportive, enjoyable relationship that makes your business better and your life easier.
What tips do you have for people thinking about a business partnership?