Are two heads better than one? If you asked the co-founders of Google, Ben & Jerry’s, and Intel, the answer would definitely be “yes.”
It’s easy to imagine your potential business partner offering sound counsel, sharing the workload, and investing his or her hard-earned cash. But there are both upsides and downsides to having a business partner. If you’re seriously entertaining joining forces with a current competitor or even an interested relative, you should consider all the things that can go both right and wrong in a partnership, and how to prevent and prepare for any outcome.
If you search “business partners” online, you will see a sad amount of articles telling you why you shouldn’t partner up and why its best to be solo. But we at BSBD believe that with the right mindset it’s not hard to see having a business partner really can be awesome and beneficial to your business.
Through our research and experience here are seven tips on business partnerships:
1. Understand That Working With a Business Partner Has Advantages and Disadvantages. Being in a partnership makes you a smarter business and it gives you deeper pockets. One of the main benefits of a partnership is that you’re spreading the risk. There’s benefits impacting what you can do and on the potential investment capital available. Whether it’s monetary investment, knowledge, contacts—you may know 40 percent of what there is to know about an industry, but a good partner will fill in the blanks.
Then there are all the things that can go wrong with a partnership. For one, you’re splitting the money. If you’re in business for yourself, you answer to yourself. But in a partnership you have to ask, ‘Who makes the decisions? What if you disagree? What if you both want different things?’ It may take more work in a partnership but there may be more reward.
2. Find a Partner Who Is the Yin to Your Yang. The key to a good partnership is having a partner whose strengths address your weaknesses,You don’t want two people who are really good at marketing, but no one knows finance. Balance it so the two of you can be the strongest single business. If you’re somebody who likes to work 24/7 and your partner likes to go golfing at noon, that partnership is doomed. You need to agree on work ethic and goals.
And what’s the endgame for the business? If one partner wants to keep growing the business, and the other wants to grow the business so it can be sold, you’re going to come to loggerheads.
3. Be Flexible. Put as much as you can on paper, but you have to be flexible. One of the key successful traits of any business owner, whether in a partnership or not, is flexibility. When you start a business, things are going to change all the time. It’s not like you have to change a document every time, but if one partner is going to be in charge of bringing in the business, and the other partner is expected to carry out the business, all of that should be spelled out up front.
4. Create a Partnership Deed. You need to figure out ahead of time what can go wrong. You need to account for anything that can happen. What if one business partner wants to move or retire? What if someone gets divorced? What if a partner dies unexpectedly, and you haven’t tied up those loose ends? The business could collapse. There are many things to account for in a partnership. Many partnerships are between family members or best friends, where people tend to go on blind faith. A partnership can mimic a wedding and a divorce. You need to consider all the ‘ifs.
5. Vet Your Partner. You should treat a potential partner as if you’re hiring somebody. Do your due diligence. Talk to former co-workers or people who have been in business situations with them. Chances are, if they have had a good relationship with them, they will be glad to tell you that. And if it was a bad relationship, they will be even happier to tell you about it. The Internet is wonderful for researching people without them knowing. Check out their LinkedIn page. Maybe you have clients in common. Make sure they are who they say they are.
6. Get a Credit Report. Run a credit report; there’s also Dunn & Bradstreet to check their business history. Be up front and say, ‘We need to know that we will be compatible working together, and we should run credit checks on one another.’ Don’t try to hide anything because that will get the partnership off to a bad start.”