When looking for a business partner choosing one that fits your corporate culture is vital for the future of your company. Together, both of you will share ownership, contribute to all aspects of the company including money, property, labor and skill, and share in its profits and losses. Because you and your partner will both provide input in the decision-making process, you’ll need to find a someone who shares your vision, goals and expectations to keep your business on track.
A business partner can bring value to the business and increase productivity. Your partner is someone by your side and is just as invested in the company as you, providing emotional support and acting as a sounding board for ideas. They help keep you accountable, while leveling out any areas of weakness you may have.
Adding a business partner is not always the easiest process, they can potentially make things much more difficult. They may have different views for the business, like the direction of the company, expectations in ownership equity or thoughts on handling money. Even if roles are split between two people equally on paper, as the former solo owner you may feel like you’re putting in more time, effort or that you simply care more about the business success. Look for someone who you can communicate with, honestly and diplomatically, especially when feelings like this arise. Be certain that your partner would be able to handle a tough situation or discussion tactfully.
Before signing on the dotted line and officially bringing on a partner, it’s important to know as much as possible about this potential collaborator, including his or her professional work ethic and personal finances. Your partnership should be built on trust and respect, communication and compromise. But how do you know if this person is a good fit for your organization? Here are a few questions to consider before making your decision:
When choosing a partner, you should look for someone whose strengths off-set the areas where you may struggle. Can your potential partner make up for the skills you lack and vice versa? Perhaps you are good at seeing the big picture and need someone more detail-oriented, or maybe you are shy and need a partner who is outgoing to drum up sales and leads. Whatever it may be, look for someone who complements your skills and personality.
What does your potential partner expect from the business? How much time and effort are they willing to commit as a partner? If they’re not as committed as you are, they may lose enthusiasm over time, leaving you with the bulk of the work. Choose someone who is as dedicated as you are and will do what it takes to ensure the company thrives.
Partners do not need to spend an equal amount of time in the office, but you should both have the same expectations on time commitments. You run the risk of brewing resentment when mutual understanding of the expectations is missing from the partnership. To avoid tension, make sure you are upfront about your thoughts and expectations when it comes to your partner roles and responsibilities.
Money is the main cause for disagreements for many types of relationship. You and your partner should be upfront and honest about your financial situations. Make sure your partner doesn’t have any outstanding payments or financial commitments that may affect decisions they will make regarding the business.
Your discussion on personal finances may be a good gateway to talk about compensation. Discuss who owns what percentage of the business, who is investing in what, where money is coming from and how partners will be paid. Generally, partners set up equal ownership, both contributing 50%, but terms can vary. Perhaps one partner contributes more money, while another brings in knowledge and professional contacts. As the business develops, adjust compensation accordingly.
No matter how confident you are in this potential partner, you should both agree to put everything in writing. Address all potential problems with your partner in the beginning, and consider hiring a lawyer to help you work through unforeseen problems that may occur in the future. Make sure to include an exit strategy, as not all partners decide to leave the business at the same time. If both of you decide to leave the business and each of you want to liquidate and divide assets, include how those assets would be divided, how you would assess the total value of the business, and specify who would appraise the business. It’s never too early to start thinking about an exit strategy, especially if you have to consider multiple points of view.
Bringing on a business partner can make your company stronger, more efficient and lighten the pressures placed on a sole-business owner, but only if you choose the right person. Choosing a partner should not be a quick decision. Before officially bringing someone into the fold, have a trial run to make sure you and your potential partner are able to work together smoothly and successfully. Adding a partner to your business is a big decision and takes much thought and effort, but ultimately, it can the decision that drives your business towards success.
Contact Evolution Capital Partners at (216) 593-0402 or by using our online contact form.
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