By Mike Michalowicz
Choosing a business partner is one of the biggest decisions you will make in your professional life. It’s important to find the right person, not just someone with a complementary skill set. Here are 5 tips to help.
1. Pay attention to the small things
Before cementing a partnership, look for small indicators of a problem that could lead to more substantial problems. For example, you would never go into business with someone who steals money, so make sure your potential business partner has the same definition of stealing that you do.
I was recently at a charity event and saw someone I was considering doing business with take poker chips from a table. Even though this had no financial consequences, he ended up winning the event trophy with stolen chips. Since then, his business has had financial misallocation trouble.
2. Look into work history
The past is going to repeat itself, so make sure you know your business partner’s work history and that it aligns with yours. People often think that everyone will behave like they do when starting a business, but that’s not true. If your partner is used to working nine-to-five and you work long hours, you could have a problem down the road.
3. Find complementary talents
Business partners each need to be a leader in their capacity. Typically, that means one partner is tasked with leading the service or manufacturing while the other leads sales. For a business to be successful at any stage, the leaders need to be able to sell the product and make sure it is executed perfectly. A partner needs to be able to do one or both of these things. Great management skills are secondary.
4. Keep funds invested in the company
When bringing a partner on board, instead of going in 50-50 from the beginning, agree up front that each partner only gets a small amount of equity and put the rest into the business. Every quarter, distribute a small portion to the owners based on performance. This way if contribution is not 50-50, the equity will be split up based on who is delivering. This can save a partnership before it goes sour.
5. Remember, it might not be forever
Even when you have a great business partner, the partnership may not last forever. If one partner starts expressing interest in starting another business, it’s time to find a new business partner. As soon as a partner dilutes his attention to the core business, he loses his heart in the business. Typically, this is because the partner is bored.
Another sign it may be time to find a new business partner is if you see your employees become disenchanted with your partner’s leadership. Employees can sense your energy and enthusiasm, and they will sense it if one of the partner’s hearts is no longer in the business.