In the last article in our series on how to start a business, we looked at how to come up with the perfect name for your business. In today’s article we are going to continue this series with a comprehensive overview of how to choose the right business partnerships. To make sure you have covered all the bases, use our handy choosing the right business partner checklist.
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Do You Need a Business Partner?
Those who make their living investing in new companies will tell you that businesses with multiple founders are more likely to succeed. However, there are also plenty of successful companies with single founders, and this is especially true in the small business space.
Reason 1 to have a partner or multiple partners: Skill Gap
The most obvious reason to bring on a partner is to fill a gap in skills that are core to running your business. There are 4 things that every business must have in terms of skills:
- Ability to Deliver Product – Obviously if you can’t deliver a high quality product and/or service you won’t make it past the first step.
- Sales and Marketing – It doesn’t matter how good your product or service is if no one knows about it.
- Handle the Finances – You have to be able collect from customers, pay vendors/employees, and keep track of the money.
- Manage yourself and/or others – You have to be able to be the boss.
Beyond this, you have to decide what other skills are important enough that they must be possessed by a partner, and which can be handled by employees or outsourced. For example, if you are a software company then you will likely want to have a programmer as one of the founders. If you are not in the software business but need things like a website, then you likely do not need a founder with programming expertise.
Reason 2 to have a partner or multiple partners: Support
Share the Load
When you first start a business you are going to have to be able to wear many hats. This is especially true if you have a small budget to start with and can’t afford to hire staff initially. Having someone else there to divide and conquer tasks with can be a big help.
Brainstorming and Emotional Support
Having someone around that you can bounce ideas off of and to provide emotional support during the inevitable ups and downs of running a business can be equally important. Also, for many people knowing that other people are “in the boat” with them makes them work harder and less likely to give up.
Where to Find Business Partnerships
Network, Network, Network
By far the best place to find a business partner is through your existing network. The more you already know someone the less likely it is that there will be surprises down the road. Here are some great places to find people from and broaden your existing network.
- People that you work with.
- People who work with people you know.
- Industry events
If you are not able to find a partner from your existing network, then there are several sites devoted to helping startups find partners.
Places to find partners online:
Evaluating a Potential Business Partner
Choosing a business partner is very similar to choosing a spouse. You are going to be spending a lot of time with this person, and they are going to be able to affect your life like few others can.
How to get to know a potential business partner:
- Work on a project together, not something for the existing business idea but for a charity or some other source.
- List out your core values and compare.
- List out your motivations and goals for starting a business and compare. For example, if you are looking to flip the business in a few years, and your potential partner wants to pass the business down to his children that’s a problem.
- Ask them for and speak to their references about the qualities listed below.
- Don’t just talk to the people that they have recommended you talk to. Use LinkedIn to find people they have worked with in the past, and talk to them as well.
- Each submit to a background check.
- Each submit to a credit check.
- Ask if they have a non compete in place with their existing employer/company.
- Do they actually have the skills that you are looking for (complementary to yours)?
- Consider personality conflicts. You want someone with different skills than you have, but you still have to get along with the person.
- Do they share your passion for the business?
- Do they share your work ethic?
- Do you have the same vision for the business?
- Do their actions inspire trust?
- Do they have any personal baggage?
- Is it easy to communicate with this person?
- Are they self motivated? You are not looking for an employee that you have to manage.
- Are they willing to adapt? Startups often go through several iterations before finding a successful direction for the business.
- Do you agree on exit strategy?
After going through the above process it should be pretty clear whether someone is a good match as your potential business partner. However, issues are still likely to arise in the future. This is why the next step you should take once you have chosen a business partner is putting together a partnership agreement, the topic of the next article in this series.
That’s our article for today. If you have any questions or comments please leave them in the comments section below. To receive our daily how to articles on starting and running a successful business, leave your email in the form at the bottom of this page.
More great articles on choosing a business partner:
- Inc: 4 Reasons Why Partnerships Fail
- On startups: 10 questions business partners should ask each other
- Neil Patel: Why most business partnerships don’t work
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