A business partner is not the same as a business partnership.
Many times, you hear about businesses that have more than 1 founder. These founders are business partners. Or you may hear about businesses that have a partnership with other businesses.
I have already talked about the different types of business partnerships, so today I am focusing on business partners.
Definition of business partners
When I talk about business partners, I am referring to:
- 2 or more people starting a business together
- 2 or more people merging their separate businesses into 1 business, or
- a business owner bringing in an equity partner to help grow the business.
The problem is: if you choose the wrong person, it can seriously damage your business. So, what should you look for to find a good business partner?
1. Shared goals, values, and character
You and your partner should share the vision for the business. You should also have shared vision of the strategy and how you will achieve your goals.
For example: it is important for you to do business ethically, but your business partner has no problems giving some bribes to government officials or intimidating suppliers. You will need to consider whether you want to go into business with this person. Because unless the two of you agree on how to do business, your partnership will not be successful.
How to approach this:
First of all, have a clear understanding of your vision for your business and your business strategy.
Secondly, understand the values that are important to you.
- How do you want to do business?
- What do you consider acceptable business practices (and what not)? Make sure to translate those ideas into reality. For example, if you say you want to support small businesses in your community, how will you do that exactly? Are there situations where you will deviate from your ambition? Which situations and why?
When you start talking to potential business partners, ask them questions that will tell you how they do business and what values are important to them.
One way to do this is to ask them for advice about some issues that you are facing in your business.
Make sure to include some information about your vision and values.
When they give you advice, ask them additional questions. Like: Why do they think this particular advice will work best for your business?
Notice whether they put effort into understanding how you work. And use their answers to determine whether their advice is aligned with what is important to you.
Also pay attention to their behaviour.
- How do they treat people who have nothing to offer them?
- How do they treat their employees and suppliers?
- Do people like working with them?
- What do customers say about them?
Pay attention to the actions of your potential partner, not their words. It is their actions that will tell you what kind of person you are dealing with.
2. Good communication skills
In any partnership, you will face conflicts, disappointments, and misunderstandings.
You will also face questions about how to proceed with the business when it is struggling. Or when it becomes successful.
In all of these cases, communication is key. Unless you and your partner are able to have an honest and professional conversation about anything related to the business, your partnership will fail.
How to approach this:
Observe how your potential partner deals with problems.
- Are they quick to anger and blame the other person?
- Do they always try to find lasting solutions?
- Is their communication clear and easy to understand?
- Do they focus on emotion or do they focus on facts?
- Are they proactive in dealing with issues?
- How do they act if they are not able to do what they promised to do?
- How do they speak to people they don’t like?
3. Less baggage equals a good business partnership
Do you trust your business partner to manage your business bank account, yes or no?
If you say “No”, I advise you to consider a working relationship that will not require you and your business partner to go into business together. Check out this post to see types of business partnerships.
Your business partner should be stable, trustworthy, and fit for business.
Meaning, they should not have money problems in their business or personal life. They should also not have addiction issues, whether gambling, drinking, drugs, or sex.
They should not have large debts or loans outstanding. And while every family has their problems, your potential partner should not have huge family issues.
How to approach this:
If you are considering a business partnership, make sure to spend enough time doing due diligence.
- Make friends with them and get to know them personally.
- Spend time with them, learn how they operate, and learn about who they are and what issues they are dealing with.
- Listen carefully to hear what other people are saying about them (but make sure to distinguish truth from gossip).
When the time comes to truly discuss partnerships, your business partner should be willing to share their financial information with you. Always let a professional accountant or business adviser review the documents.
Note: you too should be ready to share the same information with your potential partner!
4. Business partners should have complimentary skillsets
Nobody is excellent in all areas of business.
Consider your personal skills. If you are somebody who prefers to work on strategy, your business partner should be somebody who knows how to manage business operations.
The more skills you are able to combine in a business, the more chance your business has to be successful.
How to approach this:
Determine your own skills. What are business areas you feel confident in?
- For example, if you have fantastic marketing skills but you lack good business finance skills, look for a partner who understands business accounting.
- Or, if you prefer to focus on producing products for sale, look for somebody who is good in dealing with people and selling.
This infographic can also help you decide which personal characteristics your business partner should have.
5. Choose somebody you like to spend time with
If you are going to do business with somebody, you will be spending a lot of time with them. So, make sure you and that person actually like each other.
I advise you not to choose a family member or a friend.
Even though you may know them well and like them, money has a way of complicating relationships and creating confusion.
If you are able to put solid business agreements into place with this person, you can consider it. But be very careful.
How to approach this:
When you are looking for a potential business partner, look at people you work with, former colleagues, or even consultants that you know.
Check out the people in your professional networks like LinkedIn groups, industry events, and other business owners that you know from Facebook or WhatsApp business groups.
You should also start telling people in your business community that you are looking for a business partner.
6. You and your business partner need a test drive
Never become business partners until you have worked with the person.
It is important to get to know your business partner well before you make any decision.
Once you identify potential partners, find a way to get introduced to them. Take time to build a business relationship with them.
Some advisers will tell you that you should take at least 1 year to really get to know somebody before becoming partners.
Whatever time frame you decide to use, I recommend you take that time to learn about the person, about how their business is doing, their plans for the future, and how they work.
When you understand that, it will help you get clarity on opportunities for working together. It will also help you determine if you and this person are a good fit as business partners.
How to approach this:
There are many ways to do this.
- You can hire them as a employee to work for you.
- You can also give them a consulting assignment. The job or assignment should require them to show their character and way of working.
- If you feel more confident, you can also test them through business partnerships that do not require you to set up a business together. For example, a sales partnership or distribution partnership. See various types of business partnerships in this post.
7. Exit strategy
Before you go into business with somebody, have agreement in writing.
Put in the time and effort to understand all the aspects of working together, of how to run the business, and how to deal with money issues.
This includes lack of money as well as profits.
All this should be in your business partnership agreement.
But before you sign any business partnership agreement, make sure that you and your business partner also agree on how to end the partnership.
Even though you expect success, talk about what will happen if one of you should die. Or if one of you is forced to leave the business for whatever reason.
Your agreement in writing will help to avoid any misunderstanding.
How to approach this:
You can use the draft business partnership agreement that I shared with all my blog subscribers.
It contains the main things that need to be addressed. You can edit it according to the details of your own business partnership.
You can also search Google for “business partnership agreement” and use what you find as an example for your own partnership.
