10 critical Factors for Partnering with the Right Business Partner
“Creating a close connection with your Partner has its many risks, rewards & consequences. There are few things in business I have encountered that are more difficult than picking someone, and hoping he can become a friend” Mark Cuban, Shark Tank
Partnering Topics: Trust, Opposite, Trial Run, Friends. Meetings & Decisions, Responsibilities, Financials, the Agreement.
The Good, Bad & the Ugly. As a serial entrepreneur, I’ve had my share of good & bad business Partnering arrangements. One experience in particular started out pretty good, because this person had lots of industry knowledge & connections. We literally could walk into just about any account and the prospect would buy our services. It was great, at least for a while. Then personality conflicts started and it was no longer fun or productive and it quickly went downhill from there.
3 W’s: What Went Wrong? The biggest problem was not knowing him very well. Rather than taking the time to do the “due diligence” on him, the focus was on the chance to grow a company quickly and profitably – based on his knowledge of the industry & my knowledge of the product. We had never worked together before, so leadership style or values were an unknown. However, once we started working together, it quickly became clear that his way of doing business was totally different in terms of employees, customers & money – than my way of Partnering. I see this a lot when working with clients now. It looks great on paper, but issues arise when put into practice and personalities react to various situations. Just like a marriage that starts off all hearts, roses & dreams, Partnering can quickly turn into heartbreak, anger, lawsuits and bankruptcy.
Do I need to be Partnering? If so . . . Before you even think of canceling the Partnering arrangement, contemplate whether you even need one at all. If you decide it is a good idea, make sure you get the best match to your own values, goals, leadership style & skills. Because once you become partners, it is vastly more difficult to undo the partnership than it is to create it.
Following are eight (8) factors to consider to have a good Partnering arrangement.
This is first on the list for a reason. Bottom line, do you trust this individual with your personal Bank account. If the answer is “no,” think twice. As partners, every dollar you spend proportionately affects eventually – directly or indirectly – your personal check book.
2. Opposite Strengths.
Make sure you and your partner’s strengths are in different areas. If you have two people who are good at development and no one who is good at executing on an operational level, it will be more challenging than you think. It is much better to bring someone in who will compliment your strengths. In order to grow the most successfully, keep some balance of what tasks, projects, customers or functions you each perform.
4. Partner or Consultant?
Don’t partner with someone just because you can’t afford to hire them. It is better to hire them as a Consultant (as needed), than to give away a part of your company or to find out later that he/she is not a good Partner for you.
5. Trial Run.
Select a person you have experience working with – at a company, non-profit or on a project. You should know if they are a team player and how they react in difficult situations. If you have no experience with a potential partner at all, do a Trial Run for 90 days, before finalizing the Partnering Agreement.
6. Friends as Partners.
If the person is a good friend, make sure that their goals, values & responsibilities are aligned to yours. Don’t assume, just because you get along as friends, that they are. Take a look at their personal life and how stable it is. Personal problems are difficult and can easily complicate a Partnering arrangement professional life. If there is any doubt, don’t do it. Follow your intuition.
7. Meetings & Decisions.
From the information above, you can see how important it is to be in agreement. Have regular meetings (at least weekly) to discuss progress and significant issues. When a significant issue arises, call a Special meeting to discuss the issue/s, come to a decision and implement it asap.
8. Balanced Responsibilities.
Both parties need to agree up front what their responsibilities are in the company and stick to them. Have a Partnership Agreement – that covers all significant issues (including Trial Period) – that you can agree upon (or modify to meet each other’s needs). This reduces or eliminates the possibility of one person keep trying to take over and make all the decisions without discuss with the other partner. If this happens, then the partnership will start to unravel and feelings of resentment will fester and you cant work together anymore. However, don’t try to micro-manage each other. Trust each other’s responsibility and get the report (as needed) or at the next meeting. On the other hand, don’t be afraid the others opinion on a situation. The more you trust & confide in each other, the stronger your Partnership will be.
Just like in marriage, money is always one of the major problems in a business Partnering. Therefore, agree in the beginning how: 1) each will be Compensated (ie, equity share, salary, etc) & 2) how you will use the Funding you raise & 3) how the Profits will be distributed.
10. Partnership Agreement.
The following are typical elements: 1) definition of Responsibilities & Authority, 2) Compensation / Equity Split, 3) Allocation of Profit or Loss, 4) Resolving Disputes, 5) Departure / Buyout of Partner, 6) Non-Compete, 7) Termination. There are plenty of “free” or low-cost Agreements on Net. Chose one that suits your situation.
Conclusion: Why is this so important? Because a great business can be severely damaged by a bad partnership and never reach its full potential. Starting a business and/or a partnership is an emotional experience. When doing your due diligence, set your emotions aside and make sure everything lines up and has the potential at staying aligned.
Comments: are there any other Factors that you feel are critical for choosing a Partner?
from Entrepreneur.com 20 May 16 enhanced by Peter/CXO Wiz4.biz
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