Partnering Criteria for Qualifying a Business Partner
from Entrepreneur.com 02/15 enhanced by Peter/CXO Wiz4biz
Like many a relationship, a Partnering often begins with enthusiasm & high expectations – sometime to end in termination or legal proceedings. It’s important to know as much as possible about a potential partner, including how his or her finances & family life – that may affect the business – before signing on the dotted line. Here are some questions to ask before deciding if a Parternship is a good idea:
1. What do I “need” from a Business Partner? You should look for a business partner who brings something different to the table than you do. If you’re creative, maybe you need a more detail-oriented partner. If you have money to invest in the business, you may want to look for a partner with access to a market, or with great connections. Or if you’re shy, you might need a good “people person” to balance the equation. If they’re similar to you, it might be more comfortable, but it may not be what you need. You need someone who completes the skills & personality you need for the Business.
2. What is your potential partner’s Financial Situation? It is important to have an understanding of someone’s financial status & commitments before getting into a venture together. It is “tough” to ask what they are currently spending on a house or in payments to an ex-spouse, but someone’s prior financial commitments, shape the decisions they will make in the future. If they have large outstanding obligations, but says the can get by on a $35K salary, it is a red flag.”
3. What is their Expectations on the Time involved? Partners don’t have to spend the same amount of time, but it is important that they are on the same page, as to each other’s expected time commitments. How many hours a day does your partner expect to put into the venture, and do his expectations meet your needs?
4. Is their Commitment to the business as strong as mine? The business partner’s commitment has to equivalent to yours – especially one between friends – which can start off with fun & excitement, but within a short time, the work load of every day catches up with you. If they’re not as committed to the business as you, they may lose their enthusiasm and may actually be damaging the brand.
5. Is there something in their family life that might make the business a Secondary interest? If your potential partner has a pregnant wife or is taking care of an elderly parent, they may be distracted from the business. That’s why you have to be brutally honest when thinking of forming a partnership. The partner can say, ‘My wife is behind me 100 %. But you want to talk to the wife. If they’re too distracted by a family issue or their family isn’t behind them, the partnership may be doomed.
6. How would they Handle a Tough Situation? It’s important to know what your potential partner will do if they have their back up against the wall -and it will happen. The best way to discover this is to look at what he’s done in past business ventures or projects they’ve worked on.
7. What Questions do they have For Me? If a potential employee doesn’t ask any questions in the interview, you might be less likely to partner with them because of a perceived lack of interest. A potential business partner should want to know about your character, reliability & expectations.
8. What is their Standing in the Community? A lot of people seem good at first, but that may be their skill (salesman-ship). Once they get their foot in the door, it may be difficult to get them out. Talk to former employees & customers, to see what they were like to work with, or for. If you’re looking for someone with money connections, verify that they have money. If they say they have great connections, see if those connections go beyond just being recognized and given a slap on the back.
9. Are they willing to Put everything in Writing? Many partnerships are agrred to with a handshake, but this can be a recipe for disaster. It’s crucial to have a Partnering Agreement- not only what is expected of each partner – but the consequences if expectations aren’t met. There’s something about actually putting it in writing that exposes the potential problem areas in the partnership. If someone simply isn’t pulling their weight, you need to be able to get them out without destroying the business. If it’s in writing, there’s no arguing it.
10. Do I really Need a Partner? If you can get someone to do something without giving them a stake in your business, it’s always better. Founders get wrapped up in the idea of needing to work with someone, but it’s not always a good idea. Sometimes you need somebody to show up from 9-5, work hard & go home. If you’re cash poor, or it’s a startup and you don’t expect to make money right away, taking on a partner might be the better option. But if you can just pay somebody to show up & work, it’s generally a better option than giving them a stake in the company.
11. What happens if – We can’t Work it Out? Most people don’t envision the rough times ahead for a new venture, so this question is probably the hardest to remember to ask. Yet, the best time to address potential problems with your partner is at the beginning, before emotions run high. You can’t predict every potential problem, but a good startup lawyer can help you work through some of the common problems and put a framework in place to help address unforeseen circumstances.
Comments: Is there anything you can add to Partnering to Qualify a Partner?