How to Choose a Business Partner – 5 Questions to Ask
Setting up a business from scratch is a thing altogether that requires a lot of time, effort, and investment. You will often find business owners looking for business partners to divide the responsibilities among them. As a business owner, you need to be very calculated and unbiased in your decision to ensure that you give the best to your business.
Often the unbiased nature of businesses gets compromised given the fact the business owners consider it the result of their blood and sweat. The business owners go on to believe that whatever decision they take is good for the company, which might not always be the case, given their already biased mindset developed over time about their business.
It is where the requirement of a business partner comes in. However, you must keep in mind that choosing a random person as a business partner might not just cause harm to you financially. It will also incur losses in terms of the business process and the business setup as a whole. So, while deciding if you need a business partner or choosing a business partner, you need to ask yourself some questions.
The 5 main questions to ask yourself become you initiate the search for a business partner are as below:
Question 1: How will the move of having a business partner aid the business?
The well-being of the business is the priority. So, the first question you need to answer is how will the business be benefitted from the business partner being onboard? Here, you will have to understand that the business is an accumulation of your will, idea, efforts, and resources now. How do you expect the business partner to change the metrics and bring about traction in its growth? You need to make sure that you can keep your ego aside and accept the changes that might be coming in the way once the business partner comes on board.
Over time, your business decisions and visions might get somewhat biased, considering that you grew the business from scratch. Here the business partner might bring changes to the way you look at things and more. Are you willing to accept it wholeheartedly? Sometimes for business owners, it becomes difficult to consider their businesses as different entities. However, this is an essential thing to ensure proper, unbiased growth of the company.
So when you are considering a partnership opportunity, check out what you can expect of the partner and if your views are aligned.
Question 2: What is the reason I am considering the partnership?
Generally, business owners consider having partner/partners on board for various reasons. It could be for getting new-age ideas, for more accountability and support, or as a financial requirement. However, you need to understand if you are doing it only for the money. If that is the case, we would ask if you have tried all other sources of drawing the funds required for the business. Many business owners consider partnerships only for the money, and end in either tanking their business or letting go of their business ownership completely to the partners.
In this process, you might end up losing control of the business and be answerable to your partner for the slightest decisions taken by you. However, if you choose a partner whose ideologies and work ethics are aligned to yours, chances of being on the wrong side are rare. We suggest that you find reasons apart from money to partner up. The primary reason could be the finances, but the division of responsibility should and other reasons must be considered as well. Post-partnership, you must not be in a situation where you are answerable to a boss figure.
Any partnership formed under stress might not be a great idea. Consider and reconsider your decision of bringing a partner to the company with whom you are willing to break bread. Positions must not come in the way of a company’s success at any point, take that into account always. Partnerships are an authoritative decision, and they are to be handled with proper care and caution.
Question 3: What are the things that make you tick?
Understanding your strengths and weaknesses and knowing what you are good at is a great idea before starting a business partnership. After all, if you are already aware of your flaws, it becomes easier for you to accept them if someone points them out to you. Are you open to suggestions? How well can you take on instructions and suggestions is also an essential point in deciding where you stand in terms of the partnership you were thinking of. Deciding to bring on a partner for many business owners is based on the fact that they want someone to go to, for endorsement of business decisions, and accountability. If you belong to that category, it might be a great idea to choose someone you can rely on.
As business partners, you might have different skill sets, and these skill sets will in a cumulative way, enable the smooth flow of the business. You need to understand that there is no winning or losing among business partners, you need to win together as a business. Understanding your fear and realizing if that is the reason you are looking out for a business partner is important to determine the kind of partner you need for your business.
All these thought processes together can help you understand the kind of person you should seek as a business partner, as well. Why do you need to understand your fears to get the right business partner? Does it sound unrelated? But it determines quite a lot when choosing the right business partner who can help you in the way to grow the business and traction it for bigger opportunities and greater heights of success.
Question 4: How much will the partnership cost you?
Already in need of funds? Are you looking for a partnership opportunity? But how much will this business opportunity cost you? and are you willing to get everything done legally on paper? Understanding what the business opportunity will cost you is a good way of deciding whether you need it. You may decide to pay whatever it takes to get the partner on board legally and then find out that it was not worth it, or it isn’t a good idea to work with them.
Also, if you feel that your whole purpose of wanting the partnership is tossed as you spend a fortune on the paperwork for the partnership and end up sharing a big part of your business with your partner, it might not be a great idea. Talk to a lawyer, discuss with the prospects and determine how much the partnership can cost you.
Question 5: How will I be benefitted from the partnership?
Like, you need to reason why and how the partnership will be beneficial for your business, you will have to decide how you are going to be benefitted from the business partnership as an individual. It can be broken down further into sections where you determine if you would be having more or less work after the business partnership? If the responsibilities will be divided equally, what will be the profit-sharing structure, if any, and the like.
If you are satisfied with these answers, you can move ahead with the partnership. If you are not, it is necessary to refrain from business partnerships. There must be at least some personal benefit to the business owner, such as support for financial losses, reduction of accountability, moral support, fresh ideas, or any other aspect. If none of this seems to happen with your upcoming partnership, it is not a great idea.
These are the 5 important questions that can help you decide if you are ready for the business partnership. However, many related questions will come along the way, that you must answer truthfully to determine if your decision for the business partnership is necessary. Some of the other relevant questions may include what kind of visions are expected in the prospective partner? What will be your profit-sharing percentages? How much time are you willing to spend on this business? What are the steps if there is a conflict of interest? What if your business partnership strategy? What points do you wish to add to the agreement? etc. If you are satisfied with the answers you get from these questions you ask yourself, you are ready for the partnership. If there is the slightest doubt, you can reconsider your decision to move ahead with the business partnership.
Business partnerships might prove to be beneficial for the business. But, if you do not invest some time and judgment in choosing your partner, it might be a blunder for the company. Take your decisions wisely, as the accountability still lies on you wholly until you get the right business partner to share your business ideas or woes. Choose your business partner wisely to ensure that your business flourishes.
When choosing a partner for your business, consider the skills and traits your business needs, the respective strengths each candidate brings to the table, and the alignment of each person’s goals with the mission and vision of the business.
Draft up a contract or agreement outlining any terms and conditions of the partnership, and have both parties agree to them before cementing the relationship. Address topics such as the scope of work, compensation, responsibilities, and your exit strategy.
Vet potential partners by thoroughly researching the person’s background, verifying certifications and qualifications, and obtaining references. Make sure that all financial and legal matters are in order and addressed to protect both parties.
Look for qualities such as trustworthiness, dependability, commitment, and problem-solving ability. Consider how the person’s skills and qualifications complement your own, such as different areas of expertise or complementary personalities.
If the person does not share the same values as you, focus on finding someone else who is better suited for your business. Different values can lead to tension, disagreements, and an inability to move the business forward.
When deciding an equal split of revenue, it is important to consider the amount of capital each party has contributed, the amount of labor each person has put in, and any other varying factors. Consider creating a formulaic, predetermined basis for revenue sharing.
If one partner fails to meet deadlines, develop a plan of action to ensure deadlines are met in the future. Hold the partner accountable for their work, maintain open and honest communication, and consider proactively reassigning tasks to avoid issues in the future.
To create a business partnership contract, outline the agreement between the parties, including the specific objectives of the partnership, the roles, rights and obligations of each partner, the investment of each partner, the sharing of profits and losses, and the scope of decision-making authority.
When conflicts arise, talk through the issues openly and honestly. Consider the best way to resolve the conflict outside of court and which resolution would best benefit both parties. If needed, seek outside help, such as professional mediation.
If a partner wants to back out, consult the agreement and adhere to the terms outlined in the agreement. Address any remaining tasks for the partner, such as the transfer of assets or legal obligations to the remaining partner, and discuss the exit strategy with the partner.