You can’t choose your family, but you can choose your business partners and it’s the latter that can have the greatest consequence on your financial future. Among the leading causes of business failures are business partnerships that have gone bad. In many respects, choosing a business partner is similar to choosing a person to become part of your family. If you can’t trust someone to take care of your children, you probably can’t trust them to take care of your business. Here are some things you should consider before taking someone on as your business partner.
There is nothing more important than a person’s true character. Integrity, reliability, loyalty, unselfishness, broad-mindedness, and a future-oriented nature are among the most essential traits a person should possess to be considered a leader and a solid partner. As part of detailed background check that includes the financial and business background of a person, it is important to gather evidence of their character through interviews with friends, family, and former colleagues.
Without a shared vision there are bound to be disagreements on the direction the business should take which ultimately leads to struggles over basic policy and operation decisions. Two or more partners must be able to articulate a single vision for the company and agree on the minutest details of the mission, values, and goals of the business before there is any chance of a successful business relationship. Prospective partners should spend as much time as possible discussing and agreeing on these critical aspects of their business before proceeding.
Complementary Skills and Expertise
Partnering with someone in a business venture is really about bringing something to the business that you alone cannot provide — some essential skill, expertise, or good will that couldn’t otherwise be acquired by you or outsourced. An effective pairing of partners is when the each brings skills and traits that complement each other.
Business Track Record
Your background check will uncover a lot of information about your prospective partner’s business background. However, the real story lies in their actual track record for achieving results. It is important to verify their track record and their business achievements.
When two or more people become co-owners or partners in a business, each of their personal finances are subject to scrutiny when the business needs to obtain any kind of credit. Also, if a co-owner gets into financial trouble, unless there are adequate protections in place, the business could be vulnerable to creditors and bankruptcy actions. As a general rule, you should never go into business with someone who has questionable finances.
These factors are not mutually exclusive. All should be carefully investigated and a prospective partner should be able to meet all of the criteria. A hole in any of these should be a major red flag.
When a match is found, the partnership should be formally structured to include a legal, written agreement that states how either partner may leave the relationship. Management roles and responsibilities for each partner need to be clearly defined along with methods of accountability.