According to recent studies, two-thirds of all businesses fail. This means that a business has less than a 1 in 3 chance of succeeding.
So, how can you make sure that your business is one of the 33% who succeed?
The answer is by choosing the “right” business partner.
The first place to start when looking for a good partner is to assess your own strengths and weaknesses. Once you have done that, you can look for a partner who exhibits traits that complement your own skill set. This is something that a lot of people know they should look for but don’t. However, it is arguably the most important of all things to look for in a business partner.
Often, people pick partners who are clones of themselves. Other times, they pick people who are so different from themselves that they are in constant conflict. Find someone who complements your skills, not contrasts with them.
If you are not good at a particular aspect of doing business, find a partner who is. Someone with a different skill set can add something to your business that may ignite something new and brings much more success than either of you could have achieved alone.
For example, if you are starting a software company and you happen to be a great software engineer, you may not be as good at marketing and other aspects needed to maximize your business's potential. By partnering with someone who is good at advertising, marketing, and sales, you will be much more poised to promote your services and capture a successful share of the software market.
You need to be able to discuss with this person everything related to the business. Otherwise, issues between the two of you can begin to fester with time, and those that could have been worked out easily will become even more difficult to resolve. Resentment will then set in and a whole downward spiral will ensue just because you wanted to avoid discussing the issue with your business partner.
This doesn't mean that you need to find someone who agrees with everything you say, but you need to feel relatively sure that you will be able to:
A good business partner must be someone whom you can trust. Everyone has their own quirks and individual ways to deal with stress, success, and failure, but if you can inherently trust your business partner, you will have a better chance of succeeding as partners.
Also, when you know that your partner can and will fulfill his or her roles within the partnership, you will be able to focus better on your own. If you don't have faith in your partner's ability to do what they need to do, you will be distracted and will not be as productive as you can be.
Would you hire an auto mechanic to run a bank? It is extremely important that your business partner understands the dynamic of the industry that your business is involved in.
The value of choosing a partner that understands your industry is that he or she will not need to spend a tremendous amount of time being educated and may already have contacts and ideas that can help your business.
That doesn’t necessarily mean that they must have a deep understanding of the business from the onset—they can learn more by working with you—but they need to know enough that their area of expertise can have a positive effect on your business.
Knowing how to deal with adverse circumstances can be the difference between success and failure, and when a business owner has no experience dealing with the many challenges that a business can face, they are at a huge disadvantage.
You may not need a business partner who has experience raising capital, managing a sales force, and creating a marketing plan. In fact, it will be difficult to find someone who has proven above-average results in all areas.
If your main concern is consolidating debt and reorganizing bank loans, then you may want a partner who is experienced in business finance. Similarly, if you intend to pursue government contracts or focus on a particular niche market, you will probably want a partner who has experience doing business in these areas.
This goes back to the previous question of whether the person understands and has worked in your company’s industry. Business partners may bring with them valuable contacts that can lead to sales. For instance, if you have just come up with a new and innovative business solution, your new partner may bring contacts to company heads who will jump at the idea. Your new partner can then use their previous relationships with these company leaders to secure new business contracts for your company.
Whether you operate as an LLC or general partnership, you need a business partner who is financially stable. Money is the number one reason why most businesses fail. It is also one of the most common points of contention between business owners.
If a person is bad at managing their own personal finances, this is a good indicator that they will be bad at managing your business finances as well. Moreover, if a person has a tremendous amount of financial difficulties, they will not be able to invest much in terms of time, money, or emotions when helping you grow your business.
Not every potential partner will have the personal resources to invest as much into the company as you have, but they should be willing to invest as much as they can afford. When lenders and venture capitalists see that your partner is also substantially invested in your company, it gives them comfort and makes them more willing to invest their money. However, when you are in need of money and have a business partner who can afford to invest more money but won’t, it sends a negative message to other potential investors.
A person with vision is someone who can recognize the value of new ideas or business trends and be involved in actively carrying them forward. They can prioritize ideas and plan a strategy for success. This person will have the ability to hear an idea and instantly tell you the next steps that need to be taken to make it happen.
They will also be able to help you come up with new business ideas by instilling a sense of purpose in your team and bringing fresh and original solutions that go beyond the obvious. In addition, he or she will be able to reframe problems to come up with breakthrough solutions that can move your business in a new direction if needed.
A good problem solver is someone who can save your business time and money by pointing out problems and improving on new business processes before they are implemented.
Having the ability to challenge the ideas that are under discussion is important, so a good problem solver will be able to play devil's advocate in order to test the soundness of an idea. This person will also be able to protect your business by paying attention to details that can keep your business organized and running smoothly, and they will be able to achieve business goals through the most direct and efficient means.
When selecting and evaluating a business partner, you should use the same approach that you would use if you were looking to hire employees. However, the difference here is that there is much more at stake when choosing a business partner. That being said, here are three important questions you should consider:
Small businesses do not need more than a few partners. In fact, according to Paul Graham, the co-founder of Y Combinator, a seed capital firm, two or three business partners works best. That is, two or three business partners tend to work better than four or more partners where there is a greater tendency for businesses to break down and for partnerships to dissolve.
Before you take on a business partner, you need to be ready to share ownership of your company. Whether you base it on the number of man hours they will contribute or the amount of money they will inject into the business, you need to have some idea of how you will share your business with your new partner.
You can split business profits in any way you want, as long as your partner agrees. However, it may be best to first decide upon a formal business structure with your partner before making that decision.
Lastly, you should be ready to get it in writing. Although a written and signed agreement is not a legal requirement for partners, having one can protect the interest of all parties involved for the life of your business and through its dissolution.
We are all too often tempted to go into business with our friends because we love them and enjoy spending time with them. But your friend may not be the right person to be in business with. They may not have the knowledge or experience to help you achieve your business goals, and if they don’t, you will find yourself picking up the slack whenever they are in over their heads.
To find potential business partners, talk to your accountant, lawyer, or banker; these are people who have a wide network and generally want to see your business succeed, so they are going to recommend good people. You can also talk to people in trade associations, chambers of commerce, and business incubators to find like-minded people who might make good potential business partners.
Choosing a business partner can be the best or the worst decision you make when starting a business. For some, it starts out wonderfully then goes downhill from there, and for others, it is a match made in heaven from beginning to end.
In many ways, having a business partner is a marriage of sorts. You will be spending a lot of time with this person, so you need many of the same things that you would need in a good marriage, such as:
You need to dig very deep to know who this person really is before you decide to enter into a relationship with them. Sometimes, this means asking some very difficult questions, but if you ask the important questions before you enter into business with this person and be sure you have a partnership agreement in place, you can prevent a lot of the headaches that can plague your partnership and jeopardize the future of your business later on.