Key Considerations in Choosing Business Partners
There are several choices that an entrepreneur needs to make concerning his business. Undoubtedly, one of the most daunting is the ownership decision i.e. whether to go at it alone or with partners.
There are advantages to each structural choice. If you decide to go solo, you retain control over your vision and all business decisions. Additionally, you do not need to share the business profits or firm recognition. Finally, you do not have to deal with the emotive issues that may arise in a partnership e.g. conflict resolution.
For partnerships, the saying “two heads are better than one” best describes the potential benefits. Here, decisions, wealth and recognition are shared among partners. Apart from that, partners can provide each other with psychological, motivational and emotional support during difficult business times.
Regardless of the benefits, you must approach the decision to partner with extreme caution.A good partnership can result in exponential growth and great returns on investment. On the other hand, poor choice of partners can lead to the downfall of the business and of the relationship.
Do This First
Before you plunge into a partnership, do a self-inventory to assess the reasons as to why you need a partner. Some of the areas you need to critically look into include:-
- Your personality and value system;
- Your vision, expertise and skill-set required drive the vision;
- What are the critical networks, experience and skills the business needs?
- The current and future financial needs of the business.
The inventory helps you to understand where you currently are with your business and best kind of structure to adopt. Not all gaps need to be addressed through a partnership. For example, a financial gap can be addressed through a business loan. HR or IT expertise can be addressed through hiring.
The Key Considerations
If you opt for partnership, then apart from your own self-assessment, you should carry out an assessment on potential partners. Below are some of the things that you need to take into account:
The main thing here is to determine what are the person’s personal motives for joining the business. The questions that can help you to analyse include:-
- Do you know what other ventures the person is handling?
- How do these ventures fit in with your business?
- Will they have sufficient time to dedicate to your business?
- Are they looking for long term sustainability or do they want a short investment horizon with an option to exit?
2. Expertise and Work Ethic
Building a business is hard work. Therefore, you need someone who is able to pull their weight and add value to your business. For work ethic, do some due diligence on the person’s work history. Do they have problems committing to assignments or projects? What are their working hours?
On expertise, what is the person’s skill set and how does it fit in with your vision? Do reference and background checks on the person to get a good feel of their areas of expertise.
3. Financial Ability
Review your potential partner’s Personal Financial Statements. These include bank and credit card statements and tax compliance status. Additionally do a lifestyle audit to determine their financial spending and saving habits.
All these things sound intrusive but they can be very good indicators of how the partner’s financial affairs will affect your business. If they tend to be impulsive in financial decision making, they may well carry over this trait to the business.
Being financially savvy does not necessarily make one a good partner. Its good information to have as it can held determine who will bear financial responsibilities in the firm.
4. Personality Traits
Besides the foregoing issues, you should also pay keen attention to personality traits. You should aim to work with people that are interested in solving problems and good faith negotiations.
The biggest red flag trait is a narcissistic personality. These are people who whose inflated ego tends to make them manipulative, abusive, boundary-less and self-entitled. These personalities have no interest in good faith negotiations and lack empathy when dealing with people. Read more about this personality and its traits here.
Having a narcissistic partner almost always creates bad blood in the partnership. The negativity is bound to spill over and affect you as well the overall business performance.
In the end…
Business owners cannot avoid decision making and in particular business ownership decisions. Not everyone can have a seat in your boardroom. For ,maximum benefit, choose your business partners wisely.
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