Reputation is everything, especially when you’re an entrepreneur or new business owner. Bad business partners can lead to poor (if any) profits, losing clients and an unhealthy working atmosphere. Failure to work well with a business partner ultimately means a negative effect on your company. And the last thing you want to happen, when you’ve spent so long getting up and running, is to have to find ways to escape.
Here, financial consultant Neil Debenham lists some do’s and don’ts when it comes to finding a new business partner.
Do know them well
It may be so tempting to grow your company so quickly and profitably that you fail to do your due diligence.
Make sure your way and your potential partners’ style of leadership are similar or you could be in for a shock down the line when you fail to agree on a range of issues. The last thing you want is a lawsuit or bankruptcy on your hands.
It’s a great idea to have worked with the person before, on several different projects and for a good amount of time. Determine their goals, values, skills and leadership skills – and ensure they are aligned with your own.
Do have different strengths
Ideally your new business partner will have strengths in different areas. For example, if you’re both great at organisation and delegation but neither of you are handy when it comes to sales, you could be in for a rough ride. Choose someone who will complement your positive points but ensure you still have balanced responsibilities as you don’t need any resentment to fester.
Neil Debenham said: “I once ran a company and partnered up with a guy I’d known since my university days. But when it came down to it, we were both excellent at sales but not so great at delegation and the managerial side. From that point, with each business I set up, I always made sure I partnered with someone who had a different skill set that matched mine well.”
Do sign contracts
You may feel because you know your potential partner and have worked with them before – and they may even be a friend – that you don’t need to sign a contract stating what will happen if you part ways. This couldn’t be further from the truth and so many partnerships have turned sour, leaving discussion for possibilities with legal teams.
It’s vital that you decide on a formula to determine what the company will be valued at if one of you decides to leave the business.
Don’t be together 24-7
If you’re going to be running a hectic business, it’s important not to be with each other 24-7 Obviously this won’t be possible if you’re a husband and wife team but even the best of friends need a break at times. You don’t want a good relationship to start to strain because of pressures of being in each other’s pockets.
Don’t choose a bad communicator
If you already know your potential partner, then you’ll hopefully be aware of their personality traits. If they take a long time to respond to basic emails or voice mails, don’t answer questions directly or have mood swings, these are all signs of a bad communicator – you don’t need this in business.
If they can’t communicate with you, they won’t speak to clients or customers well and this could mean poor relationships with vendors, lenders and others. The last thing you want when you’ve just begun, is a bad name in the community.
Don’t let money be a problem
Losing control of the finances is a sure-fire way to see a business go under. Financial records provide invaluable information that acts as an alarm to alert you before something goes wrong. In most cases, businesses don’t fail without showing warning signs.
Make sure you hire an external accountant so that finances can be taken out of either responsibility and so you can’t be left bankrupt if everything between your business partner and you turns stale.