Starting a business can be daunting. The statistics bear that out, with high failure rates in the first five years and others closing their doors within the five-to-ten-year mark. There are many reasons for failure , including the lack of cash, not doing enough research and poor marketing. But there is one reason that does not get enough attention: a bad partnership.
Most would-be business owners are good at what they do or make but might not have all the skills necessary to succeed in the long term. That's why they look to open the doors with a partner .
How do people find a business partner? Some use their network of friends and family to get recommendations. Professionals make connections at industry events or conferences and find people who have similar interests.
It is common for individuals to look to current colleagues or those they have worked with in the past when it comes time to starting a business. After all, you know them. You know the quality of their work. You know their goals and aspirations. Or do you?
I thought I did when I partnered up with a co-worker to start my media production company. The idea was that I could handle the sales and creative aspects of the business, and my partner would manage the operation and technical aspects of the business. On paper, it looked good. It sounded appealing to those we approached for loans.
As a bonus, when we worked together at a television station, it seemed like we were compatible and like-minded regarding business. However, working with another individual is different from owning a business with them. That is why some partnerships go south . That is exactly what happened to mine, and as a result, I developed my "business prenup" to help others avoid the mistakes I made. It's important to get smart about partnering, or you might need to get a business divorce.
The concept I first explained in my book Small Business for Big Thinkers back in 2013 goes beyond the typical things you discuss when considering a partnership, such as business structure, compensation and buy-out. Those are important, but the conflicts often arise from those fuzzy, grey areas that should have been considered but did not because you believed you knew the individual. That is often the case when partnering with current or past co-workers.
In my most recent book, Small Business. Big Success, I expanded the business prenup concept to include some additional areas.
Before you open the doors with a potential partner, here are three things to consider.
1. Ownership mindset
Some individuals are great at their jobs but might not have what it takes to be an owner. Being an owner means that you take responsibility for everything, not just the work within your area of expertise. An owner has to be willing to put in the hours, make tough decisions and drive outcomes. It is very different than being an employee. Some can make the transition. Others cannot.
My ex-partner was more interested in filling out reports and doing mundane tasks than working on the important tasks that would deliver results. He liked "busy work." To see if your potential partner has the "right stuff," ask a few questions. What do you think your role is as a business owner? What is your vision for the business in the first five years? Beyond that? Are there tasks you won't do for the business? How do you see us working together?
Related: Leadership Qualities Most Successful Business Owners Share
2. Personal and style differences
People's family backgrounds and upbringing influence how they behave in business. It is one thing to work side by side with a co-worker in someone else's operation and quite another when you spend massive amounts of time together building a business. Little things that might have niggled at you suddenly become problematic. For example, every person's idea of ideal working hours might be a little different. What one person thinks is work/life balance may appear to another as being lazy. What if one person has a "glass half full" mentality while another is constantly negative? That can wear on a relationship.
When working for someone else, the structure is set by the organization. In a partnership, personalities take over. There can be unanticipated power plays to get control. That co-worker who seemed mild-mannered is suddenly unrecognizable. Or downright controlling. It is hard to know how people will react when it comes to money and power. That is why taking the time to uncover potential issues or differences is so critical before joining forces.
Here are a few questions to ask. Do you have personalities that complement each other? Does your potential partner have a healthy lifestyle? Is there anything about them that is annoying or troubling?
Related: Three Things Happy Marriages and Successful Business Partnerships Have in Common
3. Trust
Consider this. When you partner with someone, your financial and family's futures are inextricably tied to them. And it goes beyond money. Your reputation is also on the line. If your partner engages in risky behavior or operates on the fringe of integrity, it impacts your business and your life.
If you can't communicate with a potential partner about everything — run, don't walk away. Communication is key to establishing trust and the foundation for a successful partnership. Here are questions to ask in this area. Is your potential partner a good communicator? Are there things he or she seems hesitant to discuss? Do they exaggerate the truth?
Partnering with a co-worker or colleague can bring out the best in both parties. The old saying is that "two heads are better than one." That is true. With a partner, you get support and additional expertise. However, it can also be a nightmare if you don't have shared values and open communication. Ask lots of questions and listen openly before forming a partnership.
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