Choosing the right partner isn’t just critical for creating healthy relationships. It’s also an essential component of a successful business relationship. If you’re considering bringing a partner on board, there are some dos and don’ts that can help you find the peanut butter to your jam or the cheese to your macaroni.
What is a Business Partnership?
Running your business on your own can sound intimidating. That’s why many business owners enter into a small business partnership rather than staking it out on their own. With a partnership, you dramatically improve your chances of success. In fact, 54% of startups that raise $10 million or more have more than one founder, and teams of two raise 30% more money when funding their venture.
Historically, some of the largest enterprises and companies birthed from partnerships. What’s important to note is that in most cases, both the founders brought something more to the table than their financial resources. For instance, Microsoft co-founders Bill Gates and Paul Allen started the tech giant together in their garage. According to Allen, Gates was the “sanity check” on the company’s ideas, and Allen helped more with big-picture strategy.
Jerry Greenfield and Ben Cohen, co-founders of Ben & Jerry’s, both shared a similar vision for their company: They subscribed to the belief that “business should be using its power to help address social and environmental issues,” and not just turn a profit. As you can see, finding a partner is more than just improving your personal chances of success; it’s finding the right person that aligns with your core beliefs and goals going forward. For that reason, finding the right business partner is of utmost importance.
Do You Need a Business Partner?
Before we dive into tips for finding your perfect business match, you should consider if you actually need a partner. There are many advantages to having a business partner.
Positive, productive partnerships can be the secret sauce to successful start-ups. After all, where would Ben & Jerry’s be without Jerry Greenfield and who would William Hewlett have become without Dave Packard.
However, it’s also important to recognize that taking on a partner has risks. You may want to reconsider finding a partner if you’re entering into a business partnership for any of the following reasons:
- You need cash. It’s better to get an investor or find alternate funding if money is the only reason you’re pursuing a partner. If your startup business needs a little extra cash to cover the bills, cover inventory, payroll needs, equipment financing, or a laundry list of other business needs, a small business loan could definitely help.
- You lack confidence in your own leadership. If you’re unsure about your ability to make this venture successful, what you need is a mentor, not a business partner.
- You think going into business with friends will be fun. One of the quickest ways to throw cold water on a long-standing friendship is the stress of starting a business together. Not many friendships can weather those kinds of financial storms.
But there are some compelling reasons to find someone who can share the burden of building your business. Getting a business partner to lend a hand could help if you find yourself in any of the situations detailed below.
- You like being part of a team. Some folks do best in an environment where they can collaborate with others. Entrepreneurship can get lonely, especially in the beginning, when you feel the weight of the world is on your shoulders.
- You have a weakness that compromises the business. If you’re lacking a fundamental skill for running a successful business, it may be easier to find someone to fill the gaps rather than struggling as you learn.
- There’s too much work for one person. If critical aspects of the decision making and operations are falling by the wayside because you can’t keep up, it’s probably time to find a partner to share the load.
If you’ve decided a business relationship will help your start-up reach the next level, then your first step is to find the right business partner. It might be tempting to follow your instincts and jump into the relationship with the first person who comes to mind, but use caution for a decision of this magnitude. In some ways, business relationships can become just as messy, complicated, and traumatic to extricate yourself from as a marriage.
Choosing the Right Partnership Structure
So, what types of partnerships are available to you? Here are three to consider:
In a general partnership, all partners involved agree to take mutual responsibility for the business’s debt and running it’s day-to-day operations. General partnerships are a popular choice for business owners because they are easy to start and can adapt to many different business models.
Limited partnerships are ideal if partners will take on different roles in running the company. For instance, one partner may a backseat role as an investor, while the other oversees operations and logistical matters.
Limited Liability Partnership
Stuck wondering, “Do I Need an LLC?” Under a limited liability partnership, owners have limited liability, meaning that should the business incur debts or a lawsuit, the owners’ personal assets cannot be touched by a court of law. Additionally, profits go straight to the owners, who are taxed individually based on their income.
Each of these structures has its own pros and cons and should be carefully considered by you and your business partner. Whatever type of business structure you opt, it’s important that you and your business partner are on the same page and agree going into it. Nothing is worse than launching a business venture on the wrong foot.
The Dos and Don’ts of Finding a Business Partner
Follow these tips to ensure you’re creating a partnership that will last the lifetime of your business.
Do find someone you trust
Trust in any relationship is key, but it’s especially important in business. You’ll be financially vulnerable to the decisions your partner makes, so find someone who demonstrates qualities of trustworthiness and follows through on commitments. If you find them unreliable early on, even in small amounts, these moments could be signs of worse things to come.
Do try the partnership on for size
Before you sign on the dotted line, take your relationship for a test drive. It’s a big decision, and both of you need to know whether it will work out before you become financially entangled. If you don’t know each other well, it’s critical to set a trial period where you can work closely together and determine compatibility.
Do choose someone with strengths you lack
One of the reasons to have a partner is their ability to round out your approach. Look for someone with skills focused in areas where you struggle and delineate responsibilities in the partnership agreement. Not a fan of small business budgets? Find a partner that is savvy in accounting and finance. It will not only make the relationship more productive and profitable for your business but also keep you from competing with one another.
Probe to be sure your prospective partner is on the same page and shares a passion for this project. Do a couple of exercises to dig into whether you and your partner have similar priorities. Without shared values and goals, the two of you are likely to come to blows (hopefully, metaphorical ones) during critical decisions.
Don’t assume friends make the best partners
Choosing a friend to help you with a start-up seems natural. After all, you already trust and know this person. But the comradery you have may quickly dissolve under pressure. If you do decide to invest in a partner who’s also a friend, be prepared to lay down some ground rules and put things in writing to avert misunderstandings.
Don’t choose someone who avoids conflict
Having someone who is intentionally combative isn’t helpful, but you do want someone willing to tell you what they really think. A healthy business partnership means you’ll be supportive of one another while also pushing each other to embrace change and grow. Look for someone with strong communication skills and the ability to proactively manage conflict. But don’t forget this setup means you have to be open to receiving constructive feedback as well.
Don’t neglect to vet your partner
Not vetting your future business partner is the single biggest mistake most entrepreneurs make in taking on a business partner. You need to look into every aspect of your partner’s life with a critical eye. Look for both financial and emotional stability to determine if your prospective partner can commit to your business long term.
Where to Find A Business Partner
If you’re having trouble pinning down the right partner, try exploring the following avenues to track down a good fit for you and your business:
Network, network, network
As an entrepreneur, it’s likely you’re tired of hearing this mantra, but networking is vital to making industry connections. And those connections can result in referrals to someone who will be the best match for the opportunity you’re offering. Send the word out and keep the communication lines open until you get a few promising leads.
Consider colleagues or co-workers
Think about folks you’ve worked with before in your career. People who impressed you with their tenacity or who you genuinely admired. Not everyone is interested in striking out on their own, but it’s worth digging up their contact information and gauging interest in the possibility of a partnership.
Choose friends and family carefully
Going into business with friends or family can be the most convenient solution. While it has potential pitfalls, it still works for a lot of people if they prepare correctly. Vet these friendships the same way you would someone you don’t know as well, and don’t make excuses for them if you see issues creep up while working together. Think carefully about how you might protect your relationship from the business partnership so that if things go badly, you’ll still have each other.
More Small Business Tips
- 7 Types of Insurance You Need to Protect Your Business
- 6 Ways to Grow Your Business Fast
- Why the Self-Employed Plan for Retirement Differently
- How to Fund a Startup
Best Business Bank Accounts of 2022
Best for integrations
Best for freelancers
Best for digital tools