In starting a business, one of the first and most important decisions you can make is choosing the right partners. The more new businesses I am involved with, the more I see just how critical are these early decisions about the people rather than the ideas, company names, logos, and other distracting conversations.
The success or failure of a new venture hinges on the performance of the founding team: the mix of skills determines whether you can manage the diverse challenges you will face; your ability to support and challenge each other will decide how well you manage setbacks; and the culture you create through your interactions will have a lasting impact on the company.
Choosing a partner not only can be a difficult and time-consuming decision, it should be. If it’s not, there is something wrong. What follows are seven questions you should ask a potential partner before deciding to drive a new venture forward.
1. How well do you know your partner?
Business partnerships are often equated to marriages. Knowing your partner can eliminate many future uncertainties and headaches. Whether you are partnering with a coworker, friend or family member, make sure you really know your partner’s strengths, weaknesses, work ethics, and family and financial obligations. Going with your gut–or with longtime friends–can often backfire as we tend to focus on the positive aspects of the relationship and ignore and underestimate the warning signs. Asking tough questions of each other in the beginning will avoid potential disaster in the long run.
2. What strengths and weaknesses do you each bring to the partnership?
Opposites attract. A good partner will complement your skills and assets. Though you may share the same visions, having a partner with a different skill set will enable you to double your strengths and minimize your weaknesses. Choose a partner that is able to challenge your viewpoint and strategy, in an effort to find the best possible solution.
3. Do you have a shared vision?
Although a strong partnership will often consist of two people with different but complementary skills, sharing a common vision gives the partnership focus, drive and ambition. Make sure ahead of time that both parties are committed to the partnership’s success and are willing to invest the necessary time, energy and money required.
4. What type of partnership will you form?
Put your legal affairs in order. Even partnerships with the best of intentions can fail miserably if the proper legal agreements are put down on paper. At first, begin by putting in writing such things as expectations (and agreements) about profit-sharing or ownership. Then answer the harder questions: How will decisions be made (easy if you agree, not so if you don’t)? What will happen if one of you decides to leave the business? Whether for professional or personal reasons, this happens often); In the event of one’s death, how is ownership and control going to be determined?
5. Do you like this person?
Liking your partner is essential to your partnership’s success. Much like a marriage, a long-term partnership will suffer the same ups and downs. Make sure this is someone you like enough to want to weather through adversity when the going gets tough.
6. If your partner is a friend, how strong is your friendship?
Partnership with a friend can be fun and rewarding but also brings the possibility of greater devastation. If the partnership fails, chances are the friendship may as well. Decide ahead of time if your friendship can withstand the inevitable disagreements, downturns, and even dissolution of the business.
7. What is the exit strategy?
Before the ink even dries on the partnership papers, sit down and decide what the exit strategy will be. Having this conversation ahead of time can prevent heartache and dissension in the future. Decide how, when and why the partnership will dissolve. A well-thought out exit strategy can allow partners to exit a partnership gracefully and with dignity, rather than with recriminations and regret.