Starting a business can sometimes be compared to having a new baby. It is usually an exciting time, presenting different opportunities and risks as you nurture it to grow. This is why it is important, as a small business owner, to choose the right partner when you are starting or expanding your business.
A lot has to be considered when making the decision, from the ability to raise additional capital, to new and complementary business skills, enthusiasm, commitment, and also if they share the same philosophies with you in terms of business parenting.
This article highlights key factors every entrepreneur should consider when evaluating potential partners because business partnerships can pose their own challenges.
Experience in your industry
Positive experience in a similar or related industry is just as important as the skills a potential partner has developed. This is because it makes your business more attractive to investors. When you and your partner have a track record of success, it breeds confidence.
Complementary Skill and Strength
No one has mastery in every aspect of a business. It’s important to pick a business partner that possesses skill and strength in areas where you’re not particularly efficient. If you have better quantitative skills, you can bring in someone with strong marketing or networking skills. The more skills you and your partner bring to the business together the easier it will be to start, plan, grow, and run your business.
Similarity in Values and Vision
This might be one of the most important factors you should consider because you need your values to align to be able to achieve your goals. You will need to be able to communicate effectively with your partner to make decisions, set goals, and drive the business forward. If there are a lot of opposing views and disagreements then the partnership and business will not move forward.
Picking the wrong person as a partner, opens your business to a lot of vulnerability, they could steal the business, break laws and get destroy the entire business.
Financial stability and responsibility
Your partner should have a good financial record, one without blemishes, this has nothing to do with their financial contribution to the business. How they manage their finances says a lot about how much they can contribute to the business. Money, asset, and time management skills are critical for small business entrepreneurs, and someone who has grossly mismanaged their personal or business finances may not have the skills or discipline to make a business partnership work.
Personal and Business Ethics
Trust is key in anything we do and that should also be carried into our business and in choosing a partner as well. Only go into business with someone who values honesty and practices good personal and business ethics. Picking the wrong person as a partner, opens your business to a lot of vulnerability, they could steal the business, break laws and get destroy the entire business.
Responsibility, Valuation and Contract
Deciding on who does what and who is responsible for what is key, this is to avoid conflict and build individual confidence. Also, decide on a formula to determine the value of the company to avoid disagreements if one partner decides to leave. Buy/Sell agreements are incredibly useful for discussing all possibilities and how they will be handled before they become a reality.
Partner, employee or consultant
Lastly, it is important to know who fits as a partner, employee or consultant. Don’t make someone partner because you can’t afford to hire them. It is better to hire them as a consultant than give them a part of your company.
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