- Font:
- +
- -
Like a marriage, a business partnership often begins with enthusiasm and high expectations -- only to end in acrimony and legal proceedings. It's important to know as much as possible about a potential partner, including how his or her finances and family life may affect the business, before signing on the dotted line.
Here are some questions to ask before deciding if partnering is a good idea:
1. What do I need from a business partner?
You should look for a business partner who brings something
different to the table than you do. If you're creative, maybe you
need a more detail-oriented partner. If you have money to invest
in the business, you may want to look for a partner with access
to a market, or with great connections. Or if you're shy, you
might need a good "people person" to balance the equation. "If
they're similar to you, it might be more comfortable, but it may
not be what you need," says William M. Moore, founder of the
Moore Firm in San Diego, a law firm that serves entrepreneurs.
"You need someone who complements your skills and personality."
2. What is your potential partner's financial
situation?
It is important to have an understanding of someone's financial
status and commitments before getting into a venture together.
"It is tough to ask what they are currently spending on a house
or in payments to an ex-spouse, but someone's prior financial
commitments shape the decisions they will make in the short
term," says Gregory Kratofil, an attorney and shareholder with
the law firm Polsinelli Shughart in Kansas City, Mo., who
specializes in small business interests. "If he has large
outstanding obligations, but says he can get by on $35,000
salary, it is a red flag."
3. What are the potential partner's expectations on the
time involved?
Partners don't have to spend the same amount of time, but it is
important that they are on the same page as to each other's
expected time commitments. How many hours a day does your partner
expect to put into the venture, and do his expectations meet
yours? "It is equally important to level set your partner's
expectations on your time commitments," Kratofil says. "The age
old adage that it's better to under-promise and over-deliver
applies here."
4. Is your potential partner's commitment to the business
as strong as yours?
"I don't care if it's a coffee house or a design firm, the
business partner's commitment has to equal yours," says Bob
Phibbs, consultant and CEO of The Retail Doctor, a site that
provides information to small and medium-sized businesses. A
partnership -- especially one between friends -- can start off
with fun and excitement, but within a short time, the slog of
every day catches up with you. If they're not as committed to the
business as you, they may lose their enthusiasm and may actually
be damaging the brand every time you open your doors.
5. Is there something in your potential partner's family
life that might make the business a secondary
interest?
If your potential partner has a pregnant wife or is taking care
of an elderly parent, he may be distracted from the business.
That's why you have to be brutally honest when thinking of
forming a partnership. "The partner can say, 'My wife is behind
me 100 percent.' But I want to talk to the wife," Phibbs says.
"If they're too distracted by a family issue or their family
isn't behind them, the business may be doomed from the start."
6. How would he or she handle a tough
situation?
It's important to know what your potential business partner will
do if he has his back up against the wall -- and it will happen,
Phibbs says. The best way to discover this is to look at what
he's done in past business ventures. If he couldn't meet payroll,
for example: Did he do the right thing and dip into savings or
borrow from a credit card or a friend? Or did he pay employees
late, or not at all? Or worse, did he skip paying payroll taxes?
It all comes down to character issue, Phibbs says, adding,
"Payroll taxes are a federal obligation. If that's negotiable,
you can bet your partnership is also negotiable."
7. What questions do they have for me?
If a potential employee doesn't ask any questions in a job
interview, you might be less likely to hire him because of a
perceived lack of interest. The same applies to a potential
business partner, who should want to know about your character,
reliability and expectations. "I want them to ask me the same
tough questions I ask them. If they say it doesn't really matter,
it could mean two things: their expectations are too high or they
might be kind of flighty," Phibbs says. "Things may be fine now,
but in a month or two, they may want to change things or even get
out of the deal."
8. What is the potential partner's standing in the
community?
A lot of people seem good at first, but that may be their skill
-- seeming good at first, Moore says. Once they get their foot in
the door, it may be difficult to get them out. Talk to former
employees to see what they were like to work with, or for. If
you're looking for someone with money connections, verify that
they have money. If they say they have great connections, see if
those connections go beyond just being recognized and given a
slap on the back. "A business partnership is not a marriage, but
there should be some sort of courtship process that you can
verify that they are who they say they are," Moore says.
9. Are they willing to put everything in
writing?
Many partnerships are cemented with a handshake, but this can be
a recipe for disaster. It's crucial to put it on paper -- not
only what is expected of each partner, but the consequences if
expectations aren't met. "There's something about actually
putting it in writing that exposes the potential problem areas in
the partnership," Moore says. If someone has a family emergency
and disappears the first six months of the business -- even
though it may not be through any fault of his own -- are you
still expected to give that person a certain percentage of the
business? "If someone simply isn't pulling his or her weight, you
need to be able to get them out without destroying the business,"
he adds. "And if it's in writing, there's no arguing it."
10. Do I really need a partner?
If you can get someone to do something without giving them a
stake in your business, it's always better, Moore says. People
get wrapped up in the idea of needing to work with someone, but
it's not always a good idea. Sometimes you need somebody to show
up from 9-5, work hard and go home, he says, adding. "If you're
cash poor, or it's a startup and you don't expect to make money
right away, taking on a partner might be the better option. But
if you can just pay somebody to show up and work, it's generally
a better option than giving them a stake in the company."
And now a bonus question....
What happens if we can't work it out?
Most people don't envision the rough times ahead for a new
venture, so this question is probably the hardest to remember to
ask and the beginning. Yet, the best time to address potential
problems with your partner is at the beginning before emotions
run high. "You can't predict every potential problem, but a good
startup lawyer can help you work through some of the common
problems and put a framework in place to help address unforeseen
circumstances," Kratofil says.
Copyright © 2013 Entrepreneur.com, Inc.
“ ”