To Partner, or Not to Partner?

A practicing physician who is in the early stages of planning the start-up of a new venture serving the medical field recently asked me about one of the most important issues an entrepreneur can face. While he has medical expertise, he believes that he will need some help from someone with more business and start-up expertise. How and where does he go about finding someone to team up with?
The specific questions you need to address in this type of situation involve the “Why?”, “What?”, “How?”, and “Who?” issues for building your team.
First the “Why?” question.
Self-assessment is a critical part of pre-venture planning. The entrepreneur needs to know what she is good at and what her weaknesses are. This includes skills, knowledge and experience, but also things like temperament. My last set of start-up ventures worked well because my partners and I balanced each other’s personalities. One of us was the aggressor; one was the worrier; one was the analyst. We always kept each other in check. This helped us to generally be fairly prudent in our decision making. Also work habits, personal goals and so forth are all important factors to consider. Here are a few questions to think about in self-assessment beyond those dealing with technical skills:
– What are the major reasons you want to start a business?
– How many hours are you willing and able to put into your new venture?
– How would you describe your tolerance for uncertainty and risk?
– Do you easily trust other people working with you on a common activity? Why or why not?
– How much financial risk are you willing to take with your new venture (personal assets, personal debt, etc.)?
– What are the non-financial risks for you in starting a new business?
– How do you react to failure?
– How do you react in times of personal stress? How do you deal with stress in your life?
– How much income do you need with your current lifestyle?
– How long could you survive without a paycheck?
– How much money do you have available to start your business?
– Which of your personal assets would you be willing to borrow against, or sell, to start your business?
– Whose support (non-financial) is important for you to have before starting your business (family, spouse, etc.)?
Second is the “What?” question.
During the pre-venture stage of your business, one of the first challenges is to assess the specific needs of your new venture. Is there specific business expertise that you need in your particular start-up? If you will need access to a significant amount of capital, that is millions of dollars, then you will want to have someone on your team who has experience in securing such funding. I often see entrepreneurs suffer from either over kill in hiring or from under estimating the skill set needed on the team. If the venture is only going to need limited funding, say $200,000, it would be over kill to bring in a business person whose experience is in moving venture through multiple rounds of venture capital financing. On the other hand if you do need multiple rounds of VC money it is best to have that skill set somewhere in your team. Before you start adding people to your start-up, have a clear enough vision for the business to begin to know what you really need in terms of help. In fact, I might even go so far as having at least a rough idea of your business plan in place.
Next is the “How?” question.
Just because you need help on your team does not mean the person needs to be a partner. You can often hire high level talent and offer them a limited equity stake in the deal that does not make them your equal in the venture. Business partnerships are usually more complex than marriage and more difficult to get out of if things go bad. Never be casual about going into a partnership unless you think that good marriage preparation is meeting your new bride on Friday night and flying the next day to Vegas to get married. If you decide that adding a business partner is the right way to go, make sure you find someone through your network of friends and associates and take a great deal of time to get to know the person. This is not just a casual joint investment.
This then leads us to the “Who?” question.
Here are some issues you need to explore before “tying the knot”:
– Do your share the same vision for the business?
– Do you share the same aspirations for the business? Does one want to build an empire while the other create a simple lifestyle kind of business?
– What are your work habits and work ethic? Are they compatible enough to keep the partnership feeling fair to all the partners?
– How much time off to you plan to take each day, each week, each year?
– How much money will you put into the business?
– How much do you expect to get out of it?
– Who will be the President of the company? What roles will the other friends play?
– How will decisions be made?
– What is everyone’s credit rating? Can all help to guarantee a loan, if necessary?
– What if one of you gets married and the new spouse gets a job offer in another city? Would you move away?
– What are your core values and how do you want to see them play out day-to-day in the business?
– How will employees, customers, suppliers, etc. all be treated?
– What will you consider to be real success in this business?
There are probably countless other questions to talk about, but this is a start. Talk. Talk some more. Listen to your gut if you don’t like the answers you hear from potential partners. As I have said before, go into a partnership with your eyes wide open rather than with stars in your eyes.