This week’s question for Forbes magazine’s America’s Most Promising Companies initiative is as follows:
What is the single
most important element of any business partnership?
You will most likely spend more time with your business partners than
with anyone else – even your family. And it will be a relationship
that can be even more complicated to get out of than a marriage. Who you choose to be business partners with should be given as much consideration in a deal as what products you make or what markets you enter into.
Dysfunctional partnerships are a major source of business failure. They suck energy and time away from building the business. They can often lead to the break-up of perfectly good businesses.
That being said, I think that if I have to pick one element as the most important it would be that you and your partner(s) share the same values, aspirations, and vision for the new venture. This requires a careful and thoughtful discussion of critical business issues BEFORE the business is ever launched.
Work with your attorney to create a shareholder agreement before you officially incorporate. Just as marriages can fall apart on the honeymoon, business partnerships can fall apart before the first sale is ever made.
Here is just a sample of some of the issues you should discuss with potential business partners:
• Do you share the same vision for the business?
• Do you share the same aspirations for the business in terms of its size?
• Are you all going to make the same level of commitment of time to the business?
• What are your work habits and work ethic?
• How much time off to you plan to take each day, each week, each year?
• How much money will you put into the business? And how much do you expect to get out of it?
• Who will be the President of the company? What roles will the other partners play?
• How strong is everyone’s credit rating? Can all partners 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?
• How will employees, customers, suppliers, etc. all be treated?
Business partnerships can be a successful experience for everyone involved. But it takes open and honest communication and careful planning.
I would also add to the list of considerations the adage “He who has a partner, has a boss.”
I totally agree. When the left hand doesn’t know what the right hand is doing, things can get disastrous.
Another important factor to consider is the exit strategy and if you and your partner agree on how and when you desire to exit. It could get messy if a lucrative exit opportunity presents itself and one partner wants to sell and another wants to try to wait and sell for more later. A second opportunity may never present itself as well as it did the first time and that could create even more tension and resentment in the business.