What you don’t learn can hurt you in the long run.
Great partners often make great companies. But just as often, bad partnerships destroy good companies.
Great partners balance your skill set, help you make better decisions, and give you increased productivity and motivation. Bad partners drain your energy, conflict with your strategy and values, and distract from business-building tasks.
They can fail to deliver on their promises. They can even lie, cheat and steal.
Yet, many aspiring small-business owners rush into partnerships with little thought. They may feel uneasy about starting a business on their own.
They may have a friend whose company they enjoy — or whose talents they respect — and expect the venture to be more exciting or successful if they join together. Or they may need the capabilities of someone they know but can’t afford to pay that person to join a tiny start-up.
However, partners are around for a long, long time.
Legally, without a clear contract, they may continue to own a piece of your company and be entitled to a share of income even if they flake out on you. They may be able to incur debts, tie up your bank account or access your website.
If you’re considering going into business with someone, stop! First, carefully consider why you want or need a partner.
Then, spend time really getting to know the business skills, attitudes, and aspirations of any potential partners — even if you’ve been friends for many years. Find out whether a person’s goals, work style and values fit yours.
Next, make certain everyone’s expectations are realistic.
Are your partners willing to work as hard and as many hours,as you? Do they bring the same level of talent although perhaps in a different area as you? Do they share the same vision for the company?
Remember, you have more leeway, legally, to ask probing questions of potential partners than of employees.
Do they have family issues that could affect their commitment? What is their financial situation?
Get a sense of how they handle stress. What legal problems have they had in the past or do they have now?
If you’re considering going into business with someone, sit down and ask your potential partner the following questions:
1. Why are you going into business? What are your personal goals?
2. How much money are you willing and able to invest in the company?
3. What are your monetary needs now, in the next 12 months, in the next 24 to 36 months?
4. What’s your vision for this business? How big will it be, what it will sell and to whom?
5. How much time do you have to devote to this company? What time conflicts, both business and personal, do you have?
6. How do you see decisions being made? By whom? How will we resolve conflicts?
7. What do you see as your job responsibilities? Mine? What happens if either of us don’t live up to them?
8. Will we have set work hours? If so, what should they be? Where will we work? Will we have a dress code?
9. Is your family completely supportive of this commitment?
10. Have you ever been in a partnership before? What happened?
No matter what, once you decide to go into business with someone, agree to everything in writing. It’s best to have a business lawyer help you with this.
Take the time to work out as many details as possible.
Be absolutely certain to include a way to buy each other or each other’s heirs and ex-spouses out of the business.
A messy divorce from a business partner is as difficult as a messy marital divorce — with potentially greater financial consequences. Drawing up an agreement now will help avoid difficulties if you later decide to go your separate ways.
Finally, keep in mind that in the eyes of the law you don’t need a written agreement to be a partnership.
If a friend decides to invest in your fledgling social-networking site over a beer, you may have become partners. And that friend may own a piece of your company.
So when you sell the venture for millions of dollars, that friend — even if you haven’t seen him in years — may own a pretty good chunk of the next Twitter or Facebook you worked so hard to build.
Rhonda Abrams is president of The Planning Shop and publisher of books for entrepreneurs. Her most recent book is Entrepreneurship: A Real-World Approach. Register for Rhonda’s free newsletter at PlanningShop.com. Twitter:@RhondaAbrams. Facebook: facebook.com/RhondaAbramsSmallBusiness.Copyright Rhonda Abrams 2013.