I recently tried to help find financing for a client. As we went through underwriting, it came out that one of the new partners in the business had extensive legal problems from a previous career. As a result, the business was precluded from any reasonably priced financing.
You spend ample time dating before you get married, and you should treat your relationship with a potential business partner the same way. Entering into a business partnership is a serious commitment of time, money, and reputation. Knowing as much as possible about your business partner before formally signing on the dotted line to partner will save you a lot of trouble down the road.
It's important to understand your potential partner's finances, time commitments, personality, and long-term goals before making the relationship official.
How your potential business partner manages her money can tell you a lot about how she will run your business. Although it might be uncomfortable to ask about certain matters, knowing whether she is buried under a huge mortgage or monthly child-support payments could sway your decision to partner.
Someone who has hefty outstanding financial obligations, an unreasonably low credit score, or is obviously living beyond her means is probably not someone you want to trust with the financials of a future business.
Who's Going to Take Out the Trash?
In a domestic partnership, there are certain shared responsibilities that each party is expected to carry out--cleaning, shopping, taking care of children, paying bills, etc. A business partnership works in the same way. Though business partners don't necessarily need to spend the same amount of time on the business each day, each partner is expected to carry the same weight in terms of business responsibilities.
Sit down with your potential partner and realistically discuss how much time each of you can commit and what the job responsibility breakdowns might look like. If your potential partner seemingly will have trouble pulling his or her weight, it would probably lead to your taking on more responsibilities and stretching yourself too thin over time.
They say that in relationships, opposites often attract. The same is true for business partnerships as well. Creative types are often attracted to more detail-oriented business partners, and shy entrepreneurs are often attracted to people-savvy partners with a wealth of established connections. It's important that a business partner complement your personality and skill set. This means that the person might not share an identical outlook, but that together you form a well-balanced team.
Look Long Term
Equal commitment to the company is paramount for each business partner in order to run a successful operation. It's easy to be blinded by the excitement surrounding an idea in the beginning of a working relationship, but not as easy to keep that excitement and commitment running a few months or a few years into the venture. If a potential business partner isn't as committed to the business idea as you are, it will probably damage the business and the brand you are trying to build.
After working through these issues and questions with a potential partner, it's up to you to decide if the partner is a good fit for you and for the business. Though some partners enter into business together with just a handshake and shared enthusiasm, it's best to put the partnership in writing from the start. Have a lawyer experienced in business formation and startups help draft the framework for the agreement. Putting the partnership details in writing and having each partner sign off will protect each of your interests in the business if unforeseen circumstances arise or the partnership dissolves.