Bringing a new partner on board can have a positive impact on an organization, especially in terms of expanding its product and service offering, getting more experienced talent and even expanding its customer base. The key to a successful partnership, however, is making sure you and your partners are a right fit and that your vision and goals align -- otherwise you risk doing more harm than good to your organization.
So how can business owners avoid partnering with the wrong people? These seven entrepreneurs share some of the most crucial aspects to consider before setting up a new partnership.
"Having closed over $100 million in partnerships in my career, my advice is to be absolutely clear that both sides have something to gain from the partnership," says APT Advisors founder Andrew Thomas. Mutual gain will incentivize both parties to work hard for the success of their partnership.
While others suggest you get all the value in a deal, Thomas adds, it's important to ensure your partner will gain value over time and will want to invest in the partnership. "You want partnerships to produce sustainable revenue -- not just a press release."
A key element of any partnership is the reputation each side has and their ability to maintain a good name in business for the foreseeable future, thinks Nicole Munoz Consulting, Inc. founder and CEO Nicole Munoz. After all, good business hinges on good reputation.
"It's really important to make sure that both partners always have a nature that supports good reputation maintenance," Munoz explains. Even if one of the partners leaves, a good reputation will still reflect positively on the business in the long run.
"One mistake entrepreneurs make is taking on a partner that is a lot wealthier than them," Karl Kangur, founder and CEO of Above House, believes. While it may seem like a shortcut at first, the wealthier entity is more likely to pull out and cut their losses when things don't go as expected and the partnership fails.
This leaves the less wealthy party in a very precarious position, Kangur explains: "I've seen this happen dozens of times where the rookie entrepreneur gets stuck with a minority share and ends up doing all the work because of this."
Credibility And Strengths
Researching the credibility and strengths and weaknesses of your future partner is key for a successful partnership, according to ABN Circle CEO Fritz Colcol. "Know his or her strengths and weaknesses. Research what he or she has done in his or her previous company," he advises.
Otherwise, a potentially beneficial partnership can spell disaster for your company. "When I got into my very first partnership, I didn't do any credential check at all. Unfortunately, I learned my lesson the hard way," Colcol adds.
Like in any relationship, personality is crucial for a successful partnership, says Marquet Media, LLC Founder Kristin Kimberly Marquet. A good fit personality-wise can ensure a fruitful, long-term collaboration based on communication and mutual respect.
"It's critical that personalities match in a business partnership. When two people have conflicting personalities, it can lead to large issues, power struggles and create a toxic environment for employees," Marquet warns.
How Well You Know Them
"I prefer to partner with people I know quite well," says WPBeginner co-founder Syed Balkhi, explaining that many of his partnerships were with people he had known for about a year. "This helps me understand whether our values are in alignment and how well we can work together."
Knowing the other person well matters because it ensures a shared vision to build the company and makes it easier to agree on difficult decisions, Balkhi explains.
One of the most important aspects to consider before starting a partnership is whether you share the same long-term goals, according to Florida Law Advisers, P.A. founder Matthew Podolsky. Although both parties may set off with the same immediate needs and wants, the long-term goals are what any entrepreneur should look at.
"In the past, I have partnered with great business associates but we ended up going separate ways since we didn't want things to land the same way long term. Be clear in your communication and the pathway forward," Podolsky recommends.