Finance Globe

U.S. financial and economic topics from several finance writers.
6 minutes reading time (1114 words)

Choosing the Right Business Partner

A good business partner can make your life easier.
Choosing to go into business with a partner definitely brings some benefits. Shared expenses, shared workload, and shared profit means that you'll be counting on this person. The right partner can help alleviate some sources of stress in running a business. But, the wrong partner can become one of your major sources of business stress.

Is your prospective partner a good candidate?
Your buddy from college may be a lot of fun on a social level, but that's not enough for you to run a successful business together. Not only will you have to consider whether to have a partner, but you'll need to choose the right partner, if you decide to have one at all.

How do you compare on work ethic? Do you both have similar work habits? It's not likely to cause a problem if you both are hard workers, or if you both take a laid back approach. But it's likely to cause problems if one partner is willing to work weekends to get the job done while the other refuses to give up their personal time. The one who puts in more time will probably begin to feel resentment when they don't feel their partner is pulling their weight.

What will your prospective partner bring to the business? Will they bring money, skill, labor, or a ready-made customer base? Will they be earning their position as partner, or would it be more appropriate for them to be an employee or hired on contract? Think twice about forming a partnership if you are investing more into the business than they plan to, whether your investment is time or money.

Are they responsible with their personal finances? Do they put importance on paying their debts on time and keeping their expenses at a reasonable level? Or do they overuse credit for every day purchases? If they aren't careful with their own money, it should send a warning about how they may handle business finances. Also, someone who is up to their neck in personal debt may not have much else to lose if the business falls apart, giving them less incentive to make the business work if things become difficult.

Does your partner have the necessary organizational skills to run a business? One of you may be responsible for the paperwork like payroll, accounts payable and receivable, and inventory. But even if you'll be the one to take on the bulk of the paperwork duties, you'll still need a partner who can keep track of what passes through their hands. You don't want a partner who will pick up the mail, stuff it into their pocket, and forget about it until they find it in their laundry.

Do you have similar business goals? It's important that both partners have the same vision for what the business will become. You may want your business to grow into the family fortune, while your partner is content with bringing in a little supplemental income. This can be a problem when one wants more growth while the other wants more free time, and compromise can be difficult in this situation, since neither partner will be attaining what they really want. Now, it can work if one partner wants less commitment to the business than the other, as long as that is discussed in the beginning so both partners know what is expected of them.

Does your partner make up for your shortcomings, and vice versa? We all have things we love to do, usually because we do them well. Then there's the things we don't like to do, usually because we're not so sure of our abilities in that area. The right partner can make up for that; you may know your chosen industry inside and out, but you might benefit from having a partner with the people-skills to draw the customers to your business. Business partners normally don't split every duty 50/50; they each take responsibility for a specific portion of the business that they are skilled at.

Do you have similar values? It would be very disturbing to find out after you form the partnership that your partner likes to hide a little money from the IRS, or that they may mislead customers just to make a sale. How do they treat other people? You can bet that if they are dishonest with others, they'll be dishonest with you. Your business partner does not have to become your best friend, but it is still very important to like the kind of person they are. Trust is vital to the partner relationship.

Do you have compatible communication styles? You have to be able to talk to your partner about every aspect of the business, and you won't get anywhere if you can't effectively communicate. Also, you'll have to talk to other people, your customers and employees. Do you each have qualities in communication that makes up for what the other lacks? One partner may be skilled at selling to customers and training employees, while the other is good at maintaining a firm stand when there are problems like the difficult customer and employee conflicts.

Is your prospective partner a team-player? This may seem obvious, but there are those who simply should not consider forming a partnership because they can't give up being in control. A partner that thinks they're always right is going to be a difficult one to deal with. They may treat your ideas like they aren't as good as theirs. Or they want to take all the credit for ideas you both came up with. There will be times when you both don't agree; somebody will still have to make the call. But will they want to always be the one to make the final decision, without consideration to what you want? It's not only how, when, and who makes the decision, but it's also the attitude that comes with making the decision.

Choose your partner wisely
Business advisors often like to compare choosing a business partner with choosing a spouse. And, it's a good point to make. The success of any partnership, whether business or personal, is dependent on the compatibility of the partners. A good partnership is formed when two completely different people get together to make a smooth-running team; they enjoy success together, and they can tackle any problem together. A bad partnership will leave one or both partners feeling like they're missing out on something. Many will agree that it's better to stay single than to marry the wrong spouse. And it's the same with a business partnership; it's better to have no partner than the wrong partner.
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Thursday, 30 November 2023

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