The Chinese (or Africans if you like) have a saying that if you want to go faster walk alone but if you want to go far walk with others. Well, business is a little complicated and this saying wouldn’t fit in directly. While it’s true that it’s better to work in a team of founders, there is also sufficient evidence that most businesses are dying not due to market failure rather partnership issues that kill both the biz and some hitherto very healthy friendships. Because no one sets out to fail, we provide here a small guide for the key considerations you need to make as you choose your biz partner.
1. Establish Need for Partner(s)
Unlike in natural relationship where one can count on their aunties to remind them to kujikaza when they notice the clock is running down without the signs of a spouse forthcoming, in biz you just have to be too attentive to read the clock yourself. The biz might express the need for a partner right from the start or start calling for one as time goes by. You will try to get a partner who brings a particular advantage that you don’t. Is it that the partner will help in raising the capital required to start and run the biz? Does the partner bring in specific unique skill that you may not have? Market connections may not necessarily be the key reason you choose a partner due to their transient nature rather the marketing and selling skill. Initially, a biz will rely entirely on the founders and professionalize as it grows and is able to afford to acquire employees. It is therefore important to identify what type of a biz partner you want. Do you want a partner who will work in the biz full time or is it ok to get someone who does part time or whose contribution isn’t in the working?
2. Identify Potential Partner
In most cases, just like natural relationship, you hardly advertise that you are looking for a partner. You just silently look among your list of friends and acquaintances to identify who might be a best fit before making approach. Now, this is where we go wrong. We go for people because they are relatives or just friends without essentially any value contribution to the biz. In most times we limit ourselves to such a small circle we end up getting partners who have similar circumstances as ourselves hence brining not much into the biz. Unless there are really solid and quantifiable benefits, don’t accept such a partner. It’s okay in this to even go for match making session’s viable mutual connections or consider arranged partnerships only at the level of introductions. The idea being searching widely and objectively until you get the best fitting one
3. Conduct Due Diligence
Before you say ‘I do’ it’s always nice to conduct a thorough check on your potential partner for compatibility purposes and also try to identify potential blackspots that might expose the biz in the future. You want to have a partner who is balanced; has stability in life. You will want to avoid anyone who has issues with drugs, family, finances, law etc. You will want a partner who will commit to the vision and the cause. Someone who shares your value system and not essentially the kind of guy who buys things on “deals”. A partner whose history points to that rather than one who has been in previous ventures that still ended up in failure.
4. Make an Agreement
After you have settled on a best fit partner, then you will have to discuss and agree on the partnership. Try to cover all aspects of the relationship at this level and probably get everything written down on paper. Issues will range from capital contribution; who contributes what percentages, to roles to be performed by which partner. In a partnership arrangement, there is the partnership deed to cover all these angels. In a company, there will be the Articles of Association and memorandum to cover this. Don’t assume anything. Just put everything down in paper and signature. Something that people overlook always. While it’s best to wish for the best, but it’s advisable to expect a situation where things don’t work out. How do we break the relationship should it come to that? Some agree to have clauses to buy off the other partner, or liquidate the biz and everyone keeps their share. How about the possibility of adding more partners, getting equity financing etc. Another thing you need to explore is how to raise additional capital. How do you go about getting loans, on whose security etc.?
6. Implementing the Partnership
Once you have opened up to the option of having another partner it means that it is no longer I but US/WE that runs the business. Yes you may have founded it before but now it’s time you come clean and allow the other partners to feel the ownership. Don’t be overbearing. Take their ideas, and share with them what is in your mind always. If you are walking into a partnership where you are all on the same page then you will not have issues of partners stealing biz, or money or investing in different or competing ventures. Partnership issues are as many as there are partnerships. The idea is if we are all well-meaning then we shall have biz based on good faith but should there be differences we shall commit to resolving them proactively.
Have you any questions on biz partnerships? We would love to see them