As we have seen in the previous article…
Every business can benefit from having a partner. The difference however, is how it goes about recruiting a partner and what the partner brings in to the biz. You want to get someone who really brings value into the biz and essentially someone who know comfortably well. Not a stranger. As such, the decision to get a partner should never be considered as an emergency. Entrepreneurs should try very much not to find themselves in a desperate situation where they have to on-board someone when they don’t have good enough time to appreciate issues and get the best deals.
The most pressing issue for most entrepreneurs is usually working capital. This never should be an emergency. You need to always be in touch with your cash flow projections. Then you can anticipate and consider the many other alternative sources of capital. A point then comes when you have to consider deeply which between debt and equity capital is best for you. They both have pros and cons. But taking on a partner just because of his money tends to get you guys who will from that point onwards do the most minimal in the biz but act the big boss ordering you around and making drama once you have a small bad luck with “his” money. Additionally, you will have to pay them for their money through sharing your profits. Sometimes they can decide they are not in hurry and stick by you for a very long time. So are you willing to share your profits for 50 years or so? Then again, they might have the advantage over you and end up relegating you to a junior partner or buy you off at some point. It’s good therefore to give it a thorough thought before you dive in.
Skill and Experience
Partnership should essentialy be a complementary union where you bring in what the other partner doesn’t have. Now, you are looking for additional input then you had better go for the best. When I encounter partnerships, I often see guys with similar circumstances, same age, went to same school, from same home area or family. Not Enough. I would really love to see partnership between a young entrepreneurs and a really experienced ones. How about you look to make partnership with a retired senior? The skill you look for would range from production to marketing to administration and management etc. As an entrepreneur, you input would be the business idea and the passion and vision. But out there, there are guys who are much better at those other areas. If you can’t employ them then its best to consider some partnership with them. Then again, this portents even a bigger problem; the average entrepreneur you meet is a know it all. They all want to be the CEO (see their biz cards). Which makes it a little hard to accept to be led by a more experienced person. Around the world, people are realizing their limitations and admitting they need CEOs who will manage better than them as they seek to optimize on the part of the biz they enjoy the most.
Usually the most shaky grounds to make a partnership with someone but they say sometimes you can make choices for convenience. We all have this guy who knows people or who comes from a big wealthy family and we think running a biz with him will make things a little easier. Sometimes it works others it doesn’t. But sure it helps to be in biz with someone who will not struggle to raise the capital needed, or someone who will make it easier to get market and even suppliers. They say a good name is worth a lot. So if you are partnering with such a person go on. Only be aware that you might end up the junior and dispensable partner in the arrangement.
Next we take on a really strange proposition: Board of Directors in your business?