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Help Guides General Partnership Agreement Qualities to Look for When Choosing a Business Partner

Qualities to Look for When Choosing a

Business Partner
According to recent studies, two-thirds of all businesses fail. This means that a business has
less than a 1 in 3 chance of succeeding.

So, how can you make sure that your business is one of the 33% who succeed?

The answer is by choosing the “right” business partner.

Table of Contents

A Complementary Skill Set

Shared Goals and Values

Easy to Talk To

Trustworthiness

Knowledge of Your Industry

Experienced

Able to Bring New Business

Financially Stable

Able and Willing to Invest

Vision

A Good Problem Solver

Other Factors to Consider When Choosing a Business Partner

Conclusion

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A Complementary Skill Set

 The first
General place to start
Partnership when looking
Agreement for a good partner is to assess your own strengthsGet
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weaknesses. Once you have done that, you can look for a partner who exhibits traits that
complement your own skill set. This is something that a lot of people know they should look
for but don’t. However, it is arguably the most important of all things to look for in a business
partner.

Often, people pick partners who are clones of themselves. Other times, they pick people who
are so different from themselves that they are in constant conflict. Find someone who
complements your skills, not contrasts with them.

If you are not good at a particular aspect of doing business, find a partner who is. Someone
with a different skill set can add something to your business that may ignite something new
and brings much more success than either of you could have achieved alone.

For Example...

For example, if you are starting a software company and you happen to be a great software

engineer, you may not be as good at marketing and other aspects needed to maximize your

business's potential. By partnering with someone who is good at advertising, marketing, and

sales, you will be much more poised to promote your services and capture a successful share

of the software market.

Shared Goals and Values

Make sure that the person whom you are considering as a business partner has business goals
that are aligned with yours. In other words, you should both want to create the same thing.

This goes beyond whether you both want to make money––it means having the same idea of
what the company should look like down the road. It is better to find out upfront that you
don’t have the same business goals than when you have signed an agreement and have all of
your equity on the line.

Furthermore, you may want the same thing, but have different ideas about how to get it. If
the person values fast profits over quality while you value quality and customer service over
profits, you may eventually have a tug-of-war over which route to take to achieve your shared
business goals.

Easy to Talk To
 You need
General to be able
Partnership to discuss with
Agreement this person everything related to the business. Otherwise,
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issues between the two of you can begin to fester with time, and those that could have been
worked out easily will become even more difficult to resolve. Resentment will then set in and a
whole downward spiral will ensue just because you wanted to avoid discussing the issue with
your business partner.

This doesn't mean that you need to find someone who agrees with everything you say, but
you need to feel relatively sure that you will be able to:
discuss any differences you have with the person,
agree on a resolution, and
come out of it shaking hands and moving forward.

Trustworthiness

A good business partner must be someone whom you can trust. Everyone has their own
quirks and individual ways to deal with stress, success, and failure, but if you can inherently
trust your business partner, you will have a better chance of succeeding as partners.

Also, when you know that your partner can and will fulfill his or her roles within the
partnership, you will be able to focus better on your own. If you don't have faith in your
partner's ability to do what they need to do, you will be distracted and will not be as
productive as you can be.

Knowledge of Your Industry

Would you hire an auto mechanic to run a bank? It is extremely important that your business
partner understands the dynamic of the industry that your business is involved in.

What They Can Bring to the Business

The value of choosing a partner that understands your industry is that he or she will not need

to spend a tremendous amount of time being educated and may already have contacts and

ideas that can help your business.

That doesn’t necessarily mean that they must have a deep understanding of the business
from the onset—they can learn more by working with you—but they need to know enough
that their area of expertise can have a positive effect on your business.

Experienced
Does this person have the experience to help your business grow?
 Have
General they been through
Partnership the upsPOPULAR
Agreement and downs of running a business and know what it takes to be
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successful?
How will they respond to employees who have lost faith in themselves, vendors who are screaming for
payment, and clients who are reconsidering the business they give to your company?

Knowing how to deal with adverse circumstances can be the difference between success and
failure, and when a business owner has no experience dealing with the many challenges that a
business can face, they are at a huge disadvantage.

You may not need a business partner who has experience raising capital, managing a sales
force, and creating a marketing plan. In fact, it will be difficult to find someone who has
proven above-average results in all areas.

If your main concern is consolidating debt and reorganizing bank loans, then you may want a
partner who is experienced in business finance. Similarly, if you intend to pursue government
contracts or focus on a particular niche market, you will probably want a partner who has
experience doing business in these areas.

Able to Bring New Business

This goes back to the previous question of whether the person understands and has worked
in your company’s industry. Business partners may bring with them valuable contacts that can
lead to sales. For instance, if you have just come up with a new and innovative business
solution, your new partner may bring contacts to company heads who will jump at the idea.
Your new partner can then use their previous relationships with these company leaders to
secure new business contracts for your company.

Financially Stable

Whether you operate as an LLC or general partnership, you need a business partner who is
financially stable. Money is the number one reason why most businesses fail. It is also one of
the most common points of contention between business owners.

If a person is bad at managing their own personal finances, this is a good indicator that they
will be bad at managing your business finances as well. Moreover, if a person has a
tremendous amount of financial difficulties, they will not be able to invest much in terms of
time, money, or emotions when helping you grow your business.

Able and Willing to Invest

Not every potential partner will have the personal resources to invest as much into the
company as you have, but they should be willing to invest as much as they can afford. When
lenders and venture capitalists see that your partner is also substantially invested in your
company, it gives them comfort and makes them more willing to invest their money. However,
when you are in need of money and have a business partner who can afford to invest more
money but won’t, it sends a negative message to other potential investors.

Vision
 A person
General with vision
Partnership is someone
Agreement who can recognize the value of new ideas or businessGet
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and be involved in actively carrying them forward. They can prioritize ideas and plan a
strategy for success. This person will have the ability to hear an idea and instantly tell you the
next steps that need to be taken to make it happen.

New Business Ideas

They will also be able to help you come up with new business ideas by instilling a sense of

purpose in your team and bringing fresh and original solutions that go beyond the obvious.

In addition, he or she will be able to reframe problems to come up with breakthrough

solutions that can move your business in a new direction if needed.

A Good Problem Solver

A good problem solver is someone who can save your business time and money by pointing
out problems and improving on new business processes before they are implemented.

Having the ability to challenge the ideas that are under discussion is important, so a good
problem solver will be able to play devil's advocate in order to test the soundness of an idea.
This person will also be able to protect your business by paying attention to details that can
keep your business organized and running smoothly, and they will be able to achieve business
goals through the most direct and efficient means.

Other Factors to Consider When Choosing a

Business Partner

When selecting and evaluating a business partner, you should use the same approach that
you would use if you were looking to hire employees. However, the difference here is that
there is much more at stake when choosing a business partner. That being said, here are three
important questions you should consider:

Small businesses do not need more than a few partners. In fact, according to Paul Graham,
the co-founder of Y Combinator, a seed capital firm, two or three business partners works
best. That is, two or three business partners tend to work better than four or more partners
where there is a greater tendency for businesses to break down and for partnerships to
dissolve.

Before you take on a business partner, you need to be ready to share ownership of your
company. Whether you base it on the number of man hours they will contribute or the
amount of money they will inject into the business, you need to have some idea of how you
will share your business with your new partner.
 You can
General split business
Partnership profits inPOPULAR
Agreement any way you want, as long as your partner agrees. However, it
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may be best to first decide upon a formal business structure with your partner before making
that decision.

Lastly, you should be ready to get it in writing. Although a written and signed agreement is
not a legal requirement for partners, having one can protect the interest of all parties involved
for the life of your business and through its dissolution.

We are all too often tempted to go into business with our friends because we love them and
enjoy spending time with them. But your friend may not be the right person to be in business
with. They may not have the knowledge or experience to help you achieve your business
goals, and if they don’t, you will find yourself picking up the slack whenever they are in over
their heads.

To find potential business partners, talk to your accountant, lawyer, or banker; these are
people who have a wide network and generally want to see your business succeed, so they
are going to recommend good people. You can also talk to people in trade associations,
chambers of commerce, and business incubators to find like-minded people who might make
good potential business partners.

Conclusion

Choosing a business partner can be the best or the worst decision you make when starting a
business. For some, it starts out wonderfully then goes downhill from there, and for others, it
is a match made in heaven from beginning to end.

In many ways, having a business partner is a marriage of sorts. You will be spending a lot of
time with this person, so you need many of the same things that you would need in a good
marriage, such as:
complementary qualities,
open and effective communication,
shared values and goals,
trust, and
financial stability.

You need to dig very deep to know who this person really is before you decide to enter into a
relationship with them. Sometimes, this means asking some very difficult questions, but if you
ask the important questions before you enter into business with this person and be sure you
have a partnership agreement in place, you can prevent a lot of the headaches that can
plague your partnership and jeopardize the future of your business later on.

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