Launching a business is both one of the toughest and most rewarding experiences an entrepreneur will encounter. For that reason, many entrepreneurs join forces with a business partner in order to defray costs, build creativity and keep their sanity.
Before you partner up with just anyone, consider the following:
Do you want or need a business partner?
Starting a business is risky. Taking the plunge alone can seem impossible. Before you hitch yourself to another person, explore the option of starting a business on your own. You may be surprised at how prepared you are to be a solo entrepreneur.
Does your prospective business partner have solid financials?
A lot of people can be fun over dinner or drinks, but when it comes to sharing your livelihood with another person, be cautious. Perform a detailed credit check to ensure there are no skeletons. Ask for documents on their financials and be prepared to show your partner the same. It’s important that your business partner is financially responsible.
Do you share common traits with your potential business partner?
What are your values, goals and work ethic? Do they align? Building a business from scratch is a long process. It may seem like a no-brainer, but it’s important to consider your co-founders core values before jumping into a partnership.
Make sure you are on the same page when it comes important business values like brand identity, workplace policies and long-term growth strategies. Likewise, it’s important that you both treat others — from your team and contractors to customers and the media — with the same level of respect.
Does your potential partner’s skill set complement (or clash with) yours?
Sharing the workload is one of the best reasons to partner up. But if your skills overlap, you will find yourself trying to compete with each other, or worse, you’ll have a skills gap and your new company is in trouble. Ideally, you and your co-founder will meet your business’s leadership needs in different but complementary ways. For instance, if you are the charismatic type who understands how to close a deal, you may want to partner with a more cerebral personality who is more comfortable with strategy.
Do you plan to consult a business lawyer?
There are millions of reasons why you should consult a lawyer before you start a business, including personnel issues, real estate and copyright protection. These reasons are compounded when you add another person with equal claim to any profits you earn. Get a small business lawyer you trust from the get-go and make sure your partner is on board with the legal necessities.
Do you have the same communication style?
At the beginning of any relationship, including a business partnership, we often accommodate someone else’s communication quirks. We may even think it’s cute that he or she doesn’t use proper grammar in emails or enjoys late night phone calls about strategy.
But after millions of interactions, these little differences can create real tension. Make sure you and your business partner can communicate on the same level with profound honesty before you build any products or sign any paperwork.
Have you protected yourself and your brand?
Joining forces is exhilarating, but it also puts you in a vulnerable position. Have you considered how this partnership will impact the business identity? Make sure that your potential business partner won’t have a negative impact on the legacy you’ve built to this point. The same logic applies if this is your first business and you are protecting future prospects down the line.
How will you divide ownership?
“Most founders decide to split equity equally among each founder because that seems to be the most “fair” method,” according to Nathan Whitehouse, an attorney representing high-growth tech and consumer goods startups in New York City, “but this could be a very dangerous, and costly, mistake.”
Fairness is key to deciding how you will split up ownership of your new company. Just remember to have your lawyer carefully review any operating agreements to ensure that profits are distributed accordingly and that you are comfortable with any tie-breaker clauses should you and your potential partner disagree.
This article has been edited and condensed.
Danny Boice is the Founder and CEO of Trustify, a new service that lets consumers order a private investigator on-demand to check on anything or anyone. Prior to Trustify, Danny founded Speek, which patented a new way of doing conference calls without annoying dial-ins and PINs. He was also appointed as Entrepreneur in Residence to the United States under President Barack Obama and has taught at Georgetown University.
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