7 Questions To Consider Before Becoming Business Partners
Having a business partner can be an amazing thing. It is wonderful to be able to compliment each others skills and to motivate and support each other.
You have someone to bounce ideas off of, share the burden of work, and help make decisions. You can also take on more work because there are two of you to get it all done.
However, if you pick the wrong person, it can be detrimental to the business. It is important to take a hard look at your prospective business partner before jumping in. Just because you get along well and are both excited about starting a business, doesn’t necessarily mean you will be a good fit later on - especially when the going gets tough, and it will. Here are a few questions you should both consider before deciding if you want to start down the path of business partnership.
1. How well do you communicate?
There’s a reason people say communication is KEY. Good communication means that you and your business partner can share thoughts and feelings as it relates to the business openly and honestly. As partners you have to be transparent when it comes to your business and be patient and understanding with each other’s thoughts and feelings. Partners need to be supportive and kind to each other yet be able to handle difficult conversations and disagreements. You’ll have to be open to a lot of give and take with ideas, so it’s important to talk them out thoroughly and to be able to communicate clearly. It can be tricky to explain a vision you have to another person clearly, then translate it to actionable steps you can take together. There will be a lot, and I mean A LOT of conversations so make sure they are constructive.
2. What are your long-term goals?
It’s super important that your business has a long-term goal that you are both on track with and willing to move towards together. Sit down and have discussions about where you see yourselves as partners and your business in one year, in five years and even in ten years or more. If it doesn’t match up, you could be in serious trouble down the road. Knowing how large you both want to scale and on what timeline is an important piece of planning to have done before getting started.
3. What is your work style?
Do you both like to get up early and work or do you like to work later in the evenings? Are you both committed to working full time, or MORE than full time (especially in the beginning), or will you be running the business part time? Are you willing to work for free while you’re building the business and can you trust that the other person will put in their fair share of the work? Both partners need to be equally committed when it comes to time and personal and financial sacrifices. Entrepreneurship is incredibly rewarding but also incredibly hard. It’s definitely not as glamorous as it appears. The shine wears off pretty quickly and that’s when the true test of character begins. It is crucial to have as balanced of a workload as possible between partners so there won’t be any resentment.
4. How do you both handle stress?
I don’t have to tell you that stress WILL happen in business. It will be plentiful and it will be hard to handle at times. It’s important to know how you and your prospective partner handle stressful situations. You have to both be able to take on an awful lot of stress and work without taking it out on each other and letting emotions cloud your judgement. Being an entrepreneur is not for everyone, often because of the stress involved. Many businesses fail not because they aren’t profitable but because people can’t handle the stress.
5. Do you trust each other?
Obviously the most important thing in a partnership is trust. This can be a lot harder than most people think, especially when there is money involved. If you have even the slightest reservation about trusting this person with your livelihood, then I would strongly reconsider. Once you have formed a business partnership, you are relying on the other person to show up, and do their part. And if they don’t, it can be hard to dissolve the relationship because you have a legal business and legal agreements. You also have to trust that as partners you are both watching each other's’ backs. You both have to have the best interest of the business at heart, and act accordingly even when the other isn’t looking.
6. Do you agree on how you’re going to fund your business?
There are a few ways to fund your business. You can bootstrap it (fund it yourself) or you can get loans, grants, or investors. It is important that you both agree how you are going to fund your business so it doesn’t become an issue as you scale. If you are self-funding and considering fifty-fifty ownership, it’s important that you both contribute accordingly. And if you do take out loans, they should be in the name of the business, or both of you individually.
7. Can you be open about your personal finances?
It is crucial that both prospective partners have a very open and candid discussion about their personal finances. If someone is terrible at handling money or is broke, this could be a big issue; especially if you’re bootstrapping. When it comes to starting a business you will very likely have to spend some of your own money. You both need to be willing to give up some of your own cash and you both need to be in a place where you can do that safely.
Having a business partner is kind of like getting married. Just like in your personal life, you’re picking the person you want to go through the ups and downs of business with when you choose a business partner. It can be a very long-term or lifelong partnership depending on what you want from your business.
And even if you make it through these questions, it’s still worth taking your time and working together on projects to understand your flow and see how you both work - BEFORE forming a partnership. If it goes well, then you can move on to creating a business.
As business partners ourselves, we can attest to the fact that it’s worth taking time to build a strong foundation for a partnership. Make sure the other person is the best match for you, and someone you want to spend a LOT of time with - because you will!