Small Business Start-Up Guide
by Robert Sullivan
. . brought to you by The Small Business Advisor
right business partner can extend your expertise, provide a second opinion
when required, share the workload, and provide a synergy that you just
can't get working alone. Two heads really can be better than one.
other hand the wrong choice in a partner can sink you! Many businesses
fail simply due to friction between the partners, or the inability to
get things done for a variety of reasons.
chapter will provide you with some help in choosing the right partner.
a business some time ago with a friend who, like myself, was an electronics
engineer. The product was an innovative telecommunications device.
The partnership was a fiasco. Since we were both design engineers,
we argued forever about the design and other product details. After
much pain, we got the unit prototyped and were ready to do some marketing.
Of course, neither of us had the slightest idea of how to market.
Finally, we gave up ... Another great idea bites the dust. Why didn't
I find a partner who had expertise in MARKETING? I knew I had to sell
my product! I also knew that I had the expertise to design the item
myself. So, while friendship is important, of what value was my friend
as a partner?
A friend or family member does not necessarily make
a good business partner.
the right partner you must consider a number of factors. If you chose
your partner wisely you will share the risk and alleviate some of your
anxiety that is part of going it alone. Here are some factors to consider
when selecting your partner:
#4: CHOOSING A PARTNER
Do not be
quick to make a decision. An ineffective partner is much worse than no
partner at all. When you have picked a partner, the next step is to formally
(with the help of an attorney) lie out respective responsibilities of
each partner. Plan to the extent possible, for unforeseen circumstances.
this person bring expertise I don't have to the business? The story
above helps illustrate why this is important. It also illustrates
why having the same expertise can cause difficulties.
this person share my values, ethics, and goals for the business? This
is very important! You must not hesitate to bring up these issues
in initial discussions with your potential partner. If your partner's
idea of business is to get rich quick at the expense of others, you
might want to reconsider. Discuss with the potential partner both
your short and long term business goals and determine if they mesh
with his or hers. Better you find out about possible incompatibilities
before making any formal commitments.
Ted and Bill were perfect partners, or so it seemed. Different
areas of expertise, common goals, both had money to invest in
the partnership. Because they were such long-time friends, they
never talked with each other about issues that might cause problems
in the future. They knew they had a good idea and worked well
together and that seemed enough. Unknown to Ted, Bill was about
to get a divorce. As female readers know, many men generally do
not talk about personal matters, even among good friends, to any
degree. Because of Bill's divided attentions, the partnership
dissolved. Too bad, since altering the timing a bit might have
saved the partnership and another good idea.
the partner is a spouse, does he or she share my same convictions
about starting and operating a business? Refer to Chapter 8 for more
information on home and business interactions.
the potential partner share my qualities as an entrepreneur?
this person have family or other personal problems? Be frank and ask
the question! You are going to have enough problems with the new business
and you cannot afford the additional stress that is brought on by
non-business problems as well.
well do you know your potential partner? Like a marriage, you are
going to be working together through good and bad times. Don't be
too quick to get involved with someone who is just a casual acquaintance.
Has this person been in a partnership before? How did it go?
It is always hard to really know how someone - even a good friend
or family member - will react in a business/partnership situation.
If possible, work together on a project or two with your potential
partner (before any partnership agreements are signed). This way you
both can assess each other before a formal commitment is made.
A well thought out and formally-executed partnership agreement
is a must for a successful long-lasting partnership.
and execute your agreement early in the relationship before any possible
problems come up. A partnership agreement should include, but not necessarily
be limited to, the following items:
In the case
of two partners where the partnership being considered is a 50-50 split,
some thought should be given to a 49-49-2 split with the 2% going to an
outside individual who is mutually trusted by the partners and who would
cast the deciding vote in any decision that cannot be agreed on by the
partners. A stalemate can occur with a 50-50 split in which the partners
simply cannot agree.
for continuing the partnership in the event of death or withdrawal
of one or more of the partners.
easily understood "buy/sell" pro-visions in the event one partner
wants to sell his interest.
partners' initial contributions and how profit/loss will be divided.
that spell out the timing of withdrawal of partnership profits.
of the partners' initial salaries and benefits.
partners' responsibilities in the business.
case, the partnership agreement should be reviewed by an attorney. In
all likelihood, each partner will use his own attorney for this review.
partner can increase your chances for success. Your partner can be a
"sounding board" for ideas, a mutual problem solver, someone to share
the workload, and bring added expertise (and capital) to your venture.
However, choose your partner wisely and for the right reasons. When
contemplating a good friend as a partner, re-member Plato's words, "You
can discover more about a person in an hour of play than in a year of
conversation." In other words, ensure you really know your friend. And
finally, remember to draw up and agree to a partnership agreement before
any business is conducted.