A successful business partnership has many similarities with a successful marriage. In some ways it is even more challenging to build such a partnership.
The first question you should ask yourself is, “Do you really need a partner?” If you can create a viable business without a partner you are probably well advised to take that route. It may be that a partner is essential to complement your talents, to sell to customers, to help handle the work load or to bring needed financing. In that case, you and that partner should consider together whether it will work for you both by going through the following checklist.
It is often said that you learn more from your failures than from your successes. At one time in my life I was one of two equal partners in an R&D start up, which eventually involved VC (venture capital) partners. This checklist reflects that learning experience combined with what others have set out in similar checklists.
You should consider every one of the twelve items in this list in an honest and open way with your partner before either of you commit to the partnership. The more critical elements in that real life situation are discussed in the case study that follows the checklist.
Key Partner Attributes
1. Absolute trust in each other
This is rightly set as the #1 condition since without it disaster may well occur at some time in the future. One boss I had said that this meant you would be comfortable in leaving your wallet (or handbag) for safe keeping with your partner. I think that is an excellent test of your trust. The ultimate condition here is that such trust will be durable even if circumstances go awry.
2. Complementary skills
If you both have the same skill set, then the reason for the partnership is somewhat weaker. When skills are complementary, much richer creativity is possible and you have the benefit of different points of view.
3. Compatible working habits
Nothing will sap motivation faster than feeling your partner is not pulling his/her weight. You do not need to follow the same work schedule and indeed different work schedules may give better coverage to satisfy customer needs. Each partner should feel that there is a fair division of labor.
4. Good communication
Nothing will erode that absolute trust faster than a failure to communicate important news or decisions. With modern technology and smart phones there is no excuse for not staying in touch on important issues.
Key Partnership Factors
5. Shared Goals
The priority and timing for the goals to be achieved by the partnership should be equally satisfactory for both partners. You might even discuss alternative scenarios to cover how goals might need to be adjusted if things do not go exactly as planned.
6. Agreed Business Plan
You should have at least an outline business plan on how those shared goals will be achieved. This should be a realistic commitment that sets out the human, capital and cash resources required on a timeline.
7. Market awareness and savvy
It is critical to have identified a market need for the products and services you will sell and be aware of any competition that could make the sales projections uncertain. A SWOT analysis checking strengths, weaknesses, opportunities and threats is a good way to assure yourselves that you are not being overly optimistic. You can also review realistic Plan B’s if some of those threats occur.
8. Agile management
The race goes to the swift. Rapid identification of the time when action is needed is important. Then appropriate actions must be taken with vigor.
9. Good decision processes
The company radar should provide appropriate intelligence and data as needed for timely decision-making. Appropriate team members should be involved to ensure there is full team commitment and motivation to the chosen action plan.
10. Strong execution
A major cause of company failure is that the right actions, which have been correctly identified, are not executed with appropriate energy and timeliness. Partners need to be of one mind on this.
11. Written partnership agreement (confirming the above)
There should be a written statement identifying for each of the partners their ownership, rights and obligations. This should include clear descriptions of any critical items for the first 10 topics in this checklist.
12. Written exit strategy (just in case)
Just as a prenuptial agreement is often deemed necessary for some marriages, the basis on which either partner might exit the partnership should be clearly spelled out. This document should be revisited from time to time to make sure that it is still fair and equitable if circumstances differ from what had been projected.
A Real Life Case Study
Two friends who are fired up by a potential business idea may well set up a partnership and achieve great results. If they do so without considering all the items in the above checklist, then they have been extremely lucky.
I was involved in such a partnership which did review some of these items in-depth and others only partially. On many items the partners shared a common understanding. However the partnership was not a success and looking back it is possible to list the items which caused our downfall. For privacy reasons for others involved, I will keep some aspects of this business confidential.
- Item 7. Market awareness and savvy – in our enthusiasm, we did not make sufficient allowance for the technical and market threats.
- Item 6. Agreed Business Plan – like many entrepreneurs, we were overly optimistic on revenue growth and ran into cash flow problems
- Item 9. Good decision processes – since the technical concept was still attractive, venture capital was brought in to provide needed cash. The new players caused changes in the decision processes which were not equally acceptable to my partner and me but could not be avoided.
- Item 5. Shared Goals – at that point, my partner and I had somewhat different goals with respect to the involvement of the venture capitalists. The difference was so great that I could no longer have the absolute trust in my partner I had had and was unsure what unilateral actions he might find appropriate.
Given my concerns, I negotiated with my partner a suitable exit arrangement and had no further involvement with the venture. In hindsight, a more rigorous application of the elements in the checklist might well have resulted in the partnership not being realized.
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