If you are starting a business there are many advantages to having a partner. They can bring skills, connections, and abilities that complement yours, give you someone to bounce off ideas with, and keep you grounded. Remember that this relationship will be as important as a “marriage” and it takes a long time to really get to know someone. You will be drawn by the differences and those same differences can drive you “nuts”. A business divorce is emotionally and financially very painful so be thoughtful, take your time, have a trial period, and lots of heartfelt discussions. Here are some things to think about, talk about, and explore deeply.
1. Are you on the same page? What is the mission and vision of your business? Are you in it because you are passionate about the product or services and want to spend the rest of your life growing and building this business, or do you want to grow it fast, flip it and start again? Do you want to take it to an IPO? Do you want to create a legacy for your children? It is critical that you have a clear exit strategy in mind that you both agree on.
2.What does the potential partner bring to the table? Explore that individual’s background —by that I mean their reputation in the industry, any legal issues in the past, or bankruptcies etc. What accomplishments have been attained? Do they have a history of success or failure in prior businesses? Are they a straight shooter? Validate their technical expertise. What connections do they bring that are of value? Is their family life stable and will their family support this venture? Are they a driver/decision maker? Are they great at sales, and brainstorming, and team leadership? Are they an innovative problem solver? Are they good at details, research, and linear thinking? And do they complement your qualities? You don’t want 2 drivers going head to head or 2 linear thinkers pouring cold water on every new idea.
3. Values and behaviors: Are they a spender or saver? Are they a big risk taker or very risk averse? What is their work ethic? Do they follow through on promises? Do they show up prepared and on time? Can they focus or are they scattered in 50 directions with constant changing whims. Are they organized? Are they respectful of others? Do they know their limits? If you are a neat freak and they are a slob—how will that impact you over time? Will you be working physically in the same space daily or in separate locations? When and how will you communicate? All of these values and behaviors can create a smooth flow or be screeching chalk on a blackboard when your business is under a lot of pressure. Don’t under estimate how important these issues are.
4. Roles and responsibilities: What duties and decisions will each of you take on? What decisions will require agreement between you both? Who can make financially binding decisions for your business? How will each of you be evaluated? Who will manage daily decisions about money? Here and in #5 is where issues of power and ego will rise up. These are tricky and delicate issues that can only be resolved smoothly if there is solid respect between both parties.
5.The biggie: How much will each partner invest financially in the business? Having “skin in the game” is a big advantage for everyone and a big statement of commitment to the cause. What % of equity will each one have? How will more investment money be brought into the company? At what point will the partners draw salary, and how much? Who will be responsible to raise investment monies? And who will own the intellectual property and any potential patents? Take your time and carefully work through each of these issues.
6.How will conflicts be resolved- Mediation, arbitration, another 3rd party? What would be a “deal breaker” for each partner? If the relationship doesn’t work out, what will happen? Who will have to leave? Will there be a buy-sell agreement? Is there a non-compete? If one individual leaves, do they have to sell their equity? These are sometimes awkward questions to have to deal with upfront, however they can be toxic discussions if you wait until problems arise and then try to talk about them.
In summary, take the courtship slowly, talk honestly, thoroughly, and deeply. Have a “trial period” where you can experience what it is like to work together and play together and make written agreements to cover the critical details so you have them to refer to when the fur flies.