6 attributes to look for when choosing a business partner
Business partners can be co-founders of a startup, multiple owners of an existing business, or a joint venture. Either way, a partner can be an asset, bringing new skills and perspectives to the business; or a burden, making every decision more difficult and taxing your lifestyle satisfaction.
You must exercise due diligence in making this decision before you give up your capital. As a former startup investor, I was often involved in founder due diligence, and I thought founders should do the same with co-founders, as well as investors.
The differences you find after the deal is made can be painful and costly, just like in any marriage. I was delighted to see this approach also highlighted in a new book for startups,”Zero at IPO“, by Frederick Kerrest.
Kerrest also brings years of experience starting and growing his own businesses from a startup by going public, so he has plenty of real-world experience choosing and working with partners.
I support his summary of recommendations on what to look for in each candidate:
1. Being around this person is a positive experience.
If you don’t like this person now, the feelings will only intensify when you face difficult business issues. Watch out for signs of negative attitude or depression, as they can affect your business results, as well as your personal satisfaction. Always make sure you can have fun together.
I have found that happy people are the most positive and also make the best business partners. A recent study shows that people who are happy in business are also the most successful. Know that happiness brings success, not the other way around.
2. Their skills and interests complement yours.
A business partner or co-founder should support you in style and form, and fill in the gaps in your strengths with their experience and expertise. You also need to understand how the roles will be distributed as much as possible, so that the two of you don’t argue about every task and every solution.
In my experience, most tech entrepreneurs have little interest or expertise in finance or marketing. Thus, they benefit immensely from finding a partner who has skills and an interest in these areas. The same benefits also apply to a joint venture.
3. They are excited about your business goals.
A co-founder who has different motivations, such as maximum profit versus excellent customer service, will likely undermine you, take on a minimal role, or leave the company quickly. You need someone who can easily step into your shoes in a crisis or if you need time off from work.
Many entrepreneurs these days are driven to help those in need, like TOMS shoes founder Blake Mycoskie, who differentiated his brand by donating a pair to the needy for every pair sold. Obviously, a partner who maximizes his profits would not be happy.
4. Confidence is evident from his constituents.
Here you need to seek the perspective of three or more people, not recommended by your potential partner, who have worked closely with that partner in the past. Don’t be afraid to look sneaky, because the candidate should do the same with you. Don’t ignore the big red flags.
In today’s economy, with more and more employees working remotely, gauging trust can seem especially difficult. In fact, many say trust is easier to gauge now, with confidence evident in regular and effective communication and results from the leaders involved.
5. Negotiation takes place with maturity, including emotions.
Having healthy disagreements about strategy or any specific issue is good for bringing new options to the table, as long as the differences can be quickly resolved without emotional outbursts or lasting grudges. If you see emotional immaturity in early discussions, count on a rocky relationship at best.
In fact, many business advisors, myself included, now agree that emotional intelligence is more essential in business than IQ or logical intelligence. We all understand that partners, employees and customers are people with emotions rather than machines.
6. Your digestive test thinks it’s a good choice.
Don’t get caught trying to convince yourself of this partnership, based on external forces, such as access to money or future business relationships. Remember that business partnerships are a lot like marriages, which must survive and thrive in the long run, both gut-wise and logically.
In my experience, poor collaboration between business partners, including co-founders, is one of the biggest reasons for business and startup failures. It’s definitely worth taking the time to do some real due diligence before it’s too late to back down.
With the right effort, you can make one plus one equal three or more, rather than a zero. Start now and you won’t have to go back later.