Forging Business Partnerships That Last
Finding the right partner can be a huge challenge when you want to go into business. You might feel your skills alone are not sufficient to get a business off the ground, or like the support of someone with the same skin in the game. But finding the right business partner is kind of a big deal; this is something for the long run. It's great sharing this journey, but you want to be sharing it with the right people.
One of my partners was recently asked why he went into business with two other partners. Why would you want to be sharing ownership with someone else, let alone two? A recent tweet by Sam Leslie made me evaluate potential partnerships, failed partnerships and successful partnerships from the past years. These are the things that made them work for me.
Intersecting and complementing expertise
Every partner should bring something distinctive to the table. This is what makes your partnership worthwhile. While it’s great to be “in this together”, it is way more valuable to form a partnership in which one augments the shortcomings of another. This applies both the hard skills required to run a business, as to personal traits. If one partner likes to jump on every opportunity, it might be good to have a more conservative partner to level things out.
Simultaneously you need sufficient overlap and interest in several areas of business in order to have valuable discussions and bounce ideas around. There is a distinction between having your own area of responsibility, or operating in isolation. This is especially true in smaller businesses, in which you don’t have a sufficiently large team to have a subject expert for every part of your business.
This may sound obvious, but having all the partners be equally excited about the service or product that you are selling goes a long way. You might be building a business to build a business, but being able to rally about your company’s purpose keeps everyone moving in the same direction.
Values and moral compass
A common set of values and similar moral compass preemptively reduces the number of discussions on several subjects. Nobody sees exactly the same, but knowing the partners are on the same page on a large majority of topics, expedites the discussion making process. This can range on how you like to treat your team, or how the business should engage with its customers, etc.. You need to be comfortable with the kind of person you’re in business with. I live with the comfort of knowing that my partners make 99% of the decisions the same as I would.
Some might see this as a red flag and a sign of groupthink, but the comparison to the relationship you have with your spouse is justified here. How can you spend tens of hours a week with someone who has completely different views on fundamental issues that are part of your decision making while running a business? While I see the value of having different viewpoints, we can simply not debate weeks on end without moving things forward.
In some cultures running a business entails 60+ hour weeks by default, but it certainly doesn't have to be. The short term implications are seldom overlooked, but assuming that your partnership lasts for several years, at least, you might as well discuss the medium and long term. Are you starting a partnership as an entrepreneurial endeavour, or do you see this as a lifestyle business? Would you like to step on the gas for the first 5 years and ease off after? Having a similar outlook will help you move and stay in sync.
Situations always change. You might start a family, or find that running a business really excites you and want to spend every waking hour pushing it forward. While you don’t have to formalize an exit-strategy when you start off your partnership, understanding the base-case ensures you’re able to recognize when it’s time to reevaluate..
Understanding risk appetite
Running a business and making day-to-day decisions often involves uncertainty and risk. Do we want to raise debt in order to grow faster? Do we want to invest and launch a new unproven product or service that has a possible huge pay off? Not being able to understand how different the different partners cope with different risk profiles can lead to a lot of frustration. When you are aware of this, there are easy ways to find satisfactory ways to move forward anyway. You can take some extra time to prepare your proposal and provide evidence to make your partners feel more comfortable.
Whether someone is able to deal with a lot of risk is not just a personality trait, but is also influenced by their personal financial situation. Imagine starting a partnership with someone who is set up for life, while you invest your life-savings into a new joint venture. Failure is not an option for you, while this might only be a small inconvenience for your partner. This might be an extreme example, but there can be a huge difference between levels of risks partners are willing to take when the need to provide for a whole family, compared to somebody just out of school.
There is a lot that goes into finding great business partners, but there is also some evidence that partnerships return better results than individuals. When you have a wide range of skills and a large network you can tap into, finding a partner might make less sense. Growing a business is a journey worth sharing, making business partnerships one of the most rewarding relationships around.