Marrying your business partner?
“Let’s get married because we’ll make more money together.” Imagine marrying someone only for the financial benefits. You’d focus more on the legal contracts than on the wedding day. In fact, you’d probably get a lawyer to help write your vows and make sure that there was a pre-nuptial agreement before there was a down payment on the wedding venue. What kind of a marriage would that be?
What kind of a business life would you have if every relationship only focused on the money?
People spend thousands of precious dollars on legal fees to get a start-up, business, or partnership protected, just in case something goes wrong. When it does (something will go wrong), an additional fortune has to be spent on more legal work to get you out of the fix. Pretty soon you’ve wasted all your start-up cash protecting yourself, and in the end you still get burnt.
How much better would it be to build a business relationship (still having the partnership clearly outlined) on trust and transparency instead of legalities and suspicion?
If you don’t know what I’m talking about, then you probably haven’t started a business yet. If you catch this principle, it will save you a lot of money, emotional heartache, and a few intense meetings with lawyers. (FYI, lawyers often charge you per minute so be careful not to have long chats about your upcoming family vacation with them–funny lawyers. Maybe we should charge by the minute? We'll be emailing you a bill shortly upon completion of reading this, so read fast.).
Relationships are key to any business venture. The old adage of it's not what you know but it’s who you know holds true. People that you partner with need to be chosen carefully. Start-ups have potential for high friction levels: cash-flow crises, differences of opinion, fatigue, and perceived imbalances in workload.
Prevention of the problem is infinitely better than trying to cure it.
I had a question from one of our readers this week that ties in here, “Where do I invest $2,000 or $3,000 dollars today in Zimbabwe?” Good question, and my answers are simple. A business partner of mine who was a former Wall Street Investment Banker (I’ll keep his name anonymous) said it this way. “You never invest in a business idea. You always invest in a relationship.” Let that sink into your pool of beliefs and give it time to ferment.
Here are some buffering questions you can ask yourself when considering “Is this guy going to be a good partner or person to invest with in the long run?”
Question number 1.
Is their vision the same as yours? There must be the same desire to bring about change in your clients' lives as a result of your product. If their goal is simply to make money, then be prepared for a potentially rough ride. Don’t let the 'root of all evil' grow in the backyard of your business. Enriching the lives of others through your product and helping build a better world around you will often bring in the cash flow you desire.
Question number 2.
Do they have the same values as you do? If one member of the team is fine with overcharging while another is not, you have a problem. If your values aren’t the same, it will be hard to have a firm foundation on which to solve problems.
Watch for patterns that repeat themselves, and don’t be too quick to say, “Let’s partner."
Is this person always late for meetings? Is he shifting goal posts? An example: I helped start a business that had brilliant potential. We got the business to a place where it would be investor worthy and operationally viable. We had 25% of the company on the table for a certain amount of money. An investor came in with the money, only to later shift his interests and he demanded 51% of the business.
There are sharks out there that have great smiles.
My partners and I immediately pulled out of the project because of the violation of integrity. Legal battles could have been fought but time wasted on spilt milk can cause you to miss new opportunities. There was no point in trying to build with someone who is dishonest.
Question number 3.
Can you trust this person? If you cannot trust your partners on a handshake, then it’ll be hard to hold them to a document.
Once the handshake is trusted, then get roles, responsibilities, timelines and deliverables down in writing. Let me say that again, all of your agreements should be in writing. Don’t get me wrong, problems will arise even if you’re doing business with angels—the human memory is too fallible to be relied on in an argument. Put it on paper, it remembers better.
The truth is that you may make a wrong decision on a business partner. It does not mean that things cannot be solved amicably. The decision on whether to fight it or walk away remains yours.
Business is people. You need people to help you; you need people to buy from you. You need people to audit your books; you need people to encourage you when you’ve hit the bottom floor of the ocean.
Don’t short change yourself by making everything “just a contract.” It is more like a marriage.
Build strong, transparent relationships first before you ever consider entering into contract with a new partner.
(photo via ken douglas)