6 Questions to Ask Before Committing to a Business Partner
Updated: Feb 22, 2021
Being a Solopreneur has its advantages, it also can be a very lonely experience. While having the ability to make all the decisions about the company’s direction, making all those decisions gets tiring, there’s actually a syndrome called “decision fatigue.” On the other hand, going into business with someone can make for an incredible opportunity or can be a set up for disaster.
Having worked in the divorce industry for the past few years, I know what a bad breakup looks like. Believe it or not, a ‘business divorce' can be just as traumatic. To mitigate the chances of any big explosions down the road, make sure you really think about all the angels of your potential relationship.
1. How well do I know this person? There are really two ways to look at this question. It may feel more comfortable to go into business with someone you know well. Having spent every holiday with their family or grown up with them, it would seem logical to jump into a serious relationship. Yet going into business with someone, is very different than going on vacation with them.
2. What’s their ‘Money Behavior?” My mom always liked to quote a French saying “Les bon comptes, font des bon amis.” Good accounts, make good friends. When you’re dealing with money, your friend may have a very different approach to money than you which will have a direct impact on how you operate in business.
Is she a saver? Does she have an emergency fund?
How much money is she willing to put into the business?
What is her philosophy on risk?
Would she agree to take on debt for the business?
What is her credit score/how much debt does she have?
Do you find yourself judging how she spends her money?
3. Are your work ethics similar? I've worked on a lot of team projects. I take my role in a team very seriously, I’m extremely conscientious about doing my part. Nothing is more maddening than a team member that disappears and then takes credit for the work of the team. Think about how you work versus how your prospective partner works:
Are you someone who works better under pressure?
Are you organized?
Are you interested in someone else’s input along the way?
Do you prefer to work alone and get feedback at the end?
Are you a team player?
4. How much time do each of you plan to give to the business? The world has gotten crazier and the demands on all of us greater. Working from home introduces a whole new set of distractions and challenges. If you’re an empty nester with plenty of time on your hands and your prospective partner has small children at home, you will need to be very realistic about when she’ll be available.
Will you be on the same work schedule? Does it matter?
Does your partner have enough time to devote to the business?
Who is minding the kids/dog/mom while you’re on calls?
Are there things that might get in the way unexpectedly and have you planned for that possibility?
5. Are your goals aligned? I was working with clients who were partners recently. They were having some business challenges taking their business online when quarantine started. In the course of our work together, it became clear to me that they hadn’t really thought about the future of the business. What I saw as one of the most important goals was related to determining if they were doing it as a hobby or as a business. If one had thought one way, and the other another, it could have become a very contentious relationship.
6. How much equity is each of you expecting? Does 50/50 make sense? What will the contribution of each of you be and should your shares be proportionate?
Another client was creating a new business with a friend. He and his partner had already put their first two proposals out when they started to discuss how they would set up their company. Turns out one of them felt entitled to a much larger percentage of the company than the other despite the fact that they had both worked together for the past few months creating their product. Needless to say, the partnership never happened.
Getting into a relationship with anyone can be the greatest adventure you’ll go on, make sure you approach it wisely.