Once upon a time after working very long days and weekends, I concluded I was more than ready for a business partner. Besides splitting the workload I longed for a business companion to collaborate on new ideas and share a common vision for success. Overall I felt a business partner would divide the workload, add new skill sets, contribute to the vision with new ideas and insights, increase capital, and add new contacts, clients, vendors, etc. Seems reasonable right? Reasonable? Yes. But easy? Not so much. Despite all the available advice sometimes you just have to learn the hard way and I did. Look for these signs of a bad business partner.
And so my partner dating chapter began and I engaged with multiple potential partners in my quest to find the right fit. Like a marriage, a business partnership starts off exciting but then the shininess wears off and you get to the real stuff. Some work and some end up in court. I learned just how important it is to know everything about a potential partner from finances to family to compatibility. In most cases, you will be spending more time with your partner than your spouse.
One of my potential partner candidates was Hesitant Hal. I ran across Hal during my business development activities and we hit it off right away. He, too, was running his own recruiting business and we quickly connected as we shared similar experiences as entrepreneurial business owners. Fast forward we tried to form a partnership but just couldn’t make the numbers work. Hal grew hesitant about opening up his 100% to another party. I get it. When you start your company from scratch it’s hard to let go a piece of it. Hal just wasn’t ready.
Onward and upward. Enter Nellie um Nightmare Nellie that is. We weren’t friends but she lived in my community and our paths crossed occasionally. Like Hal, Nellie also had a recruiting business and struggled with too much to do and too little time. I progressed further with Nellie than I did with Hal and we started working together as a “trial” to test the waters. She would seek out new clients and my team would fill her open positions. Sounds reasonable right? The Nightmare begins…
Nellie and I were so excited at first. As individual companies we were successful but combined we were going to rock it! She had been in talent management longer which I considered a plus. Turns out I learned more about what not to do. Though useful it was not quite what I expected. It seems Nellie cut too many corners and made some very unwise decisions resulting in her spending more time in front of attorneys than with customers.
As part of our trial partnership, Nellie introduced me to her main client. I began filling their positions so she could focus on bringing in new clients and diversify our portfolio. I felt it was bad business to put all your eggs in one basket.
The last couple of months of our trial I began to notice things that were very unsettling. In business discussions, Nellie left no room for compromise and was very controlling. She became hard to track down and would take off on long weekends going radio silent. She wasn’t following up on agreed upon tasks. Once when I suggested we meet to discuss our annual goals she replied, “I don’t make goals because I just feel disappointed when I don’t meet them”. Are you kidding me? How did I find this chick? In the 5 months that Nellie and I worked together, she never signed on a single new client. Not one.
Choosing the right business partner is one of the most important decisions you will ever make. Partners will play a defining role in the success and enjoyment you experience as you grow your business so before you walk down the aisle consider these critical factors.
Diverse But Complementary Skill Set
Part of a good partnership is working with someone that brings a certain skill set that you currently lack in your organization. If you’re good at finances find someone who is strong creatively. What you don’t want is a carbon copy of yourself. You want someone who can complement and enrich your business from a skills and personality perspective. Select a business partner who can fill in the gaps and take your place in front of employees or clients when needed. Be clear on your roles and how you will work together. Failure to establish your rules of engagement will only cause you unnecessary conflict.
Be sure you know the financial status of your partner both past and present. A person’s current financial commitments will affect and shape the decisions they will make going forward. Past financial events will reveal possible trends or patterns and help you to identify the overall character and decision making of the individual. Have they ever filed bankruptcy? What is their credit rating? Have they ever defaulted on a loan? What is their debt today? This was a huge red area with Nellie. The more I got to know her the more I learned that she was fiscally irresponsible and even blew through all her 401k to stay afloat because she made some very poor choices. Nellie couldn’t answer basic questions regarding her business expenses, margins, and overhead without referring back to her financial advisor. Any solid business owner should have a grasp on this kind of information.
Evaluate a potential partner’s personal life and their commitment to the business. Is the commitment as strong as yours? You don’t want the business to be an afterthought or a secondary interest. Flush out time expectations and be brutally honest. Elderly parents, sick spouses, children, side businesses, can all be huge distractions. Be sure you are on the same page from the beginning or the results will be disastrous.
Sadly Nellie’s personal life was a mess. Two divorces, a troubled teen, debt, and lawsuits just don’t add up to a good stable partnership. If your partner fails at relationships in their personal life then chances are they will fail with you and with your customers.
Although you hope to know your partners beforehand, you may not realize their true colors until they have damaged your reputation, stolen money, or gotten you in some kind of trouble. After I learned more about Nellie I couldn’t run away fast enough. I wanted a trusted business partner not a contestant for The Housewives of NC. I was concerned her reputation was going to negatively reflect upon the reputation of my business.
Be sure to look at your potential partner’s standing in the community. Talk to former employees and clients to see what they were like to work with, or for. Partners that can’t meet deadlines, follow up with clients, or follow through with their responsibilities can destroy everything you have built. If your partner dances with the law, churns through employees, behaves inappropriately with clients, or disrespects customers their actions may come back to haunt you and impact your business.
Do They Have A Lawyer On Speed Dial?
Any business should have an attorney. That is a given. But be suspicious of any partner who is on a first name basis with theirs. As I learned with Nellie – if their attorney is on their speed dial then ask yourself why? Even if you and your partner trust each other, you have to monitor one another to avoid negligence, misuse, or violations. Whatever happens in your business is on you. If your partner violates any laws, you too will end up in court. Don’t go into a partnership with anyone until all of their legal issues are resolved.
Put Everything In Writing
And I mean EVERYTHING. This was my biggest mistake by far. Nellie and I weren’t ready to declare a partnership until after we completed our trial. This is where we failed miserably. We had nothing in writing regarding our trial period. It was verbal and it was a real mess in the end. Never cement with a handshake alone. It’s critical to put everything on paper. Spell out any financials, expectations, consequences for failure, and conflict resolution procedures. Partner disagreements consume resources, cause stress, and eat up valuable time. Having agreements in writing minimizes misunderstandings and will give you some legal footing should it come to that.
Try Before You Buy.
A business partnership is like a marriage and it’s imperative that you pursue a courtship process that allows you to verify they are who they say they are. Live together first to uncover the real person and the traits that aren’t necessarily reflected on paper like passion versus profits. William Craig in 3 Signs to Ditch Your Business Partner put it best “You need a business partner who respects the idea of profit but puts it after more important motivations, like a passion for doing quality work and improving your little corner of the world. Profit takes care of itself if passion—and not money—remains the center of your universe.”
Always Plan Your Divorce/Exit Strategy
Don’t forget your prenuptials. No one wants to start off a partnership with negative talk but failing to discuss your exit strategy is a mistake. You need to determine how to handle buy offers, life event changes like death and illness, and irreconcilable differences. You can’t predict every issue, but an attorney can help you work through some of the common problems and put a framework in place to help address certain circumstances. If Nellie and I had done this we would have made a couple of lawyers a little less richer.
Not all partnerships have to be a Nightmare Nellie. Building successful partnerships takes a great deal of effort. Be sure to start off on the right foot and remember that all things come to an end. Prepare for the end so it can be a smooth one. A great deal of soul-searching, as well as a solid written financial and operational agreements, must be in place before the champagne is popped. So before taking on your partner, make sure you’ve explored these crucial considerations in detail. Otherwise, you may be drinking for different reasons.
Tricia Lucas has over 25 years of demonstrated success in recruiting, marketing communications, and social media and helps technology companies recruit more efficiently by focusing on Recruiting Efficiencies, Employer Branding, and Social Media.
At Lucas Select, based in Raleigh, NC, we are passionate about technology startups and about sales and marketing as professions and have built extensive national networks of top-performing executives and managers. Unlike typical staffing agencies and headhunters, our recruiting services ensure that your company maintains a sustained growth model that is supported by strong sales management, talent recruitment at scale balanced by on-going people development while aligning with your Company’s core values.