Let’s start with the difference between a business partner and a co-founder.
There are no real strict rules here but this is generally how I look at it. A co-founder implies that they started from the very beginning with you. Maybe you collectively came up with the idea. A business partner may be someone that joined at any time, even after the business has already been going.
Usually business partners are people involved with the business on a level that they help make major decisions, and get an equal share depending on how many partners are involved. Co-founder could be the same or could be someone that get less than an equal share depending on their exact role.
Sometimes those two roles can blend and the difference between the two is not really the point of this article, so I will be referring to both as business partner from here out.
1. Don’t become partners with a mirror image, instead find someone that compliments you
A business partner should usually be someone that can do things that you can’t. That way as a team you can tackle more things before you need to go and hire someone.
People often make the mistake of finding mirror images of themselves. I prefer to hire mirror images of myself rather than partner with them. And my business partners are people that have strengths that make up for my weaknesses, and vise versa.
There could be some exceptions in certain businesses where a mirror image of yourself might work, but in my experience that’s usually not the formula for success.
2. Weed out the lazy people that don’t want to work
When you are initially looking for a business partner, understand that a lot of people are all talk. They will talk and talk but never actually roll up their sleeves and do anything. This isn’t always a bad thing, but make sure you know what you are signing up for.
In fact, make sure you spell it out too. Generally people draft up “operating agreements” that explain the roles of each person, whether they get mutual shares or not, and what happens if things go wrong. It’s important to have this for handling disputes. You can hire a lawyer to handle this or go to a site like LawDepot.com and find one mostly pre-drafted.
I’ve encountered a lot of businesses where they didn’t realize until after they started that one of the partners was not the “hands on” type, and in a bootstrapped startup scenario that can be extremely detrimental.
Often times you need to partner with people that will do whatever it takes to succeed, and ready to roll up their sleeves. And if they don’t do anything or live up to their end of the bargain, they are out.
3. Avoid money disagreements by spelling it out ahead of time
Disputes revolving around money are usually the most common. Figure it out ahead of time exactly what the plan is there and who gets what. Make sure that everyone has to work to get paid.
Also decide on how the company plans to use it’s money to grow. Avoid partnering with people that want to pay all of their friends, unless their friends happen to be the best people for the job, and then still be weary.
Make sure to put everything in writing.
4. Be cautious when mixing business with pleasure
I would admit that most people I partner with in business are or become personal friends as well. That’s not necessarily a good thing, it can be both good and bad.
The good is that it can deepen your bond with that person and when things go well, it’s a lot more fun to be working with that person who may now be your friend.
As a friend, you may feel the urge to tell them a little bit more than you would strictly a business partner.
If there’s a dispute of any kind, it can make things messy. If you have opened up to that person about personal things going on in your life outside of business, they can often times throw them in your face later.
I’ve made that mistake many times and opened up to business partners about other things that I was involved with outside of that business, and they came back to throw them in my face.
If you are an entrepreneur that is involved in many business projects, it may not be appropriate to share everything you do with your business partner. It could create resentment or look like you aren’t focusing enough, when in reality it may not be the case at all, just their perception or fear.
5. Handle disagreements before they become major problems
Inevitability you will come to a point where you disagree on something. Having a reasonable way to handle those disagreement is vitally important.
Compromise is the name of the game here. When something is not that big of a deal for you but your partner feels adamant about going a particular direction that you may not 100% agree with but can live with, that’s when you can compromise.
The trick is ensuring that you have a business partner that mutually respects you, so that when you feel strongly about something and they don’t, then they agree to handle it your way.
6. Roles may change in time, have an understanding of what happens if a partner drops out
People lose focus and it’s not uncommon for someone to drop out and do something else instead. Sometimes entrepreneurship is not for everyone and they want to do something else or can’t take the heat of being an entrepreneur. It’s ok, not everyone is cut out for this. I don’t know anyone personally, but some people love 9-5s, having 8 bosses, daily TPS reports, and printers that don’t work to complain about to get them through the day.
The last thing you want to do is pay someone a salary or percentage if they drop out and stop working, if that wasn’t the original intended deal.
7. Having a business partner is not always the right move
Sometimes you don’t need a business partner, plain and simple. A business partner can be a great thing, but as you can see form this post, there are also a lot of things that could go wrong.
If you have enough funding, it may make more sense to start the business yourself and hire people instead. That gives you ultimate control and less potential for disputes or disagreements, since in a 1 man show you are the ultimate authority.
Conversely, if you don’t have enough funding and you need someone else to put in sweat equity with you, then a business partner might be a great idea.
Here are some of the key takeaways:
- Avoid partnering with a mirror image of yourself unless you have a very good reason for it.
- Avoid lazy partners.
- Agree on matters relating to money beforehand and make an agreement.
- Be cautious when mixing business with pleasure.
- Be willing to compromise and let your partner be right or do it their way sometimes. Demand mutual respect.
- Know what happens if someone drops out or doesn’t do their end of the bargain, spell it out in writing.
- It’s not always the right decision to take on a business partner.