Considering a Business Partner? Farsighted Warnings and Principles for Success

The health of business partner relationships can make or break a business.

Most of the time, your business partnership begins full of optimism. You have hopes for building a wildly successful business and you see many possibilities.

However, there will always be ups and downs in business and this is where those partnerships are truly tested. It’s effortless to work harmoniously while things are going well, but business or personal challenges can cause relationship strain.

It's easy to find examples of very public falling-outs between business partners. In fact, data suggests the business partner “divorce rate” is as high as 80%! 

Ideally, you don’t want to be in a position where there are “irreconcilable differences,” so it’s important to work on building healthy partnerships in the first place.

Free download: Get my quick guide to business partner red flags here.

What makes a “healthy” business partnership?

Talk to any investor or venture capitalist, and they’ll often tell you one of their key considerations when investing in a business – the people who run it. Businesses don’t just fail at random, usually there is a good business plan in place. Most business ventures fail because of the people organizing them. 

When you’re making a business partner decision, one way of looking at it is to think like an angel investor. An investor understands that ideas are important, but it’s the people who will make or break the success of the business.

That said, many startups are founded on an idea and optimism. Sometimes it’s two people sitting in a coffee shop, sketching out an idea on a cocktail napkin. You get a high from talking about possibilities in an echo chamber of optimism. 

It’s not that the cocktail-napkin business model is doomed to fail. It’s that due consideration needs to go into the mechanics of the partnership too. The human part. That's where you need to focus a lot of energy and disciplined foresight.

If I was going to give you a “recipe” for a healthy partnership, here are some ingredients I might consider:

Clearly Defined Roles and Terms

There are all kinds of reasons good partnerships turn into antagonistic nightmares. But a common culprit is when there are disagreements over who is doing what. It doesn’t matter if your business partner is your friend or relative, it’s important to go into the arrangement with clearly defined roles when it comes to making decisions.

Arguments tend to occur when someone feels their toes are being stepped on, that their input is not listened to, or that they’re expected to do 80% of the work for 50% of the reward. People are very adept at spotting perceived imbalances, in fact, our brains are wired to automatically evaluate things like the fairness of financial rewards.

Everyone has a different perception of what fairness means, but fair compensation and “playing by the same rules” tend to feature highly. Too many partnerships begin with a vague “we’re in this together” notion and no formal description of what that actually means. When it turns out that each person has their own version of how it works, trouble ensues.

Besides formally documenting how decisions and disagreements will be managed, starting with the correct legal documentation in place is also vital. It can seem a bit distasteful, in the same way pre-nuptial agreements often stir awkward feelings, but it provides a solid safety net that will allow you and your partner(s) to work harder, unencumbered by the fear of losing all your effort during a serious disagreement. 

For example, what happens if one person wants to dissolve the partnership while the other doesn’t?  How will early profits be shared or reinvested in the business?

There will always be new grey areas that arise. You can't anticipate them all. But you should try to get the basics down on paper. It's really about looking into the future and preparing a safety net before you need one. 

Remember, a partnership isn’t always dissolved because of irreconcilable differences. Sometimes one partner's personal circumstances change in unanticipated ways that pull them away from doing their share of the work.

Shared Vision and Values

Here's the ideal situation: shared values. A set of core business principles and personal values you agree on with your partner(s). 

Your values in business should draw you together and help to keep you on the same path. They should be part of what draws clients to you, because your values resonate throughout the culture of your company.

You’ll find if your values are fundamentally different, you’ll end up hiring employees who don't mesh with each other well. As a result, you'll experience high turnover and a lack of momentum.

The downfall of WordPerfect in the 1990s was a direct result of a clash of values between the WordPerfect team and the management of the company that bought them, Novell Corporation. Novell’s insistence that the WordPerfect team follow their more rigid views of management led to resignations in droves. They were later forced to sell WordPerfect for a lot less than what it was purchased for.

Your values feed directly into your vision for the company. That's why you should take the time to write out your core values and share them with each other before launching a shared venture.

It’s not just about potential moral conflict, but differences in terms of goals as well. For example, what if one person assumes the goal for the company is to become a worldwide conglomerate, while the other partner just wants a thriving, local business with a good reputation in the community?

One question you can ask before formalizing a partnership is; how do we each see this business playing a role in our individual futures? This can help highlight any major differences.

The Ability to be “Tactfully Frank”

Have you ever been in a situation where someone or something annoys you, but you have to remain quiet about it? Or alternatively, you see something that you feel is wrong or could be done a better way, but you’re not really in a position to speak up?

In a business partnership, these situations are a recipe for disaster. If partners are walking on eggshells for fear of offending each other, business growth can be hobbled and resentments will fester.

This is not to say you should be in the habit of blurting whatever comes to mind – the ability to be tactful in business is important too. As a partnership, you should be comfortable enough with one another that you can have difficult conversations without causing offense. 

In a successful business partnership, you have regularly scheduled meetings to bring up "issues" that need to be openly addressed. Build this habit into your partnership meeting routines right from the beginning. 

You could say that clear communication skills and emotional maturity are the best traits to look for when selecting a business partner. It’s not just about your “hard skills” such as ability to code or to manage finances, but “soft skills,” such as social ability as well. 

Having Complementary Skills or Experience

Building a business requires a range of skill sets, and that's where a partnership can really help in the early stages before you have the financial resources to hire the talent you need for optimum performance. When it comes to choosing a partner, the ideal situation is that they have strengths in areas you don’t. 

Remember, a partnership is not a friendship. It's about getting stuff done in a way that creates value for your customers. It's fun to start a business with a close friend, but don't let that friendship (which feels whole and complete) blind you to the missing skill sets needed to run a successful business. 

This is not to say never to go into business with friends - 90% of partnerships are formed with people they already know. I am saying you need to consider whether you might be friends with people who share your same strengths and weaknesses. 

For example, a good business needs an integrator and a visionary. Many of my friends are visionaries. They love to talk big ideas, but they aren't as strong when it comes to engineering business systems and processes that will run like clockwork. It's a mental strain for them to show up to meetings on time, let alone manage payroll and recurring tax compliance tasks. 

If you and your partner are both visionaries, who brings the important skills for running the daily operations of the business? That's the role of the integrator. The person who integrates the big ideas, opportunities, and creative insights of the visionary into a realistic, workable business strategy. 

Before going into business with a close friend, consider whether your friendship may be due in part to having many similarities. Sometimes, that's a liability. 

Working on the Relationship

How do business partners work to keep a healthy relationship? Well, that’s one of the keywords right there – work. Just like a marriage or any other partnership, healthy relationships require both parties to put effort into maintaining them.

The best partnerships are formed gradually through a progression of small projects that have little long-term commitment. If you can't be creative enough to figure out how to do a series of small test-run projects together, don't start a business. You'll end up hating it. 

Bonding informally can also be a great strategy for keeping a strong relationship. Life isn’t entirely about work – hanging out socially, at least sometimes, can help you know one another better. The social sports, family barbecues, or after-work drinks are where people loosen up and share the side of themselves that isn’t “work.”

Where disagreements arise at work (and they will), healthy business partnerships work through them logically and respectfully. They don’t devolve into screaming matches. If tempers do run short, they are quick to apologize and don’t allow the workplace atmosphere to become toxic. That toxicity is a key destructor of business relationships.

Download my quick guide to business partner red flags here.

Final Thoughts

Healthy business partner relationships are set up from the beginning. They evolve from making the right partnership choices and aligning, vision, values, skills, and expectations.

This doesn’t mean there will never be arguments – those are bound to happen sometimes! The point is that a solid partnership doesn’t allow an argument to derail the success of your company.

If you'd like additional guidance on the key personality characteristics to look for in a partner, or help navigating a decision about an existing partnership, I'd be happy to help. Just follow this application link to arrange a consultation. 

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