Challenge No. 467 in TheEntrepreneur's Real-Life Handbook: Drag yourself through a pit of fire to see if you like the pain of entering into a business partnership without thought, planning or a signed document. I'm only half-kidding.
In the "If I knew then . . ." school of thought, I probably would have used different criteria for choosing a business partner. My first criteria was "I've known this person for several years." It sounded logical--friends are always thinking of going into business together. Today, I wouldn't put any sweeping "don't do it" on a proposed partnership between best friends, but I would place a warning label on it that reads "Approach with extreme caution."
The best way to ruin a friendship is to throw money into the mix, but at the time, I thought the only obstacle to starting my own business was that I had no working capital. Therefore, a friend with lots of cash handy and a higher credit limit seemed like the perfect partner for me.
So how should you pick a business partner? Kevin Lee, three-time new media entrepreneur (INTERACT Multimedia Inc., Did-it.com Inc. and BRIEFME.COM Inc.), recommends: "Select partners with whom you have complementary talents. In addition, a partner who has been a partner before should let you talk to his prior partners. Partnerships are a lot like getting married, including the high cost of breakup."
Julie Denny, a conflict consultant with Resolutions (http://www.resolutionsforyou.com) in Amenia, New York, makes another suggestion: "Try collaborating on a joint project to make sure your working styles are compatible. For example, your prospective partner is highly creative and loves impromptu meetings, where she shines. You are detail-oriented and prefer carefully planned-out agendas with advance notice. One of you is intuitive, the other a planner. While this may seem trivial, over time it will drive both of you to distraction."
Plan out and discuss the partnership before actually getting the business venture underway. What are your expectations? What are theirs? What role do you see yourself in? What about them? What title do you want? And so on. Now that you know what they want out of the partnership, have you checked their credentials? Being a "fun person to be around" is not the best criteria for picking your business partner. Partners inevitably disagree, whether it be about the direction of the company, how money is spent, or corporate culture issues. Disagreement between partners can lead to arguments or, at the very least, heated debates. Suddenly, all the differences between the partners in communication and business styles come to the fore and become issues as well.
My most vivid memories of disputes with my own business partner are money-related. It wasn't until after we worked together in the same office that I realized how different our communication styles were something that not only led to trivial arguments between us, but also major issues in terms of how we communicated with clients and staff.
Partners should generally not have overlapping responsibilities within a company. If someone's role isn't clear, there's room for unnecessary duplication and confusion of duties. "I thought you were paying the bill this month" is not a good excuse for the phone being disconnected. Have a written plan addressing the expectations and roles of each partner. Then have a lawyer create a document that includes this information as well as clauses to cover worst-case scenarios.
If all else fails, Lee advises: "At least try to find a neutral third party . . . sometimes an early meeting with this third party will provide a therapeutic environment, almost as if it were couples counseling." Yes, business partnerships are just like marriages. I wonder when they'll start offering partner licenses based on psychological compatibility tests. Hey, that's not a bad idea.
Aliza Sherman is an entrepreneur and author of Cybergrrl: A Woman's Guide to the World Wide Web (Ballantine Books, $12, 800-726-0600). She is currently working on her next book and new company.