Navigating Business Partnerships as an Entrepreneur
No great business idea flourishes in a vacuum, and not even the most talented entrepreneur is an expert in every facet of running a business. You’ll eventually run into challenges you can’t solve alone. When that time comes, being able to tap into a large professional network to find someone with the skills you need becomes a major boon.
You may meet potential business partners or clients in business school, at your day job, at a networking event or even through speed dating. Savvy entrepreneurs know that nearly any encounter could blossom into a valuable opportunity.
But partnerships don’t fix every business challenge. Even entrepreneurs who are able to work with a diverse mix of talented people will eventually find that maintaining those relationships presents a whole new set of challenges. Sometimes, the social toll can exacerbate the already numerous hardships that come with trying to build a business.
More people, more problems.
Working with a spouse or close friend, for instance, might seem like an exciting prospect at first, but it can quickly become a nightmare. Whether it’s due to lagging success, differing values or an uneven level of commitment, most partnerships don’t flourish. In fact, statistics show that up to 70 percent fail completely.
That said, the symbiotic alliance of a good partnership can certainly jump-start business success. Successful partnerships are possible, even when a massive number of people are involved. The healthcare partnership among Amazon, Berkshire Hathaway and JPMorgan, which aims to improve the way these companies -- each a giant in its industry -- provide health coverage to their employees should give entrepreneurs some assurance.
To maximize your chances of successfully navigating potentially tricky business relationships -- from co-founder partnerships to mergers -- follow three guidelines.
1.) Learn how to argue.
An argument doesn’t have to be a combative conversation, and it shouldn’t create or intensify rifts between the parties. Instead, a productive argument should move everyone closer to a satisfactory outcome.
Erica Cerulo and Clair Mazur, who were close friends before they became business partners, learned that fighting with one another was an art. After starting Of A Kind, a fashion and design ecommerce site, they hired a management coach to help them learn how to argue in a way that actually strengthened their working relationship rather than damaged it.
Structured fights helped them get comfortable with addressing disagreements, ensuring that relatively minor issues are handled before they become major problems. Importantly, they’ve learned to set aside time weekly to air grievances, inviting alternative perspectives in lieu of ignoring a ticking time bomb.
2.) Be selective when choosing partners.
Michael Harden, co-founder and general partner of VC firm Artis Ventures, has been working with startup founders for almost two decades. His top recommendation for entrepreneurs looking to raise capital? “Choose investors like you’re choosing a spouse because it really is a marriage.” This is especially good advice if you’re raising money for the first time; your initial investors will inevitably impact later funding rounds.
To extend this analogy, be wary of investors who want to get married after the first date. A good VC firm will want to truly get to know you over the course of a number of meetings, and founders should use each one of those as an opportunity to ask critical questions, much like you would on a date. You should know exactly what you’ll be getting out of a relationship with investors (why they enjoy working with startups, where they see your company going, whether they’re involved in day-to-day operations, etc.) before you sign a term sheet.
3.) Find the middle path.
For entrepreneurs running more established companies, a merger or an acquisition can often feel like a collision of two completely different worlds. Even the most carefully planned mergers -- the ones that look like strategic home runs on paper -- will present major challenges from a management perspective. That’s because a merger doesn’t just aggregate the strengths and capabilities of the companies involved; it requires combining two founding identities.
Chris Wallace, co-founder and president of marketing consulting firm InnerView Group, believes that mergers are about evolution. They won’t work if either party is unwilling to change. “The best mergers are not about winning or losing,” he says. “They are an opportunity to form a new entity greater than the sum of its parts.”
According to Wallace, managers in the trenches should constantly be seeking to identify or create a “third way” of doing things: a new process or set of organizational principles that demonstrates the collective strength of both parties. The best way to do this? Talk to your new partner’s frontline employees to discover what strengths fortify their brand. It’ll only strengthen your partnership to learn what the business is like on the ground floor.
In theory, your odds of a successful partnership will increase when fewer people are involved. Yet even relationships between just two individuals require consistent effort to maintain. Just remember that a diversity of thought and skill will be a benefit to your business -- even if you don’t live happily ever after.