How do you pick the perfect business partner or cofounder?
This article will discuss the following.
Starting a business can be exciting, motivating, and completely overwhelming, all at the same time. While some entrepreneurs have an independent nature and strike out on their own, others choose to share their journey with a business partner or cofounder with whom they can divide the workload, financial outlay, and decision-making duties.
Deciding to share half of your new venture with a business partner does offer many advantages. A business partner may have expertise that you lack, can provide emotional support and encouragement when times are complicated, and bring more financial resources to the table. On the other hand, a partnership can result in disagreements over future goals, differences in work-life balance, and decreased share of profits.
Carefully consider whether a potential partner is the right choice for you, your new business, and the type of business you envision having in five, eight, or ten years. It is best to go into this endeavor with your eyes wide open to both the opportunities and the pitfalls.
Is it necessary to have a partner in business? What are the benefits?
Partnering with another professional offers many benefits that can lead to better business performance and help increase the odds of success. But do you need a cofounder, or can you be just as successful on your own?
Jeff Bezos of Amazon, Pierre Omidyar of eBay, and Craig Newmark of Craigslist are just three examples of wildly successful entrepreneurs who were solo founders.
You’re probably asking yourself, “What are the benefits of having a business partner?”
Collective skills and expertise.
A partner can offer additional skills and expertise you do not have. Their addition helps boost your collective capabilities and increases the likelihood of success.
Shared workload and responsibilities.
A business partner can take on fifty percent of the workload and responsibilities, reducing the pressure you feel to do everything and enabling you as a collective team to achieve more quickly.
Joint financial investment.
Not only can a financial injection from a business partner ease your financial burden, but it can help grow the business more quickly with additional investment in product development, marketing, and sales, than you would have been able to accomplish on your own.
Varied outlooks and perspectives.
You bring specific views, ideas, and perspectives to the business based on your history and experiences. Having a partner with alternative thoughts, ideas, and perspectives lets you see your business differently, enhancing your overall decision-making capabilities.
Emotional support, motivation, and inspiration.
Starting a business can be stressful and demanding. While a spouse or a friend can reassure you that everything will be okay, no one truly understands what you're going through like a business partner or cofounder. They can provide the emotional support, encouragement, and motivation you need to endure rough patches.
What are the disadvantages of having a business partner?
In his book, The Founder’s Dilemmas, author and professor Noam Wasserman asserts that 65% of startups fail because of conflict between the cofounders. What conflicts or drawbacks could cause you to say, “I’d rather be a solo business owner?”
Potential personal or professional conflicts.
A business partner comes to the relationship with unique ideas, objectives, priorities, and experiences. This unique perspective can cause friction, disagreements, and tension that are difficult to resolve and can damage the business beyond repair.
Lack of complete control.
A business partner or cofounder has a say in the direction of the business, sales objectives, and future growth goals, just like you do. You may not agree with their approach or strategy, but you must compromise because you have surrendered some decision-making authority by engaging in a partnership.
Communication challenges.
If you don't see eye to eye on how to communicate with one another effectively, your differing styles will conflict. Your business will struggle to grow and achieve your goals.
Shared liability.
Cofounders or business partners share everything related to the business. That includes right and wrong decisions. Any debts, liabilities, or legal challenges the company incurs will be the responsibility of both partners, whether you were actively responsible or not.
Split profits.
Cofounders also share in the profits when the business is growing and doing well. If you owned 100 percent of the company as a solo entrepreneur, you would enjoy all its gains, but a partnership requires you to divide the equity and profits. Are you willing to turn over a percentage of the returns to a partner and accept a smaller share?
No mentor, coach, friend, or family member can tell you with certainty that you should or should not have a business partner or cofounder. Nor is there certainty that your business will fail or succeed with or without a partner. No one knows that, for sure. Many unique factors go into starting and growing a business, which is an individual decision. Only you can ultimately determine whether to go solo or with a partner based on your current situation and future goals.
Where can I find a business partner?
A potential business partner can be found virtually anywhere, from your friends and business colleagues to networking groups and online platforms. If there is no one in your circle of business colleagues you would consider, here are three sites that can provide helpful information, assistance, and guidance and are places to start your search.
CoFoundersLab
CoFounderLabs is dedicated to assisting entrepreneurial-minded individuals in gaining access to the tools and people they need to succeed. They specialize in facilitating creative entrepreneurial partnerships.
LinkedIn
LinkedIn helps the world’s professionals connect to make them more productive and successful. With more than 900 million members worldwide, LinkedIn is a crucial resource for developing business partnerships.
Startup Grind
Startup Grind is one of the world's largest communities of startups, founders, innovators, and creators. It gives startup entrepreneurs the education and opportunities to build, grow, and scale their companies, regardless of geographic location or socioeconomic circumstances.
What are some good qualities in a business partner?
A successful business partnership requires you and the other person to be partners – in every sense. It takes a lot of blood, sweat, tears, and long hours to start and run a business, so you want to choose someone who shares your vision and is as committed to the company's success as you are.
Here are just some of the qualities to look for. You can create a more comprehensive list based on qualities specific to you and your goals.
Complementary skills.
Look for a partner with skills you do not have. Their skills will supplement yours and help create a more well-rounded management team. It will also enable you to divide responsibilities based on your skills and experience.
Shared values.
Shared values, vision, and goals are critical to getting your organization off the ground and driving growth for many years. It will ensure that you both have the same priorities and are “rowing in the same direction.”
Strong work ethic.
I’ve already said that starting a business takes a lot of blood, sweat, tears, and time. It is not for the faint of heart and certainly not for someone with a 9:00 AM-5:00 PM mindset. Find a partner willing to put in the time and effort needed for the business to succeed.
Communication skills.
Effective communication is critical for any partnership – personal or professional. A potential partner must be able to express their thoughts effectively, take your feedback on board, and actively listen to your ideas.
Adaptability.
To be successful, you must adapt to changing customer and market demands. A business partner should be willing to listen, learn, and pivot as requirements change. Flexibility, not rigidity, is key.
Trustworthiness.
One of the most important but frequently overlooked qualities your potential partner should have is trustworthiness. You will hand over up to half of your business to this person. Stop and think about that for a moment. Can you trust them? If yes, you can depend on them to meet their commitments and always have the company’s best interest at heart.
Financial responsibility.
You share both profits and financial losses in a business partnership. Ensure that your potential partner is a financially responsible individual with a good understanding of financial management best practices. Don’t let their financial irresponsibility drag you and your business down with them.
Positive attitude.
As a business owner, you can have some very successful, uplifting days and some grueling, discouraging days. An optimistic and confident mindset will get you through the rough patches. Your potential partner should possess a positive attitude – always committed to finding solutions and overcoming challenges.
What should I look for when doing due diligence?
Whether your potential business partner is someone you have known for 20 years or were introduced to at a recent conference, you must do your due diligence to determine if this potential partnership will be a good fit for both of you. The success of your business depends on it.
You can start with these five essential areas of evaluation to begin your assessment but also include criteria specific to your business or industry.
Examine their background and experience.
It’s easy to assess someone’s background using social media. Start with LinkedIn to better understand their work experience and resume. Facebook and other social networks focus more on a person’s personal life and personality. A general Google search will uncover a great deal of information from their past. And remember to reach out to their colleagues and friends to check references.
Analyze their financial history.
You can review their financial accounts, including their credit history, financial statements, and previous bankruptcies or legal cases.
Consider their communication style and work habits.
Are they a good listener? Do they keep you in the loop and communicate well or do they go off and do things without updating you along the way? Do they have a reputation for ending the workday at 5:00 PM, or will they continue to work until a task or project is complete? Will they do what they say, or are they known to drop the ball and avoid obligations?
Investigate conflicts of interest.
This may include any personal or business conflicts of interest which could cause difficulties between partners or clash with business goals. For example, your potential partner may already have a financial or equity interest in a competing business.
Evaluate their character and values.
What words do people use to describe this person? What is their reputation in your industry? Are they moral, reliable, fair, honest, ethical, and truthful?
Starting, running, and growing a business with a partner is like marriage. In fact, it is common for cofounders to spend more time together than they spend with their spouses. You wouldn’t marry someone on a first date. Don’t sign a partnership agreement with them after only knowing them briefly. This is a long-term commitment that requires thorough vetting to ensure you find a business partner that shares your passion, vision, beliefs, and goals.
How should my business partner and I work together to help ensure we're successful?
While you want your allocation of responsibilities to be fair and equitable, you should also take advantage of each other’s strengths, skills, and expertise.
Assess your strengths and weaknesses.
Take an honest assessment of your current strengths and weaknesses and those of your business partner. It will help you decide which areas of the business each of you should focus on.
Earmark responsibilities based on expertise.
Earmarking responsibilities based on expertise will enable you both to be more efficient in your roles and effective for the company. Suppose your previous job included reporting to a CFO, and you enjoy crunching numbers more than speaking with customers. In that case, you may take on accounting and finance responsibilities while your business partner, who enjoys talking with customers, takes on the sales leadership position.
Designate specific roles for each person.
Designating particular roles and responsibilities is the first step. The critical next step is confirming that you both clearly understand and accept these responsibilities. This acceptance helps to prevent tasks, activities, and projects from falling through the cracks and keeps each of you accountable for your area of focus.
Develop a consistent communications strategy.
Ongoing, effective communication is the cornerstone of success between you and your partner. Agree to a communications strategy that works for the two of you and stick with it. There’s not one strategy that’s better than another. The right approach is the one that works for you. That may include daily Zoom meetings at 4:00 PM or early morning check-in calls. What matters is that your communication is consistent and ongoing, helps keep you both moving forward toward your goals, and enables you to address challenges before they become significant issues.
Adjust as needed.
As your business grows, needs change, and goals evolve, you both must be flexible enough to reassign roles and responsibilities. The willingness to take on new responsibilities, hand over other duties, and hire staff to offload responsibilities will help you grow your business more effectively.
Set clear expectations.
Be specific and clear about each partner's agreed-upon responsibilities. Ensure you both are working toward the same goals and business objectives and can assess your accomplishments based on clearly defined expectations.
Hire additional staff as needed.
If you and your partner are doing everything yourselves, eventually, these tasks will become impossible to accomplish on your own. Consider hiring staff as required—no need to rent an office and hire full-time, permanent employees right from the start. Today’s gig economy enables you to engage everyone from a remote, part-time data entry person to a junior sales associate, a marketing director, and a CFO. They complete the tasks or projects you assign, and when it’s over, their work is complete. This process can save you headaches, time, and money and provides flexibility in determining when you hire your first full-time permanent employee.
Remember, communicating about your roles and dividing responsibilities is not something you only do at the beginning of your partnership and never discuss again. It is an ongoing activity that enables both of you to adjust responsibilities and remain highly effective as your business needs change.
The final word.
Your first decision on the road to successful business ownership is whether to be a solo entrepreneur or willingly give up a percentage of your business to a partner. If you decide a partnership is the answer, selecting the right partner is the critical next step. While a partnership can benefit you personally and brings many advantages, it can also bring challenges that cause distraction, disagreement, and division.
By identifying partnership advantages and limitations and following through on your due diligence, you can build a solid foundation of mutual trust, collaboration, and long-term business success.
