Starting a business individually can be a risky move. This risk leads many into going to business with a partner, whether they are a friend, a family member, or a business colleague.
However, creating a business with another person can be a risk in itself. Similar to a personal relationship, a business partnership only works if the two can truly benefit by working with each other.
Before starting a business with another person, here are five things one should consider. These tips will help clarify some questions that may linger in the future and help both partners in creating a lasting business relationship.
1. Can you work with this person?
This is the first question one should ask before going into business with a partner. One should make sure that they either have worked with this person before and it went well, or that their personalities complement each other.
It is important not to start a company with someone and instantly end up disliking them, which could lead to selling off the business. Sometimes friendships in partnerships do not work all the time, so it is best to consider how a personal relationship will translate into a business relationship. Scott Gerber’s The 10 Worst Partners For Your Start-Up characterizes the types of partners that may not be ideal for a partnership.
2. Is a partner necessary?
A question one should ask themselves is if they really need a partner. Are the skills and finances that they are offering benefits to the planned company as a whole, or would they just make the perfect employee? In some instances, a partner is not needed but if what they have to offer is worth the financial bond than one should take the risk.
3. What are your goals and are they shared?
For a company succeed in the future, it is important that the goals one person has been shared with the other. By creating a proper mission statement and focusing a clear direction, a positive starting point for your business can be created.
By clearing up the goals for a business and creating a clear mission statement, the ethics and beliefs of the business practice can be instilled from the beginning. If there are obvious differences, then it is at least good to note them in the beginning.
4. Spending time with your partner
Before starting a business with someone, it is important to spend some time with them and find out if shared skills and cooperation can exist. This is extremely necessary if prior work experiences with one another have not been shared.
Start off with a small project or a retreat can help gauge if the two partners can cooperate, have shared values and ideas, and open conversations that could cover shared expectations and plans for the future.
5. Create a proper agreement
Many times when two partners are starting a business, a proper agreement between the two is not made. It is extremely necessary to have one and have it be in print. Things that should be covered in an agreement are compensation, exit clauses, and responsibilities.
By setting up the percentage of ownership and noting who is investing and where the money is coming from, will help both partners get properly paid through the business. By creating a thorough agreement, in the beginning, both partners will know what to expect and to avoid any confusion later in the partnership. Wall Street Journal’s How to Start a Business with a Partner goes into further detail on what an agreement between two partners should consist of.