Before going into business with a partner, there a number of things to consider to help ensure your partnership is successful. After all, a successful business is built off of a successful business partnership! When you’re looking for a potential partner for your business, we recommend following a multistep process to ensure you have all the information available to you before making a firm decision. In this article, we’ll be sharing our 5 step process for choosing the right business partner.
1. Personal assessment
The important first step in deciding on a potential business partner is a personal assessment to determine your compatibility and business skills. You will spend lots of time with this person, so it is important to ensure your working styles, communication skills, business savviness, and technical expertise are complementary to each and you can create a healthy working dynamic.
To best assess your personal compatibility as business partners, we recommend taking on a variety of projects to determine how best to work together and if this partnership has long term potential. Remember: compatibility on a personal level does not always translate to a great working relationship. You can be great friends with someone but terrible business partners, so it is important to differentiate between working styles and personality compatibility.
2. Determine the financial obligations of each partner
It is important to lay out each business partner’s financial obligations early on to ensure these responsibilities are realistic for each party. We encourage potential business partners to have tough financial conversations early to ensure you are both on the same page before continuing to move through the process of solidifying your business relationship. Look for someone with compatible business skills, financial literacy, and realistic expectations of the investment that it takes to create, grow, and maintain your business.
3. Outline the roles and responsibilities of each partner
Once you have ironed out each partner’s financial obligations, it is now time to consider the logistical considerations for running your business. Who will manage the business accounting and expensing? Will one partner be primarily responsible for the day to day operations? Based on the financial investments of each partner, will their decision making power and responsibilities be different? These are all important questions to consider when outlining your business model and working relationship.
4. Do your due diligence!
As a final step in our business partner process, we recommend doing your due diligence to run a background check on your potential business partner. Using a reputable background check website like CheckPeople can help you gather information through their comprehensive background report.
CheckPeople.com is an online background search that pulls information from publicly available websites, databases, and records to create an easy-to-read report. CheckPeople.com searches can often be completed with only the first and last name of the person you’re searching for. A comprehensive background check on a site like CheckPeople.com can turn up valuable information on your potential business partner, including:
- Court records including past criminal charges and sex offender status
- Past and ongoing civil litigations
- Past business dealings or investments
- Bankruptcies, insolvencies, and other financial information
5. Create a partnership contract
Now that you have completed the first four steps of the process, it is time to decide whether or not you’d like to move forward with your business partnership. After reviewing all of the information available to you and through discussion with your potential business partner, it is time to finalize your informal conversations and agreements.
All business partnerships should be guided by a legally binding partnership contract to help protect both partners and your business. A partnership contract should outline each partner’s financial responsibilities, the operational and logistical responsibilities of each partner, and mitigation clauses should you choose to dissolve your business or business partnership.
The clearer your contract can outline each partner’s financial and entrepreneurial responsibilities, the more effective this contract will be in the long-term management of your business.
Now that you have completed this five-step process for choosing the right business partner, you’re ready to make your decision! This process is designed to capture all the relevant information you will need to make an informed and responsible decision about your next potential business venture.