Looking for a Business Partner? Why!?
Why Are You Looking for a Business Partner?
Before we get into the meat of finding you a suitable business partner, let’s get clear about what you mean by the term “partner”. One problem you’ll have in finding a good business partner is that those words mean different things to different people. When partner seekers are asked about specific terms, the answer is usually, “I’m open”. Going into business with someone is serious stuff and you need to be clear in your own mind about what you are looking for in a business partner. Most often it means that the business needs money.
Partner or Investor
You probably want a partner who will bring an investment to your business. If that’s the case, what are you offering in return? If a stranger is going to sink money into a business, they will expect a high degree of accountability from you. Investors want as much security as they can get. That means they will require you to perform or lose your interest in the business. And that’s a kind-hearted investor. They’ll add money and become somewhat silent as long as you are kicking back a nice return on a consistent basis. They’ll call that a performance clause in your agreement. So long as you perform, they stay silent. If you miss the numbers, they will bring in their team to run things. You will be sidelined.
If you are looking for an active partner, you can expect that anyone who bails out your business is going to want control. That’s their protection of the funds they bring to the game. Can’t blame them for that. Who would add a sizeable investment without gaining the control to prevent bad decisions using their money?
You have to ask yourself what you are willing to give up in exchange for the investment. Be clear in your mind about this or you will certainly give up more than you should when the checkbook is on the table.
It’s Your Business, Not TV
You have seen Shark Tank. Some couple with a new business concept makes a pitch of their idea and millionaires argue over who will put in more while taking only the tiniest piece, often around 15%. Wouldn’t that be fun? Warren Buffet hands you a check for $2 million and asks for a 15% stake in your business. He’s a nice guy. He says, call me any time if I can help. That’s it. You have the perfect partnership.
In real life, and even on that TV program, it doesn’t work like that. There is a lot of vetting going on behind the scenes. Before anyone plunks down the cabbage, they want to see the books and the operation. It’s much harder than qualifying for traditional financing. Yes, the sharks might lend some expertise to your business but it comes at a steep price.
Back to the Question at Hand
Investors are very different from partners. If you want an active, involved, fully participating partner, I must ask you, “Why?” If you are starting a new venture and need money, that’s very understandable. It takes cash to start a business. But let me caution you right now that taking a stranger as a full business partner is a very risky thing to do even if they bring plenty of cash to your party. If your business is already up and running, I again ask, “Why?” You have to think carefully about the answers. Actually, you might not need a partner. You might need guidance.
Being in business with a full partner is harder than marriage. I know, I fix partnerships. That’s what I do. It’s astounding when someone tells me they entered a partnership after only a couple of meetings. I’m warning you, these quick business weddings have short honeymoons. Trouble generally starts after the first year. When the tension starts to rise, things get very dodgy. People always want more in return than they put in. Always. A new business, that is a business less than 3 years old, can rarely afford a full buyout. If it can, the exiting party will simply demand more. These break-ups are messy.
So again, why do you want a business partner?
If you just need money, talk with me. I can help you develop the terms to protect you and provide help with creating the materials that will appeal to a potential investor. In many cases, I conduct meetings with investors for my clients.
If you are seeking a fully participating business partner, there is much to consider. You want terms that make sense and documents that provide the proper legal protection. Please talk with me about this. I will find the time to help you. I am pleading with you to avoid the boilerplate documents online. You will never regret doing this right.
The Biggest Piece
Here’s the most important part of all this. The person who will be your partner or investor must be a great match for you. Partnerships break over personality differences more than for any other reason. Don’t ignore this. You must be very careful to find the perfect fit for your financial need, personality, talent, and vision for your business.
Here’s the punchline: Are you certain that you need a partner? I’d like to discuss this with you before you get into a situation you regret.
Chris Reich, TeachU