Choosing Partners: A Decision of Paramount Importance

Posted by Randal Pinkett on 7/26/2007 at 7:06 AM
Posted in Entrepreneurship

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I can't stress enough the importance of choosing partners wisely. I've had eight business partners over the course of my various professional ventures, some of whom I brought to the table and some of whom others brought to the table. Every partner was a friend of an existing partner. Everyone was a known quantity.

Nevertheless, not everyone worked out. Sometimes people didn't pull their weight; in a few instances, partners didn't bring in contract opportunities when they had an equity stake in the company that required them to land new business. At other times, individuals had other priorities and were unable to sustain their commitment to the venture. The result is that some partners left of their own accord. Some were escorted out, and others were kicked out. Bringing someone into your company as a partner is a decision of paramount importance and should not be taken lightly. Many say, and I agree, that from a legal and fiscal standpoint, the relationship of "being in business with someone is second only to being married."

To understand what your potential new partner will bring to your enterprise, start by asking him or her the following questions:

What specialty knowledge and expertise do you possess? (Also known as “human capital”)
What synergy can you bring to the team? (intellectual capital)
What relationships and contacts can you bring into the fold? (social capital)
What experience and intuition with our customers or industry do you hold? (cultural capital)
What monetary contributions or credit are you willing to invest? (financial capital)
What amount of time and effort are you willing to contribute? What sacrifices are you willing to make? Is this a priority? (sweat equity)

Also, avoid the mistake that many cofounders commit when they come together to found a business and arbitrarily divide the ownership equally (i.e. two partners who say, “Let’s just split the business 50/50.”). Equity stakes should be divided based on the contributions that various partners bring to the table as a result of their answers to the questions listed above.

It’s one more area where it is vital to have partners who can separate the business from the personal.

Randal Pinkett, PhD, outlasted 17 other candidates to win NBC's acclaimed reality TV show The Apprentice. In addition, Pinkett owns BCT Partners, a multi-million dollar business that he started with several college friends while at Rutgers University. After graduating from Rutgers as a star athlete who also maintained a 3.9 grade point average, he went on to become a Rhodes Scholar and earn four more degrees, including a PhD. from MIT. Thanks to his academic savvy and his profitable campus-born business, Randal managed to graduate from college completely debt free -- a rare feat for most college students.

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7 Comments Post a comment

Posted by member1600131 on 07/26/2007 10:43 AM

Hi Randal
What a coincidence. Just few days before I wrote about choosing partners. It's really a challenging job.
I would request you and the readers to find some time to read my article on that. Few blogs have featured my article after I published.

http://www.rajeshshakya.com/challenges-to-find-a-right-partner-in-bus...

Let me know your comments.

Regards
Rajesh Shakya
http://www.rajeshshakya.com
helping technopreneurs to excel and lead their life!

Posted by William Yang on 07/26/2007 7:21 PM

That's not all Randal, the partners must love your new company, love your new product, & ready to fight for it.

well, when I post this comment, I was in process of starting a new business.

no matter how good your product, how good your business plan,how light they responsibilities, & how critical they position are, if they don't love the product & ready to sacriffice for it, forget it, they'r no more than a bomb in the futures. They're a complainers (check Donald's Blog about "too many complaints"), maybe they'll help a few things but they'll ask more, even much.

I has met many crap like them in the past 6 months. I was tired of them, so I just tell them : "well, it's a tough one, but YOU'RE FIRED ! ! ! "

When I said it's tough, it was.

I realy need a partners to fight with me, but . . . what else can I say . . .

Posted by Charles Lau on 07/27/2007 4:45 AM

I felt so emotional about this post... I have been with partners on and off. It has let me learned a lot about business partnership that it is not as simple as we have thought. Hence I have written an addon review of this post in my blog at http://www.charleslau.com/2007/07/27/choosing-business-partners/

Thanks, I must say that you have written a great post for every startup company to take note of... :)

Charles
http://www.charleslau.com

Posted by member1600131 on 07/27/2007 5:04 AM

Randal
I would also like to bring into your attention one of my blog posts about capitals.

http://www.rajeshshakya.com/what-you-need-to-become-an-entrepreneur.htm

Expect your opinion about "Emotional Capital" I have discussed in the article, which is one of the most important thing in partnership.

Rajesh Shakya
http://www.rajeshshakya.com
helping technopreneurs to excel and lead their life!

Posted by member1590996 on 07/27/2007 5:10 AM

Hi Randal,

The question i would like to ask you is how different is choosing partners in business from choosing partners for a specific project? Coming from the IT field, for me knowing the latter is extremely critical. We have had some partnerships based on projects which didnt really produce envisioned results . Since the roles involved us providing development services and the second party to cater to all marketing related activites including research, i believe that these past unsuccessful outcomes were a result of ineffective planning and research. Although we have been in resource crunch situations, but i feel that had the other side been more aggressive with their strategy, planning and research, we would have worked around the resources problem, thus landing ourselves with a successful project.

Rajesh! i'd love to hear your views on it as well.

Thanks.

Posted by member1600131 on 07/27/2007 7:03 AM

Dear member1590996 (Love to know your name:))

Thank you for asking me as well in your comment.
You really raised a pertinent question. I am also from the IT Field and fully understand what you mean.
In IT projects also applies the same thing. You need more flexibility in IT, as IT itself gives you flexibility to be virtual and virtually make your presence.
If you have carefully read my article (I had provided in my comment above) about required capitals, the emotional capital is the one that is very much required in IT Projects as well. If your project members don't feel the project as their own, it's likely to fail.
I would like you to read one of my blog post on this:
http://www.rajeshshakya.com/everybody-in-project-team-is-the-project-...

Let me know your thoughts.

Rajesh Shakya
http://www.rajeshshakya.com
helping technopreneurs to excel and lead their life!

Posted by u266082 on 07/27/2007 5:53 PM

Hello Randall,

KandidKate here (AKA: Kathleen, the middle age, timid woman who gave you a comment on your post before), we met at the Trump Power Summit.

I appreciate this article because I have a woman who is wanting to be a partner with me and draw up a contract. I keep telling her, "No, we are not at that juncture yet." I have fronted the start up cost for a website. We have not laid the proven groundwork to determine if a website for her products and services is going to work. I have told her to wait until we are ready to publish it and test her market to know how much it will bring in before we write a contract. Right now I told her that we are in the learning process together (being that neither of us have experience at websites and she is with me as we build it). I have made no money from this but have made the investment. "When in doubt, don't "is my motto. So I have this wait and see approach right now. There are other concerns that I need to broach with her. Your basic list of questions here will help me. Thank You.

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