Choosing Partners: A Decision of Paramount Importance

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.