5 Critical characteristics of a business Partner

Many of the most important and memorable lessons are learned as I learned these, the hard way. Experiential learning can often be painful, stressful, and very expensive. 

“Hey, let’s start a business together.” These words can be the beginning of a long and rewarding professional relationship, or the beginning to a very nasty end of what would otherwise have been a beautiful personal relationship. Going into business with family is especially risky because even if/when a business fails, the relationship doesn’t go away, leading to a lifetime of potentially uncomfortable family events.

Business compares closely to a marriage, especially considering you are legally joined, and you’ll spend 8-10 hours a day with your business partner, and only about 4-6 of your waking weekday hours with your spouse. Like a business, most marriages begin with a well intended couple, but still end in a bitter divorce. While it’s generally agreed that somewhere around 50% of marriages fail, it’s also generally accepted that around 95% of businesses fail. 

Studies on individual happiness show that personal relationships contribute much more to our happiness, especially over time, than does vocational success. So why would you want to jeopardize your personal relationships on a gamble for professional success?

Well, because entrepreneurs are, by their very nature, optimistic, and sometimes things work out beautifully. There few things better than working daily with some of your best friends. Some friendships are deepened in the crucible of business and can go on to be really good, regardless of success or failure. Often, however, the opposite is true. In many cases the business environment destroys personal relationships in either success or failure. The trick is knowing if or who to partner with, and then how. 

1. Personal Compatibility

Too often, the ability to work together is taken for granted, especially among “Best Friends”. Many best friends become somewhat less than best friends after they become roommates, an environment where inter-dependence generally requires little more than keeping the place clean and covering your share of rent. The business world, however, is a crucible that often tries relationships like no other with such stressors as deadlines, sacrifice, disagreement, and even success can try a relationship. 

• Can you communicate in stressful situations and resolve differences? Married couples often spend their entire lives honing their communication and conflict resolution skills. Is your relationship with your partner such that you can survive conflict, differences of opinion, and differences in communication style? Does conflict lead to resolution and agreement, or contention and resentment? Once decisions are made, can you hold each other’s feet to the fire, and maintain a relationship? When someone makes a mistake, can it easily be recognized and resolved by both partners without keeping score?
• Is he/she a good teammate? Can each of you share both credit and blame with each other? Are you both sincerely as interested in, and committed to, the others success as you are your own? Can you share liability as well as wealth? Many partnerships work wonderfully until it comes time to divide the spoils. If your agreement is to split profits, will your partner still split profits with you on projects where he/she did most if not all of the work? Will there be a temptation to alter the split? Is your partner as interested in your success as you are? Are the conversations regarding equity splits, compensation, bonuses, titles and responsibilities cooperative or contentious? Whatever they are at the beginning, will be magnified as dollar numbers increase.
• What kind of enemy would your partner make? Anticipating that you could be one of the 95% of businesses that fail, this is an exceptionally important question. How does your partner treat and speak about previous relationships? Does he/she hold grudges, act vindictively, keep a list of traitors or enemies? Is it easy to get on that list? Are there ultra-competitive feelings or lawsuits against previous friends, family or partners? I’ve worked with partners that have walked away from failure as friends, and others that have spent tens of thousands of dollars on vindictive competition or litigation to satisfy a grudge. If you see any of these characteristics, you must anticipate that you have a 95% chance of being on the wrong end of that vindictive behavior and you must stay away from this person as a business partner. 

2. Character

Another area that’s often taken for granted by unsuspecting entrepreneurs is the character of the partner. 

• Is there a strong Work ethic? Is he/she dependable and can you rely on this person to put in the required hours, accomplish tasks and take responsibility? Will the partner do the unpleasant and mundane things that have to be done? One potential business partner made a great roommate, but as a partner, often could not be counted on for punctuality, or to complete important tasks according to established deadlines. Another had incredible work ethic and was extremely reliable, until the company grew to where he became “management”. Then he delegated nearly all his responsibilities and became an unproductive distraction for the rest of the company.
• Is he/she Loyal? Few things destroy a company culture faster than disloyalty, especially between those at the head of an organization. I once worked at a company that grew from nothing to over $50 million, only to be destroyed by disloyalty and selfish ambition among the executive staff. Does your potential partner exhibit loyalty to friends, family, and other associates? Does he/she speak negatively about others behind their backs? 
• Is he/she completely honest? We all have read stories about embezzlement and the like, and many of us have experienced that personally. But this is much more than that. Does your partner honor agreements, written or not? Is their handshake agreement more valuable than the contract with their signature, even if it has loopholes? Does he/she represent facts accurately rather than with exaggeration or vagaries? Would you bet your business on the word of your partner? Because if you go into business with that person, you will be. Remember that there are no contracts strong enough to protect against a dishonest person, and no loophole large enough to tempt an honest one.

3. Emotional make up

It’s frequently said that business is an arena for logical, rational and analytical, and that there is little room for the emotional. Realistically, however, even the most left brained among us are ruled by our emotions and our passions, especially when we are under pressure. In high pressure situations, our ability to process logic is either enhanced or inhibited by our emotional make up.

• Does your partner have a Strong Ego? A strong ego is dramatically different than a big ego. Where a strong ego is confident, a big ego is cocky. I have worked with several people whose egos were not strong enough to allow them to hire people who were smarter than they were in any given function.  They needed to “know it all”, even in areas where they had no education, experience or expertise, and could never be wrong, even when they obviously were. They were often “my way or the highway” type’s who loved the view from the ivory tower. The strong ego allows you to fill your organization with the best people, who are smarter than you, leverage their skills, and learn from them to be a better business person yourself. They are not afraid to give credit to others or take blame themselves when required, even if/when it’s misapplied. They build leaders, rather than followers. Where a strong ego is a significant asset, a big ego will significantly limit your success, if not destroy your company.
• Does your partner Control Emotions? The entrepreneurial world is a rollercoaster in many ways. You can count on some of the highest highs and lowest lows; exhilaration and despair, supreme confidence and complete frustration, content satisfaction and boiling anger. When the inevitable hard things come, when bad decisions are made, or good decisions poorly executed, is your partner more likely to resort to anger and blame, or to step out of the box to find a resolution? Is his first impulse to find the culprit or the solution? Entrepreneurial ventures are, by their very nature emotional rollercoasters, and as human beings, you cannot avoid the emotions. The question is whether or not the emotions can be controlled, or channeled for the good of the organization.
• Does your partner make Emotional Decisions? Most business decisions can be made using logic, reason, facts, history, and standard decision tree’s or other processes, even in cases where the decisions makers come from diametrically opposed positions, such as marketing (who are paid to be optimistic risk takers) and finance (who are paid to be conservative risk mitigators). In most cases, when decisions become difficult, it’s because emotions are involved. Most of the time, emotions come into play when either personal (not business) objectives are threatened, or people are forced out of their comfort zones. This happens in many situations but some can include requiring someone to do something they don’t feel capable of doing, or something they are tired of doing, even though they are the most capable in that area. Sometimes emotional decisions are “knee jerk reactions” in an effort to make them go away, even if only temporarily. Can your partner make analytical decisions, in an emotional environment?
• Is your partner Emotionally Stable? There are a surprising number of emotional disorders affecting the business world today, including: depression, bi-polar disorder, ADHD and many others. These are not necessarily a deal breaker, as long as your partner has demonstrated a long-term ability to control the issue through either counseling, medication, or both. There are varying degrees of each and many people who are deeply affected, but are still highly functional, can make great partners. If there are any issues in this area however, they need to be clearly discussed and understood.

4. Personal Stability

• Does your partner have a stable home? While divorce is enough of a distraction when you have a significant employee going through it, it can be devastating to a business when an equity partner does. It can also be a significant issue if/when there are dramatic problems involving the children in a home. Does your partner dedicate enough time to his/her familial relationships to maintain a happy home life? Does your company provide enough time for you and your partner to accomplish this? Can your partner’s family handle the issues and demands associated with entrepreneurship?
• Is your partner healthy financially? Bad credit and financial instability is almost cliché among entrepreneurs. While entrepreneurs are often among the “bet it all” optimists, financial irresponsibility does not need to be an accompanying characteristic. Successful serial entrepreneurs anticipate the financial highs and lows associated with their chosen trade and know how and when to save money, and live on a shoestring (rather than a credit card) when necessary.
• Is your partner healthy physically? The value of a successful business is often made up of things like the brand, the customer base, the products, the intellectual property, etc. Early in nearly every entrepreneurial venture, however, the primary value of the business is the people. If your partner doesn’t bring significant value to the company, he/she shouldn’t be a partner. With this in mind, what happens to the value of your company if your partner becomes seriously ill, or dies? Even with insurance, replacing the value of that partner can be difficult if not impossible. Consider also that the life insurance only helps if the partner dies and does nothing for you if he/she is incapacitated by injury or illness. Is your partner healthy enough to deal with the stresses associated with entrepreneurship?
• Are there any addictions?  Alcohol and illegal drugs are quickly recognized as legitimate concerns, but are not the only productivity sapping culprits. Pornography and even video games have risen quickly to be among the highest productivity killers for people of all trades, and yes, they can both be addicting. Since so much of an entrepreneur’s productivity occurs beyond the normal 8 – 5 timeframe, there is no room for compulsive activities that distract, rather than strengthen, rejuvenate and sharpen the saw.

5. Functional Expertise

It seems obvious that functional capability would be among the initial considerations when choosing a business partner. Too often, however, even this is not the case. Too many times I have seen untrained spouses or close friends tasked with accounting, payroll and other functions including marketing. This rarely produces a positive result for either the company or the marital relationship.

• Are the skills complimentary? I once worked with a company that was started by a sales person, and a technical expert. Neither understood accounting or marketing, but they could hire those functions. That was a very good start. Another company was started by two sales people. Both could sell, but neither could produce or deliver their product. Not a productive combination. Your partnership, executive team, and management staff must be complimentary, such that each function is covered, and there are no rivalries created for functional recognition.
• Does he/she reduce risk? If you were looking for a portfolio manager and choosing between Warren Buffet and my ex-brother in law, which would be the less risky choice? Looking from the perspective of an investor or buyer, you would want the most qualified people in each of the positions where the most important initial decisions are made (strategy, marketing, product development, operations, sales, and finance). Perceived risk, measured against opportunity, is what determines both the availability and the cost of any capital acquired, the quality of the people you will be able to recruit, and will affect the size, quality and quantity of customers you will be able to acquire.
• Is he/she entrepreneurial, or corporate? I once made a lateral move from one entrepreneurial firm to another, in an executive marketing/sales role. The company I left behind replaced me with an executive from Apple, believing it would enhance the company profile, which it did. The new executive knew how to manage and direct a large staff with multiple departments, but did not know how to perform any of the required functions himself. Within a week I was asked to moonlight and perform many of the same functions I had been performing for that company as an employee, because the new executive couldn’t. This scenario is not rare. There is a significant difference between the solutions driven, do whatever it takes to accomplish what is required entrepreneurial mindset, and the job description, functional territory driven, 8 to 5 mindset of the corporate employee. What is your potential business partner’s work history and can he/she be productive in the naturally chaotic entrepreneurial environment where tasks must be executed rather than delegated or managed?

Summary

Friendships and family relationships are extremely valuable and should bring you health and happiness for a good portion of your life. You want to keep them healthy and strong forever. The more close and intimate the relationship, the more valuable it is, and the more it needs to be protected. 

Your business should also bring you health, wealth and happiness for a significant portion of your life, and make you excited to go to work every day. It’s wonderful when both strong personal relationships and daily business interactions can combine to create the perfect scenario. This has occasionally been the case in my own personal experience. Unfortunately, it’s more common that the two worlds don’t mix well, a scenario with which I also have painful experience. 

Objective analysis and extreme caution is recommended when selecting a business partner. What’s even more important is the honest self-evaluation to discover what kind of partner you are, and where you fit among these 5 characteristics of a good business partner.