Business Life Lessons 101: Choose Your Business Partner Carefully

You have worked for an employer for 20 years, you have a great career going, you’re at the top of your game, and your confidence is high. With everything in life seemingly going your way, you decide to kick it up a notch and go into business for yourself. It’s a risk but perhaps one worth taking. You have the experience and the skill to be successful, so why not improve your lifestyle and join the ranks of the wealthy entrepreneurs?

While some small businesses can be started with just one person, the more common approach is to form a partnership of 2 or 3 people. A business partnership is like a marriage. You may spend more time with your business partner than you do with your spouse. A bad business marriage can be more devastating than a spousal divorce. Choose your business partner carefully. Perform your due diligence and review every aspect of the partnership.

Due Diligence: Is Your Business Partner Worthy?





• Work Ethic: Does your potential partner have the same work ethic as you? If you come to work every day at 6 AM and stay until 6 PM, don’t partner up with a 9 to 5’r. There will be animosity, and the end result will be failure.

• Value Added: Will your partner add value? Does he/she have a skill that you are lacking? If not, then perhaps you should start the business on your own and just hire your pal as an employee.

• Financial Checklist: Review your partner’s personal financial situation. Can he/she weather the storm if financial times are tough? When the going gets tough, you need a partner that has a personal reserve of cash on hand. Otherwise, he will expect a steady check every week from the business which may place your company at risk.

• Ethics: Does your partner share your moral and ethical values? You don’t want a rouge partner who may break a law or put together an unethical business deal that may put the company at risk. Keep in mind that you will be personally liable for the company and the actions of your business partners. Scary, isn’t it? This may be why only 2% of the population chooses to start their own business.

• Equity: Equal equity, equal partners, equal pay, and equal say! If one partner owns more than 50%, then he might as well own the entire company. He will be in control of every major management decision.

• Goals: Do you have the same long-term goals? You may want to grow the business into a billion dollar enterprise while your partner is satisfied with a 2 man operation with very little stress. Make sure you are on the same page or find another partner.

• Shotgun Clause: Any small business needs an escape clause or shotgun clause in the partnership agreement. If things go south and you and your business partner need a divorce, the cleanest way to end the dispute is a shotgun clause. Basically, either partner can offer to buy out the other partner. The other partner has only 2 choices; they can accept your offer and sign over the company to you, or they can keep the company and write you a check for the shotgun offer amount. The only drawback to a shotgun clause is if one partner is liquid and the other partner is broke. Just like in poker, the man with all the money wins.


There are several advantages to partnerships vs. going at it alone:

• Complimentary Skills: While you may be the most innovative engineer and develop new, cutting-edge products, you may not have the ability to sell the product. You may also need help with the financial side of the business. When selecting your business partners, align yourself with partners who have complimenting skill sets.

• Networking: To jump start a small business, you need as many contacts as possible. After all, you need to generate revenue quickly to sustain the business and put food on the table. Your partner should be chosen from a related industry but have a unique contact list or client portfolio.

• Coverage for Vacation: One of the more challenging aspects of operating a small business on your own is finding time to take a break or a small vacation. It is imperative that you take a vacation from time to time to get away from the business and rejuvenate your mind. If you don’t take this advice, you will burn out, and your business will ultimately fail.

Business Life Lessons 101:

In my first business venture, I followed only 90% of my own advice; the missing 10% cost me my business. I was the mastermind behind the successful start up. I provided the engineering and vision behind the business. I worked 60 plus hours every week to ensure the business would be a success, as it was.

My weakest skill at the time was sales so I partnered up with successful sales manager. The problem, or should I say problems were he was lazy; he didn’t need the money, and he was ready to coast to retirement, and since he was rich and I was poor, the shotgun shot me.

Lesson learned. I have since learned how to sell on my own, and I’m ready for another go at it. This time, my partner will be me.