Assessing Partners

ID Number: RE-012

Why: Business joint ventures (preferred) and partnerships can bring together individuals whose complementary skills and experience can help the venture succeed. And sometimes a partner can contribute valuable resources to the business.

Sometimes these arrangements can result in headaches or heartache.

Purpose: To consistently do specific actions to increase the likelihood of working well together.

1. Inputs

  • Potential Partners

2. Steps

  1. Define what we mean by "partner".

  2. Describe all partner responsibilities so everyone is clear on expectations.

  3. Just because you know them, do not skip these steps.

  4. Ask open-ended questions and let them talk.

  5. Research the prospective partner online.

    1. Review their social media accounts. Do their tweets or Facebook posts jive with the person you think you’ll be working with?

    2. Do you want to be professionally associated with them?

    3. Be sure to go back a while in their timeline: there may be older information they forgot about that provides valuable insight into their thinking and character.

    4. Go beyond one search engine.

  6. Meet the prospective partner for lunch and treat it as a "quiet" interview, where you assess each other.

    1. Ask "What do you really want out of this relationship?"

    2. "What do you really want out of this business?"

    3. "What are your goals for the next 2-5 years?"

  7. Discuss money.

    1. What do each of you bring the the table and how do you value that?

    2. How much do each of you get paid, and how long can each of you go without receiving a steady paycheck?

    3. How comfortable are they with terms that the person that doesn’t contribute wouldn’t receive as much compensation (profit distribution not based on percentage of ownership).

  8. Run a commercial credit check on their businesses. They may need to get their own report and share it with you.

  9. Conduct a background check and review the results together. Include credit, criminal proceedings and other details may require the permission of the person on whom you request the report.

  10. Do a compatibility check to estimate how well you will work together.

    1. Where are they on the scale of complimentary to diametrically opposite? (complimentary preferred)

    2. How compatible are each party’s values?

    3. How compatible are each party’s ethics?

    4. How compatible is each party’s risk tolerance?

    5. Listen to your gut. Listen to that little voice that says hold off or slow down.

    6. Investigate red flags.

    7. To what degree do they put value on the business idea over money and work?

    8. Can you imagine doing a four hour drive together?

    9. Look at personality types.

  11. How do you anticipate disagreeing productively with this person? We’re not right 100% of the time, so how do we envision getting a second opinion when disagreement may be built in?

  12. To what degree do they play devil’s advocate or bring in fresh perspectives versus always being on your side?

  13. To what degree are you ready to trust and not do it all yourself, so as not to sabotage the partnership?

    1. We may need to reassess processes. Assess readiness to revise the "what" and the "how".

  14. For strategic partnerships:

    1. Does their business share your ideal customers? Will partnering get us in front of our ideal customers?

    2. Will they do an up-front financial deal or commitment?

    3. How strategically aligned are the two companies? How well does your product/service roadmap align with the changes they want?

    4. How well do the brands align? Will you be proud to be associated with that partner?

  15. Get a formal partnership agreement drafted.

    1. Add provisions for breaking up that are respectful and considerate.

    2. Add a section to partnership agreement that covers:

      • Handling Disputes

      • When the other partner does not pull their weight

      • What buy-sell terms and conditions are appropriate?

        • Create a buy sell agreement that says if one person abandons the projects they lose all their interest.

        • If either party commits fraud they are out of the business.

        • If they get divorced, only the person you entered the deal with can be an owner — the spouse can’t be granted their interest.

        • A good attorney can prepare a buy sell agreement that can cover all these contingencies.

  16. Consider a practice run. Consider hiring the other person for a project or limited period of time to see whether you work well together. You will be able to get a better sense of how you might work together.

3. Outputs

  • A decision about whether or not to partner.

  • A written partnership agreement.

  • Excitement to succeed together.

4. Revision History

Date Revision Description

2020-01-03

1

Initial

Updated on 02 Jan 2020

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