Choosing a business partner: How to tell the prince from the frog

Sometimes a partnership is the best way to start a small business. This arrangement allows you to share the responsibility and the risks, both financially and practically. Partners can contribute a wide variety of skills and experience and usually share the management of the business as well as the profits. They can also offer support and motivation to get you through the tough days.

It is vital to choose a business partner with great care, however, because there could be serious problems if you and your partner disagree. It is important to remember that partners are liable jointly and without limit for the debts of the business. This means that if your partner leaves you in the lurch, you will be personally liable for all the debts – not just half of them.

It is tempting to go into partnership with a friend, but there’s a big difference between getting on with someone socially and surviving the daily grind of running a business. Sometimes starting a business with a friend or a relative leads to a whole lot of stress and a broken relationship. A better approach is to decide exactly what you want from your partner and to find someone who meets those needs.

Important key factors to consider would include:

• Would additional experience and contacts be useful?
• Are you looking for someone with money to invest?
• Do you need someone with skills that you lack?

No matter what specific requirements you have, it is vital to find someone who shares your goals and basic values. Of course, you must enjoy being with each other – because you are probably going to spend a great deal of time together. He or she could be a friend, a relative, a colleague or a work contact. You may have met them at university, at a conference or at a meeting of your professional association.

Rule number one is seeking a business partner; do not settle on the first person that shows an interest – cast your net wide and take your time. If you are unsure whether you and your potential partner make the dream team, use the researching and planning time to find out how well you work together. Rule number two, never partner with a person who does not share in your vision, otherwise you will all be “walking” to different directions. Rule number three, always set out working rules at the very beginning. You will avoid many a bitter row if you clarify everything at the outset.

Once a partnership has been created, the following is critical to conduct: Create a shared vision and objectives for your business and keep talking about these as the business develops. Define each partner’s areas of responsibility in relation to your individual strengths. For example, if your expertise is in finance, concentrate on this and let your partner look after advertising and marketing.

Agree a Deed of Partnership which sets out each partner’s expectations on key issues including: profit sharing, division of labour, management responsibilities and purchasing rules. If you fail to draw up your own deed of partnership, your business will be governed by the Partnership Act – and this may not suit your situation at all.

Partnerships can be great fun and very productive, but like any relationship they need thought and effort if they are going to be a success. The most important thing is to be open and honest with each other and to nip problems in the bud by resolving any differences of opinion as soon as possible.

Therefore, key to partnership success is good communication. Being able to sit and talk through matters with a partner is very important. There might be matters that both are not able to agree to each other. But it is the talking that can help situations like this. Both should be able to sit across the table and decide on the matter and come up with a solution, talking about all aspects of the situation and then go further for the mutually decided course.

Trust too cannot be understated. The reason for so many failures in the past is the greed for quick money and the resultant shortsightedness. Trust is a vital ingredient of a partnership. Each partner should be able to go on with their decision and the other trust his. There should be trust. Even so, a clear partnership deed should be prepared. The deed should be clear, simple and leave no room for ambiguity.