How to Find a Business Partner for Your Small Business
When starting a new business venture, one of the first decisions you’ll make is the choice of business structure. A lot of small business owners and self-employed individuals prefer to become sole proprietors. But getting a business partner might give you the best chance at success.
Running a business can sometimes be a lonely endeavor. The weight of the business rests entirely on your shoulders. This can take a toll on your productivity, health, relationships and overall wellbeing.
A business partner is someone who has a substantial, if not equal, stake in your business. As such, they bear some of the risk, rewards and responsibilities that come with it. The right partner is someone who cares about your business as much as you do. That person lends a hand in running it and is a source of support when things get tough.
Finding the right business partner isn’t a walk in the park. But when you do find one, they can be an incredible asset to your business.
Benefits of Having a Business Partner
To partner or not to partner is a question that you would have to contend with when setting up or running a business. Having a business partner gives you access to more financial resources, professional networks, business contacts and skillsets. It’s also important to have someone you can confide in, someone to share the burdens and journey through the ups and downs that come with running a business.
Another great benefit is that venture capitalists are more likely to invest in businesses with one or more partners. Investors understand that starting a business can be a risky venture. Inexperienced entrepreneurs make fewer mistakes when they have a competent partner beside them.
What to Consider Before Searching for a Business Partner
If you’re an entrepreneur or small business owner, you should first review your personality to determine if you’re partner material. After doing things solo for so long, it may be difficult to have to consult someone before making a decision or discussing the direction your business should take.
Also, you should consider your tolerance level to determine if you can work with a partner who isn’t as hardworking as you are. In most partnerships, one partner almost always does the lion’s share of the work but has to share the profits equitably with the other partner. This can be irksome. So if you have a low tolerance for such situations, partnering may not be the right move for you.
What to Look for in a Business Partner
Before beginning your search for a business partner, first, clarify why you need one. This will help you define exactly what you're looking for. Usually, your business partner should be someone who will bring more than financial resources to the table.
The partner must possess solid business acumen, some measure of industry experience and a set of complementary skills to balance out your areas of weakness. If you have a head for numbers and planning, you may need a go-getter, someone with a flair for creativity and marketing.
Although a business partnership is a professional relationship, you’ll need to pick a partner you actually like. When running the business, you’ll spend a lot of time with that person, and things will run more smoothly and productively if you both get along.
The best partners are usually persons who have the same goals, ambition, motivation, work ethic and value system as you do. They also can commit to the vision you have for the business.
How to Find a Business Partner
Once you’ve defined the qualities and skillsets you’re looking for in a business partner, the next step involves finding a person with such qualities. To help you get started, here are some ideas on how to find a co-founder or business partner.
If you were an employee and decide to go into business for yourself in the same field, your former colleagues could be potential business partners. However, don’t limit yourself to these persons alone. You can reach out to contractors you worked with, individuals you met at corporate events and other professional contacts.
Your professional network is a good place to start your search for a business partner. You have the advantage of being familiar with the work ethic and skills of nearly everyone. As part of your due diligence, reach out to mutual acquaintances for more information. This should help you determine if the person in question is a good fit.
Your Social Circle
When looking for potential business partners, the first port of call for most entrepreneurs is their immediate social circle. Although many pundits advise against entering into a partnership with friends or relatives, a lot of great partnerships were formed that way. However, you also need to do your research. Ensure that the persons you’re considering have the right set of skills, expertise and work ethic before you bring them on board. It’s never a good idea to partner with someone just because you’re buddies.
Remember to keep personal issues and differences aside when making business decisions. This is quite difficult and is a major reason why most partnerships between friends and family members eventually break up. Also, the failure of the business venture could signal the end of your friendship or cordial relations with your estranged partner.
Accelerator and Incubator Programs
Accelerator programs have become quite popular in recent years, especially in the IT/tech industry. They prepare you for the challenges of business and provide you with the skills and resources to get your startup off the ground. These bootcamp-style training programs are a great way to find a co-founder or business partner. They bring you in contact with lots of like-minded individuals.
No matter your industry, there are usually dozens of meetups and networking events all year round. Search for those that are local to you. These networking events usually attract entrepreneurs and those with business interests that are similar to yours. While you are unlikely to meet the right partner straightaway, you can build up your personal network and eventually meet a suitable candidate through a mutual acquaintance.
Other ways to meet potential business partners or cofounders include:
- Partner-matching platforms such as CoFoundersLab.com and FounderDating.com
- Former clients
- Business brokers
Dos and Don’ts When Searching for a Business Partner
Choosing a business partner can be a difficult and challenging task. It requires great effort, time and consideration to find someone who is compatible with your work ethic and has the same vision for your prospective business venture.
To help you get started, let’s take a look at some questions to consider when assessing a potential business partner.
- Do you trust this person?
- What skills, knowledge and resources will your prospective partner bring to the table? Do these skills complement your areas of weakness?
- What are the personal goals, ambition and motivation of the partner? Do they coincide with yours?
- Are you comfortable sharing management and decision-making activities with this person? Are both of you comfortable with each others’ style of management? Or would you have to change some of your core tenets to collaborate better?
- Do you have similar ideas, objectives and vision for the business?
- What is your partner’s work ethic?
Getting answers to these questions requires thorough research and due diligence. You would need to do a background check and speak with the person’s former colleagues, business partners and employees before coming to a decision.
It’s tempting to enter into a business partnership with a relative or friend because you know them so well. However, note that friendship and business are very different terrains. It’s easier to get along with someone on a social basis than during the daily grind and hassle of running a business. You could end up losing your friendship or ruining familial relations with your relatives.
Also, it’s easy to get into a partnership but quite difficult to get out. To avoid potential problems, expectations, responsibilities, duties and rewards should be clearly spelled-out at the onset and understood by each party.
Getting the details right at the start of a partnership can save you a lot of headaches down the line. When forming your partnership, get a lawyer to help draw up legally-binding agreements that are enforceable in court. Your partnership agreement should include the following details:
- The capital and other resources that both partners will bring to the table
- Who owns what
- The day-to-day duties of each partner
- The areas of administration that each partner is responsible for. For instance, you could be in charge of HR while your partner handles all the purchase decisions
- How both partners will resolve disputes, make decisions and share profits
- A buy-sell agreement and how business assets will be disposed of if the partnership ends
Lastly, the agreement should discuss in detail how the disability, death or divorce of one party will affect the partnership.
There are also some things you shouldn’t do when searching for a business partner. They include:
- Never rush into a partnership: Take time to check the background of your prospective partner before signing a partnership agreement. Don’t be swayed by sentiments if the potential partner happens to be a friend or family member
- Set out clear expectations from the onset: But don’t expect your partner to get on track right away and become a top performer on the first day. Allow some time for your new partner to get the hang of things
- Be transparent: If there are issues with your business or person, such as debts, liabilities, lawsuit, etc., don’t hide them from your prospective partners. Ensure that they understand the current status of the business before coming on board
Advantages of Having a Business Partner
To help you decide if entering into a partnership is the right move for your business, let’s take a look at some of the benefits of having a business partner.
Most small business owners are usually a "jack of all trades." They wear many hats to run their businesses. While you may be excellent in some areas and average in others, there are definitely areas where your skills aren’t up to par. It could be administration, supply chain, marketing or accounting.
Bringing on a partner whose skills complement yours in such areas is a smart move. It can turn your fledgling business into a successful enterprise.
Better Business Decisions
Over time, business owners would have to make weighty decisions that can make or break their businesses. If things aren’t going smoothly, do you increase your marketing budget, expand product/service offerings or change business location? If your business is making consistent revenue, should you continue running things as they are, open a new location to bring in more revenue or hire more staff and scale the business?
These are just some of the decisions that you will have to make when running your business. With a partner, you do not have to bear the burden of such decisions alone. Your partner can offer a different perspective on issues. They can make valuable contributions that enable you to arrive at better decisions.
A competent and savvy business partner can be the linchpin that helps you achieve your business goals and objectives faster.
Other benefits include:
- Greater borrowing capacity
- More capital is available to expand business operations
- Shared risk and liability
- Additional tax savings from splitting business revenue
- Access to more business opportunities (due to a wider professional network)
Disadvantages of a Business Partnership
Despite these great benefits, there are several downsides to having a business partner. They include:
- Unlimited liability of both partners to business debts. Aside from being equally liable for their share of the partnership’s debts, either partner could become liable for all business debts if the other partner becomes legally indisposed
- High risk of friction and disagreement over managerial issues as a result of different viewpoints
- The business could end if either partner decides to leave and the other partner doesn’t have enough cash flow for a buyout
- Each partner is also liable for any and all actions taken by the other partner while running or operating the business
As a business owner, it can be difficult to give up full control of your business affairs. But having the right partner can mean the difference between:
- Burning out trying to keep your business afloat
- Or effortlessly scaling your business to gain market share, boost revenue and increase profit margins
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