Teaming up with a partner is a great way to achieve business success. It is also a one path to business ownership. You will have combined skills and knowledge, more business capital and you won’t have to ‘go it alone.’
But partnerships can go sour. Partners can quickly clash over money, time commitments, goals and more. So, before you commit, it’s always a good idea to know as much as possible about your potential partner.
Here’s a list of ten questions you should ask your potential partner before you sign on the dotted line.
What are they looking to get out of the partnership?
If you’re going to work with a partner, you need to know what they hope to get out of the partnership. There needs to be a clear and measurable goal for what you and your partner want to accomplish. Just start with the why then let the circle expand from there.
What are they hoping to get out of the business that you are buying together?
Unfortunately, many entrepreneurs form partnerships without articulating their personal definition of success when buying a business. If you’re going to work with your partner, you need to understand what they consider a win to actually be.
What do they think each one of you brings to the table? Do your skills complement each other?
A good business partner is one who brings something different to the table. If you are creative, consider partnering with a more detail-oriented person. If you have exceptional interpersonal skills but poor financial skills, you might need a partner who understands business accounting to balance the equation.
‘A good business partner is one who brings something different to the table’
What is their financial situation?
What is their projected timeline for the purchasing and running of the business?
Just like building a business from the ground up, there are certain steps in the business timeline that require a thoughtful approach when buying an existing business. Some of these steps include the type of business to purchase, consulting with professionals, hiring a team and marketing.
While the timeline for the purchasing and running of the business may be different for each partner, it is important that you and your partner are on the same page in terms of each other’s projected timeline.
Is the potential purchase and running of this new business a priority in their life?
If your potential partner has family issues or serious challenges in his/her personal life, they may carry their problems into the business. Running a business takes a lot of time, focus and energy. If your partner is too distracted by their personal problems, the business may be doomed from the start.
What relevant experience do they have or proof that they will be able to get through the tough challenges that are involved with buying and running a new business venture?
You need to know how your potential business partner will act if they have their back up against the wall. Have they handled bad situations in the past? If yes, how did they do it? The best way to discover this is to do some digging into their past business ventures.
Do they have hesitations or worries about working with you? What are they? What questions do they have for you?
Does the person you are thinking about working with trust you to manage the business? If they don’t, you should reconsider the partnership. Partners should trust each other to run the business the way they believe it should be run.
In addition to this, your potential partner should have questions to ask you. They’ll want to know about your character, expectations, and reliability.
Will they be willing to put everything in writing?
To avoid conflicts and misunderstandings, be sure to create a partnership agreement that outlines all important areas of the business. The partnership agreement should include the contribution of each partner, division of work, allocation of profits, losses, and draws, dispute resolution, and what happens if one partner dies, becomes disabled or incapacitated.
What is your vision for this new venture?
It’s essential that you ask your potential partner about his/her vision for the new business. This will influence decision making and management of the business. For instance, if your vision is to build a business and pass it on to heirs, you’ll likely make decisions based on long term goals.
If your partner wants to sell the business as soon as it becomes profitable, their decisions will include short-term planning and goals.
Finally, partnerships aren’t for everyone. Be sure to take a step back and consider if you really need a partner before buying a business.
Jo Thornley is head of brand and partnerships at Dynamis.
Further reading on buying a business