When it comes to marriage the typical chain of events include dating, meeting family, getting a dog, moving into together, meeting friends and other steps so you know that you want to be married (excluding Vegas but that is another matter all together). However, it never ceases to amaze me how many people will jump into a business relationship without “dating.” Like a marriage, a business partnership often begins with enthusiasm and high expectations — only to end in resentment, anger and legal proceedings. It’s important to know as much as possible about a potential partner, including their finances, education, training, and how family life may affect the business, before signing on the dotted line.
Here are some questions to ask before deciding to entering into a business marriage:
1. What do you need or want from a business partner?
A good business partner should compliment your skills and experience. If you are the more artsy, creative one then you should look for a detail-oriented partner. If you have money to invest in the business, you may want to look for a partner with access to a market, or with great connections. Just like any good marriage you need a business partner that “makes you better.” It goes without saying the just because you are friends doesn’t equate to the fact you will be great business partners.
2. Show me (or more correctly you) the money?
You must (yes I said that correctly – must) have a complete understanding of the potential business partner’s financial status, including but not limited to prior bankruptcies, outstanding debt, current liabilities before deciding to enter business. If they won’t tell you then that is a sign from above to choose a different business partner.
3. What time is each partner willing to commit?
How many hours do you expect to work? Then double it. Is the potential business partner willing to commit to the same?
4. Has the business partner been successful in the past?
You wouldn’t marry someone who has 20 ex’s
s. Why would you enter into business with someone who has numerous failed businesses in the past? Just because someone has a failed business in the past doesn’t count them out of the running, but it is important to know did the failure have to do with the actions taken by the partner? Did the partner do the right things such as paying the proper taxes? Did they have legal issues? Is the FTB breathing down their neck?
Moreover, just because someone is entering into their
first business, they shouldn’t count them out. But do they have prior successes
such as education, training, or are they at the top of their respective games?
These are all important things to consider.
5. Do they have interest in the business or are they looking for a paycheck?
If someone wants to enter into business for a paycheck they will not have the commitment to grow and sacrifice for the business. Everyone wants to be successful, but there is a huge difference between a great employee and a great business partner.
6. Verify and then verify again.
Check that the person you are courting has the goods to back up what they say.
7. Are they willing to put everything in writing?
Too many business relationships are based on a handshake. Such agreements keep the lawyers very busy. Remember ambiguity is disastrous for a business. This is why most banks require a business plan. Once you choose a partner you need to sit down with a business attorney to iron out all the issues between the partners so nothing is left to interpretation years down the road. It’s better to send a little now, to save headache and money later.
Just like marriage a little planning and research now makes for a happy and long relationship. Business relationships are no different.
Jeremiah Raxter, Esq
Local Small Business Attorney
27851 Bradley Rd, Suite 145
Menifee, Ca 92586