Over the years I’ve represented hundreds of startups, joint ventures and partnerships. I’ve even been a part of a few partnerships myself and had I put myself through the same 42-part test below perhaps some of those relationships would not have ended so miserably. People rush into business relationships all too often because we’re human beings and as much as we may want otherwise, we’re emotional by our very nature. It is one our greatest strengths but also greatest weaknesses. We put aside logic and reason for validation.
If you’re thinking about bringing in a partner, collaborating with another business on a project, or going into business with a long-time friend, I urge, no I beg you to go through the list below when you’re formalizing your strategic relationship.
There’s a saying that summarizes this best: “sometimes it’s better to leave them at the alter rather than suffer a messy divorce”. The point of this is to think things through and in doing so taking a more calculated approach to the best extent that you can.
I. VALUES: All business planning, whether it’s your own business or a shared business starts with determining your core values. These core values can be a mix between personal and business (as they tend to overlap). These core values are the heart, root, and foundation of your business. To help you visualize this better, think of a mission statement as a recitation and memorialization of your core values. Now place that mission statement in the middle of a white board (often referred to as a vision board). The mission statement is the heart of your business. It is placed in the center. From the heart-center you have branches that connect to different goals, and hanging below each of those goals is the process for achieving your goals. Everything centers and revolves around your mission statement because it consists of your values i.e. what matters to you most as part of the vision for your business, for your life, and for your customers. Now, when visualizing this vision board, focusing on that heart-center, ask yourself the following about your potential business partner:
II. CONFLICT: Dealing with conflict in your business is something that most business owners overlook. I’ve come across some incredibly brilliant business owners starting out, ready to take on the world, and in their zeal they didn’t take the time to consider how conflict is inevitable in all relationships in your business. The source of conflict is at minimal three-fold: partners, clients, and people that work for you. How people handle conflict will drastically effect your ability to function and could impact the culture of your business overall. Conflict between business partners can bring a business to a halt. If your business partner does not have the wherewithal to productively and efficiently address conflict in your business, it can effect the management of the employees and the level of necessary customer service. Conflict is inevitable because relationships are complicated and emotional. Conflict is the result of expectations not being met and the failure to communicate and document those expectations. With that in mind, think of the following:
III. WORK ETHIC: I represented someone who fought with her sister over their business of 20 years. One of the key aspects to the dispute was that the opposition claimed my client quit because she “gave up on the business” by not showing up at the office. For many reasons they were wrong which is why we ended up being successful in the lawsuit and forcing the other side into agreeing to a substantial (well above market) buy out. However, it raised a lot of questions over whether one’s work ethic has consequences for their ownership in the business. If the attorneys who drafted the shareholder agreement were more clear on that point then perhaps we would have lost. Regardless of win or lose, those types of expectations should be addressed before you start the business (and preferably in writing) because they are absolutely a source of tremendous conflict down the line if expectations are not met. With that in mind consider the following:
IV. INTEGRITY: Integrity is something that is often overlooked but critical for the survival of a clean and healthy business relationship. Integrity is the root of trust. If we’re being technical we’re talking about the quality of being honest and having strong moral principles; moral uprightness. It’s about the practice of being honest and showing a consistent and uncompromising adherence to strong moral and ethical principles and values. It’s about consistency. With that in mind consider the following:
V. THE ADD-VALUE: Determining the add-value is a more practical line of questioning. You’re trying to determinewhat you and your business partner bring to the table and if those are valid reasons for entering into this potential partnership. You’re trying to understand what about this potential relationship will make your business venture successful and profitable. You’re trying to understand how this person will work with you to realize your end goals. Your answers or motivations should not be just about money. In addition, if your responses to these questions are motivated because of fear, then you should reconsider the partnership altogether. With that in mind consider the following:
VI. RELIABILITY. It’s a simple question really. Can you rely on this person? Is this the type of person you have to lie to in order to get them to meet you on time for dinner? If so, they’re not so reliable, and you may want to re-consider getting into a sophisticated business relationship with them that involves having to rely on their actions and ability to execute time sensitive decisions.
The foregoing is meant as a guide. It’s not a bible, it’s not law, it’s not set in stone. It’s nothing more than a thought provoking guide that I trust you’ll use as the baseline for considering a business partnership.