I’m a firm believer that business relationships are built on trust and respect. There are a number of other factors such as good communication and shared values, but if you don’t trust and respect someone, getting into business with them is a precursor for failure. Business relationships can take many forms: joint ventures, co-founders, client-vendor, consumer—business, business owner-investor, etc. The list could go on.
Before jumping into a relationship, ask yourself some questions:
- Do I believe the person is going to do what they say?
- If not, am I doubting it because of the person, or some other factor?
- Hypothetically, a sum of money goes missing in this business, what’s the first source of trouble I think of?
- What goals does this person have?
- How do they align with my own goals?
- What values are important to me and this relationship?
- If I had to sacrifice one of my values to achieve a goal, how would I feel about that?
- How would the other party feel?
Vet the Partner
There is no quick and easy way to vet potential business partners. Sometimes these will be friends you’ve known your whole life, and other times people you just met. Both have pros and cons. The person you grew up with might be a trustable person but could have different ways of doing business.
Spend some time interviewing the person in a light way. Ask them about their experiences, how they’ve dealt with challenges, and ask about a time they’ve been faced with a moral dilemma. What did they do? What was their thought process to arrive at that decision? Did they decide themselves, or consult with anyone else?
How Should You Work Together?
Once you’re comfortable with the person or business, their experience, and how well you match, move onto discussing how you could work together. It’s really like dating, but should be much blunter, at least in western culture. If you only want to work as an owner with a passive investor, you should say so. If you feel more comfortable with shared managerial responsibility, put that on the table. Openness and honesty will go a long way.
Depending what you’re working on, you may want to do a small project or two before diving into something big with someone for the first time. If you’re in real estate, do some small projects with someone before building that skyscraper. If you’re considering a startup, organize an event with someone to see how well you work together.
Take the Plunge
If you’re still comfortable, and hopefully excited, about working with someone, document the relationship. This could be easy if one person will be a passive investor or advisor, or more complex for shared responsibility in a business. Either way, write down as much as you can:
- Who is responsible for what?
- How much money will each person contribute?
- What time commitment will each person give?
- If someone can’t produce their share of time or money, then what?
- How are decisions made?
- If another partner needs brought on, how will ownership be divided?
- Who will get paid, when, and how much?
You may feel confident enough you don’t need this, but go through the exercise and sign something. As your business and relationship evolves and becomes more complex, you’ll need a reference point as things change. You may need to update this agreement from time to time, but that’s a good thing.
The last thing you want is for a successful business to fail because some partners had a disagreement that could have been clarified at the beginning.
Hopefully all goes well and you have a thriving professional relationship and business. No matter what happens, take time to analyze what went well and what could have been improved. This likely won’t be your last business relationship.