Approximately 22.5% percent of all startups fail within the year of operation. What’s more, a recent study shows 82% of businesses fail due to poor cash flow management. Tech entrepreneurs must focus on their expenditure and revenue streams to ensure a healthy financial status. But there is another vital aspect to focus on: their business partners.
The persons or companies you bring on-board can directly impact your success or be a roadmap to hell. As a successful tech entrepreneur, VC, and international speaker, Raffy Pendery continues to invest in value-added partnerships to propel his business interests. Here is a detailed guide on the dos and don’ts of finding a business partner.
Do: Match Values
It is essential to choose a business partner who has similar goals and interests. Working with like-minded individuals is a recipe for success. Start by setting goals for your company before outlining responsibilities for each partner. Watch out for personality conflicts that may create a stumbling block to determining your business goals and values.
Don’t: Seek a Partner for the Wrong Reasons
The first step to finding a business partner is to ask yourself the question: why? Conduct a personal evaluation and establish objective reasons for getting into a merger or partnership. Creating a list of merits and demerits may help paint a clearer picture.
Do: Look for Complementary Skills
Find the yin to your yang, as they say. You should only bring in a partner if they have a complementary skill or capital. Evaluate your skills to find out your strengths and weaknesses. If, as a digital entrepreneur, you find yourself short in selling your products, look out for a marketing guru as a partner. Complementing skill sets can make up for the extra work needed to find common ground.
Don’t: Agree to Unequal Commitments
One of the most common entrepreneur mistakes is a lack of balance in commitments to the business. Unequal partnerships breed bitterness, which is a surefire path to sinking the business. When finding a business partner, ask the potential candidate-specific questions on the role they intend to play within the company. While it isn’t a legal requirement to file for equal partnerships, take it up as a practical reason to ensure your agreement will not turn into an ugly mess.
Do: Have an Exit Strategy
When finding a business partner, ensure that the individual or company understands and agrees to an exit strategy. Settling on an exit strategy clears the way for a smooth transition if the partnership fails. You may settle on the different options such as:
- Selling to third parties
- Taking the company public
- Passing ownership in exchange for a significant buyout
Don’t: Settle for a Gentleman’s Agreement
While handshake deals are quite common, it is wiser to have a founder’s agreement drafted by an attorney. Without a written contract, you may have a challenge in dealing with issues that arise later on. The only other option may be an expensive civil lawsuit, which may drag on for years. Avoid any individual hesitant to put the agreement in writing.
Value-added partnerships are excellent recipes for the success of any business. They can help you finance, grow or even expand your business to global levels. With this guide, you can now find invaluable individuals for your business operations and those you should avoid.