On my last blog in Part 2 of this series, I touched on the concept of not trying to do everything yourself. It is very possible you may contemplate bringing on a founding partner to launch your business. While it is very tempting to choose a like minded close friend, it is better to follow the relationship cliché – opposites attract. Most importantly, your ideal partner should provide a complimentary skill set that you are missing. If you are a risk taker, it is a good idea to bring someone on who is more conservative to balance you. If you are proactive and like to run at opportunities, it is a good idea to bring someone on who is more analytical and will force you to do some planning.

I have met with many start-ups comprised of 2 type-A, sales oriented entrepreneurs as founders.  While they are proactive and are likely to make things happen, I noticed some red flags from the perspective of an investor:

• Constantly reinforcing each others’ ideas without a sobering opinion
• Tendency to take action without planning
• Take proportionately more risk
• Run at several initiatives at once, spreading themselves too thin

In spite of all this, two partners have to be on the same page on two fundamental concepts – the vision of the company and the exit strategy. The biggest cause for breakup is typically due to misalignment in these concepts.

“Let’s not allow our business to affect our friendship.” This is a great theory in concept, but the odds are certainly stacked against you. Over 70% of business partnerships end up in breakups, which is higher than the divorce rate. Therefore, you need to be prepared for the breakup.  I have given entrepreneurs the following advice when bringing on a partner to increase their chance of success:

• Ensure your partner has bought in 100% into your vision and business plan.
• Avoid a 50/50 partnership. I have seen 50/50 partnerships where partners attempt to bifurcate decision making by roles but you will always encounter grey areas where you will disagree. Either have one partner take at least 51% or bring on another equity partner to be the tie breaker.
• Draft the “prenup”. I have seen people enter business with no agreement, and it baffles me. Similar to marriage, you don’t go into the partnership thinking you’re going to break up, but due to the high rate of business partnership failures, it is prudent to do so. Contemplate the mechanism for the break up in a dispute and the valuation to buy a partner out. This provides you a chance of an amicable breakup avoiding massive legal fees.
• Agree on the capital raise process. Are you going to stay private or go public?
• Agree on the exit strategy. Are you looking to build a business for 3-5 years to sell to a strategic buyer or did you want to build a long-term business?
• Very importantly, do not overthink how much value each partner is bringing to the business and expect the contribution to be inequitable.

It is human nature to feel you are working harder and contributing more to the business than your partner. Funny enough, your partner may actually feel the exact same way. Constantly trying to calculate the value each partner brings to the table will not only drive you crazy, but will significantly increase your chance of a breakup. If your business is successful, put your ego aside. Your partner is likely contributing more than you think, and sometimes, it is only after the break up that you realize you have undervalued and underappreciated their contribution to the business. 

Before you make the decision to get married, you have likely discussed and agreed to key decisions.  Are we having children? How many? Where do we live? House or apartment?  When you have these discussions ahead of time, you significantly increase the chance of success because you have established that you are on the same page.  The concept is exactly the same with a business partnership.  Ensuring you are on the same page from the start and not overly thinking contributions are the greatest ways to ensure that your business partnership will be a successful one.

Who would of thought?  Business partnership and marriage advice in the same blog.