How to Choose the Right Business Partner

 

It Can Be Lonely at the Top

I’m Steven Byler of GrowthLab Financial. Today I want to talk about choosing and finding a business partner. Choosing to find a business partner or co-founder is probably the second most important decision you’ll make—only after actually deciding to launch a business. Ask any entrepreneur out there: being an entrepreneur can be lonely. Not all startups are unicorns that get constant attention and awards or have an experience like HBO’s Silicon Valley. A solo entrepreneur soon finds out how lonely it can be at the top and how overwhelming the business can become.

A Strong Business Partner Complements Your Skill Set

Successful founders, I’d argue, don’t stop there. Successful founders go on to realize that they can best leverage themselves by finding a strong business partner that complements their skill set. No doubt, the introduction of a business partner or co-founder adds new dynamics. Now you have two people making top decisions, and another person—and potentially another family—to consider financially. And let’s face it: you also have another person to consider emotionally. The interpersonal and emotional challenges shouldn’t be underestimated, and they can take a toll.

The real reason to have a business partner is to leverage yourself and de-risk the business. Stay focused on the intersection of A) what’s important and B) what you can do best, and have your business partner do the same. Find a partner who is best at something different. With a business partner, you’re trying to achieve a one plus one equals ten situation. That is the power of leverage. Whether you’re building a scaling startup, emerging tech company, restaurant, or company, choosing to seek out a business partner is a personal decision.

Leverage the Strengths of Others

As an example, let me share some of my personal experience. Certainly no two stories are the same, but hopefully you can learn something from the path that I’ve traveled and apply it to your own life. Myself and my business partner Dan are running a service business, have an equity stake in several companies, and are launching a hardware company. We are consistently and continually learning about the value and dynamics of business partners. It’s not always blue sky, but our complementary skills and personalities are an asset, and neither of us would be in this position today with without leveraging the strengths of others.

And we didn’t do it overnight. When we first met, neither of us was ready for a business partner. Me being ready for a business partner started many years ago. Coming out of grad school, I jumped into the startup world in Cambridge. I didn’t jump into a scaling startup. Rather, I found a guy who had an idea—our CEO—and jumped in as employee number one to build the business. Eventually, I set up my own business helping numerous startups and small business clients with their operations and financial strategy.

That’s when I met Dan. We were both out there. We were both hungry. We were both networking. Dan had started a similar business but was also thinking about growth through acquisition. We met for drinks. We started working together. Now two years later, 25 employees later, and a growing portfolio of startup businesses later, we’re business partners. For me, building the startup gave me the drive to build businesses. Without this, I wouldn’t be where I am today. And without a great business partner to do this alongside me and complement my skill set, I wouldn’t be here.

Character, Strategy, Leverage, and Opportunity

There are four things that I reflect on as Dan and I assessed our relationship: character, strategy, leverage, and opportunity.

Character is so critical. Your goal is not to become best friends, but let’s face it—you’re going to spend a lot of time together, so find someone who you’re comfortable with.

Strategy needs to be aligned. You need to know that your business partner views risk through a similar lens as you and approaches decision making in a similar manner.

Leverage is necessary. If you’re going to be stepping on each other’s toes from the very beginning, it won’t work. What I liked about my relationship with Dan was that we both had very distinct skill sets, backgrounds, and networks. We could leverage each other.

Opportunity needs to be present: opportunity for growth and opportunity for cash flow. At the end of the day, one paycheck is easier to afford than two paychecks, so make sure that the pie is big enough, or can be big enough, to feed two.

Five Steps to Finding a Business Partner

Let me close with a five-step guide to finding a business partner.

1. Take inventory of your strengths and weaknesses. What holes do you have that you might need to fill in running your business?

2. Develop a strategic road map. Identify your milestones and the functional requirements to get there.

3. Identify in the context of your strategy what core competencies the company needs to acquire versus what competencies it can buy, rent, or borrow. The competencies that you deem the company needs to acquire—those you find in a business partner. Those that you can buy, rent, or borrow—those you find in employees or key vendors.

4. Think exponentially about your business and how an awesome business partner can drive value. Don’t limit yourself with your history, your ego, or your personal investments. Partnership agreements can be written to deal with much of that.

5. Network the old-fashioned way. Meet people, talk, test drive, break bread together, and meet their families. This way, you’ll get to know if they have what you need, and more importantly, you will each understand what is important to the other.