What’s the best way to grow your business in a highly competitive, unpredictable economic climate? Business experts are advising small business owners to increase capacity and spread risk by choosing one or more business partners. That may be great advice, but choosing a business partner is a big decision with all the earmarks of choosing a marriage partner. Anyone who has experienced a divorce knows a marriage that may have been easy to get into may be difficult and costly to get out of. From a business perspective, the financial health of a potential partner may be an important factor, but there are a number of other important considerations that should not be overlooked in the decision-making process. The following is a list of seven factors to take into account when choosing the right partner.
- Make a Shopping List. Develop a reasonable list of the “must haves” that will influence your decision. An objective list of selection criteria developed before you begin the selection process will ensure that each partner candidate is assessed against the same important selection criteria. It will also help insulate your decision-making against potential partners that present themselves very well in person, online, and in marketing materials but fail to meet standards you have established as essential.
- Don’t Fall Madly in Love with the First Potential Partner. Limiting consideration to one business – even if that business appears to meet all of your selection criteria – is inadvisable. Considering more than one partner will validate whether your list of “must haves” is unrealistic or whether the list should be expanded to include requirements not previously considered.
- Trust But Verify. Protecting the business brand is important. So don’t hesitate to request a list of key customers and business references. Be sure to contact the references. They can verify the alleged relationship exists, the duration of the relationship, and the quality of service and/or the integrity of the business owner. It’s also a good idea to check that all business certifications, licenses, insurance certificates, etc. listed by the potential partner are current.
- Loose Lips Sink Ships. Don’t enter into a discussion of a potential partnership without a well-written, signed, mutual confidentiality agreement. Resistance by a potential partner to signing a mutual confidentiality agreement is a large “red flag.” The purpose of these agreements is to protect both parties against unauthorized disclosure or use of the other’s confidential information. Refusal to sign a confidentiality agreement is an indication that the potential partner is not willing to make that commitment. It’s also advisable not to disclose everything about your business immediately, even with a signed confidentiality agreement in hand. The number and types of disclosures made should be dictated by the time and trust invested in the relationship.
- Dating Prior to Marriage is Always a Good Idea. Inviting a potential partner into your social circle is another way to “vet” a partner. A good business partner will display values that you respect and will not embarrass you in social settings by failing to dress appropriately, by drinking alcoholic beverages excessively, or by failing to observe simple rules of etiquette. Neither will a partner attempt to “one up” you in the presence of friends and colleagues whose relationships you value.
- Test the Relationship. An agreement that works perfectly on paper does not always pass a “reality test.” Before committing to a long-term relationship, pilot the partnership on one or two projects. However, avoid involving your best customers in the testing process. If the potential partner performs well, it’s a good indication that both parties are committed to holding up their end of the bargain.
- Negotiate an “Escape Clause.” Sometimes after taking all precautions, a business relationship does not work. In that case, either party should be able to terminate the relationship in an expeditious manner based on terms the parties have agreed upon.
Choosing the right partner is never an easy decision, but by following these seven straightforward steps, small business owners can make better decisions when choosing compatible partners.