Thinking About Taking on a Business Partner? Here’s What You Need to Know.

The following is adapted from F*ck Me Running (a Business)!

In August 2015, I was at DEF CON, the biggest hackers’ conference out there. I’d gone every year for 10 years. It’s the hacker event of the year.

Summer is always my company’s weakest quarter, but it had never looked as horrible as it did that year—a year after I’d acquired a competing business and a 50/50 partner to go along with it. I remember sitting in the hotel in Las Vegas thinking, I can’t afford to be here. Where the hell did I go wrong??

I knew the answer, but I just didn’t want to admit it. My company was in trouble because of a stupid decision I had made. I’d underestimated the impact the wrong partner can have on a business, and it almost ended up costing me my company.

If you’re thinking about taking on a business partner, then you do not want to skip over what I have to say. Understanding how to choose the right partner will save you a lot of money and headaches. It could ultimately save your business.

Your Business Is Your Baby

A partnership is like a marriage, and the business is your baby. You need to be on the same page about how you’ll care for it and what you want for its future. You might both agree on the making money part, but how you make it and what you do with it could be miles apart.?

How much they want to be involved can differ from your vision too. They may be looking to scale up the business but scale back on their contributions to it. Or they may be looking to leverage the success of others and extract a portion of that value.?

Before you say, “I do” to a partner, make sure your goals align. If you’re the only one committed to the long haul, your partner could undermine you. If you want to split, it may not be easy. Unlike a marriage, you can’t just file for divorce. Both parties have to agree to call it quits.?

The biggest mistake you can make is getting into a partnership with someone you don’t really know. You have to look for warning signs, ask the right questions, and then really listen to the answers. Don’t just hear what you want to hear. You have to do your due diligence.

Partnership Dos

When you’re thinking about partnering with someone, stop worrying about the competition, stop wanting to grow at all costs, and instead focus on what you are really trying to do with your business and the best way to get there. Before you sign any agreement, research your partner and make sure you fully understand the person, their business, and how they run it.

• Read their financial statements, including their M&A (mergers and acquisitions) history.
• Interview their staff.
• If possible, interview some of their ex-staff, particularly managers or executives.
• Interview some of their clients.
• Verify their references and claims. (As I found out, people do lie. Case in point: my partner never got the degree he put on his resume.)
• Take it slow and test the waters. Before you sign into a partnership, find a way to work with your potential partner to check your compatibility. People may act one way in a meeting, but you won’t really get to know them until you put in some time together.
• Have the uncomfortable conversations, the really tough ones you want to avoid because you’re afraid you might uncover a deal-breaker. Again, think marriage. You wouldn’t wait until after you were married to ask your spouse how much money they make, or how much debt they have, whether they want kids, or whether or not they plan to keep working after you’re married. Imagine being surprised by the answers to those questions!

If at any point during this process you notice red flags, walk away. I know it can be tempting to overlook warning signs, but trust your gut. The right partner is out there; you just may need to dig a little to find them.

Partnership Don’ts

Of all my mistakes, the biggest one I will never, ever repeat is going into a 50/50 partnership. Knowing what that means and knowing myself better, I would never agree to own less than 51 percent of a business I’m running.?

Someone has to say, “the buck stops with me” and if I’m in charge, I want that person to be me. When multiple people have that responsibility, you end up at a lot of impasses. Here are some of the other “don’ts” I wish I knew when I made my partnership mistake:

• Don’t let your ego control your senses.
• Don’t leave the physical company for an extended period.
• Don’t sacrifice your values.
• Don’t ignore culture and how merging, acquiring, or being acquired will affect your staff.?

You know yourself best, so you may have other “don’ts” that you should add to this list. If you know something is a deal breaker for you, put it on the list. Talk to your prospective partner about it. If you notice any signs that things aren’t working out or your partner isn’t who you thought they were, take action immediately to mitigate the situation before it destroys your business.

Questions to Ask a Potential Business Partner

Before you ask your potential partner the following questions, answer them yourself. Get crystal clear about them. Then, ask your partner the same questions; their answers will help you see whether or not your goals and values align.

• How does your P&L work?
• How does your billing work?
• Tell me about your technical operations.
• Where do you see the business in five years: how much revenue, how many employees, how many markets?
• How do you define success? (If the person defines it differently than you do, consider that a big, bloody red flag smacking you in the face. Do not ignore that flag.)
• What’s the contact info for the last three customers you onboarded?
• What’s the contact info for the last three customers you lost?
• How would you describe your company’s values?
• How would you describe its culture?
• What are your end-of-career goals? Do you plan to retire? If so, when? What do you want in terms of income and lifestyle?
• Have you had partners? If so, who are they, and how can I reach them?

Don’t skip any of these questions: you’ll learn a lot not only by what they say but how they respond. For example, if they’re unwilling to put you in touch with their ex-partners, it’s pretty clear they’re hiding something and you should move on.

Look for the Right Fit

Just like with a marriage, a business partnership will only work if both people are a good fit. To find that out, do your due diligence. Think about why you’re looking for a partner, what your goals are, and get clear on what is and isn’t acceptable to you.?

Ask them questions, then really listen to what they say. You don’t want to find out after signing an agreement that their dream is just to own shares and sit on the board forever but not do the work. You don’t want to find out that their perception of success is wildly different from yours.?

Finding the right partner can be tough, there’s no doubt about it. But you owe it to yourself and your business to do everything you can to find someone who aligns with you and will bring massive value to your organization—and armed with the information here, I’m confident you’ll be able to do just that.

For more advice on how to find the right business partner, you can find F*ck Me Running (a Business)! on Amazon.

Nolan Garrett is the Founder and CEO of Intrinium, a firm dedicated to providing clients with comprehensive consulting and managed services in security solutions and information technology. Voted Best Place to Work Inland Northwest for three consecutive years, Intrinium has distinguished itself as a leader in IT solutions and workplace culture. Nolan is a member of the Forbes Technology Council and the Information Systems Security Association, among other organizations. With CIO and CISO experience and a background that includes multimillion-dollar cybersecurity transformations, Nolan provides specialized insight for businesses large and small in a variety of industries.