Choose your partners with care or you could end up with something very nasty indeed! Remember that going into business is for the long haul; you don’t need to fall in love with your partner(s) but make sure that you have common goals, strategy, beliefs and standards. Whether you are looking at a fellow shareholder-director or an external backer, do your due diligence and make rational decisions. Would you open a joint-account with a complete stranger?
Unlike a marriage, you should be planning from the outset on leaving your business one day. When I decided to pursue management buy-in targets, I made the choice of venture capital provider only after the most careful due diligence, choosing the one firm that had the policy of allowing its management shareholders to choose the timing of exit. Ultimately it transpired to be the best decision I could have made (I met owners along the way who had equity partners that forced a sale at the worse possible time).
On the whole I have been very lucky with my business partners and would choose most of them again but you can make big mistakes even with apparently glowing references. One of the deals I did was with a business partner introduced to me by the backing VC who, (from the top of their organisation) provided the most glowing reference. I had my doubts about the business we were buying but I was lulled into a false sense of security by my new business partner and his glowing reference. It was only after I had to fire him for gross financial incompetence (he was a CA would you believe) and ultimately put the business into administration as a result, I found that he had made a similar disaster of a previous investment. All of the shareholders lost their equity and a large number of suppliers lost a great deal of money.
The same principle applies to corporate managers. A short time after I left corporate life I sat down and made two lists; one was of the successes and failures I had had in each of the roles I had held and the other was the quality of relationship I had enjoyed with my boss in each role. The result? There was a perfect correlation between the positive nature of the relationship and my success in the role (luckily the majority). Those roles where I didn’t see eye to eye with the boss were without exception the roles where I achieved very little. An important analysis which also works in reverse; the businesses where I have had the best team achieved the best results.
If you don’t really know the true nature of your business partner(s) until you hit a rough patch (and you will), then trying to fix the business and the relationship at the same time is a very tough act.