How to Choose a Business Partner

Great partnerships can be rewarding. Think of Lennon and McCartney, Astaire and Rogers or Ben and Jerry. Each brought complementary skills to the partnership that allowed the duo to achieve more than either could have achieved alone.

As business owners dream about growing their companies, their thoughts often turn to taking on one or more partners. Additional business partners — by which I mean equity owners of a company who are actively involved in its day-to-day operations (regardless of whether the legal form of business is a partnership, a corporation or a limited liability company) — bring with them a great deal of promise. You may want to bring in a partner to provide expertise in an area where you lack experience. Or perhaps a new partner would give your business access to potential clients and customers that you can’t reach. One of the most common occasions for bringing in a new partner is when you need additional capital to grow.

Yet, everyone has heard stories of partnerships that have gone sour. If you decide to take on a partner, the survival and prosperity of your company depends on how well you choose that partner. How can business owners tell which prospective partners would be a real boon to the business . . . and which might be a real bust?

No approach is ever perfect, and business ownership consultants and experts differ on which factor is the most important. However, together, they identify several that can help you narrow down the candidates and make a wise choice.

Communication and Leadership Styles

Owning a small business with others isn’t like a corporation where you’re handed a ready-made team of co-workers. “Business owners frequently have a choice. Make the most of it,” counsels Sharon Horowitz, Ph.D., founder of CenterNorth, Inc. (www.centernorth.com), which provides multidisciplinary leadership and strategic consulting to partnerships, family businesses and small businesses. In her view, the greatest area for potential (and downfall) is communication between the owners. Can you speak candidly and frankly with the potential partner? Does each listen well to the other? “Just because you’ve chosen a key player [as your business partner] doesn’t mean you can play well together,” she cautions.

She cites an example of two seasoned business partners who needed to get their partnership back on track. “On paper, they were terrific. They had a wonderful invention. They raised gobs of capital,” she says. But six months later, they were at each other’s throats, in part because of different communication and leadership styles. Partner #1 was accustomed to being a senior leader in a large company with a team of followers. His “my-way-or-the-highway” style didn’t surface until the partners actually began working together. Whenever Partner #2 wanted to do something novel or take a risk, Partner #1 refused. Not until they reached the brink of disaster (Partner #2 threatened to dissolve the business) did Partner #1 relent and consider alternative viewpoints. “It’s just like a marriage,” Horowitz notes.