10 Questions to Ask Before Choosing a Business Partner
Start with the end in mind
By Arianne Missimer, PT, DPT, LDN, RD
Where do you see your business in three years? Five years? Ten years?
Goal-setting is a standard practice of entrepreneurs, but sometimes we can get lost in working in the business rather than developing the business. When you think of where you want your business to be, how are you going to get there? Do you want to grow the company, pass it along to a family member, or leave a legacy?
You may have even thought that the only way to achieve your vision is by choosing a business partner. You have someone in mind, but you’re not sure where to start. Choosing a partner may be one of the biggest professional and personal decisions you can make. It requires an in-depth review and analysis of your current business, the vision for your business and, of course, why you need or want a partner and what value a partner can bring to your business, among many other considerations.
DO YOU NEED A BUSINESS PARTNER?
The first and most important question to ask yourself is “do you need a business partner at all?” An important decision like this should not be made from desperation, but rather a well-thought out cost/risk analysis and execution plan.
Although this may seem obvious, make sure to enter a partnership with someone you trust and respect, who values good personal and business ethics, and values you and your company. While it is great to have a business partner who has financial resources, there are other contributions a partner can bring to the business that can be just as valuable. A partner with a secure business network, industry connections, client list, or specific credentials and expertise can also increase the value of your business and improve your chances of achieving long-term success.
KEY QUESTIONS TO ASK
The following questions can help you decide whether you should bring on a partner, why you should, and how:
1. Why are you considering a business partner?
Perhaps your business growth is exponential and for you to continue to grow at a pace that you’d like, bringing on a business partner could potentially support the growth of your company. Is your partner providing the necessary funding that your company needs? Take your time to answer these questions carefully. Evaluate your business needs and vision to determine whether you need an employee, contractor, or business partner.
2. What do you envision in a business partner?
This is someone with whom you are going to be working very closely. Do you respect them inside and outside of work? Assess honesty, ethics and trustworthiness. It’s important to make sure you get along very well, have excellent communication, and have clear expectations of what you are hoping they bring to the table. For example, you may be great at certain aspects of the operations but not others. Your potential partner, on the other hand, could be excellent in these areas and serve as your compliment.
3. What value are they bringing to the business?
Ultimately, your future partner should be bringing value to the business. Although they may not be contributing financial resources, determining how your potential business partner will help drive the business forward is essential. If not, there is no need to consider a partnership, but rather you can consider or maintain employee status.
4. Is my company likely to generate enough revenue to support a partner?
This is an important question to ask yourself. When the time is right, it’s imperative to take a hard look at your financials to determine whether you can support a partner. If your prospective partner is not buying into the company, then what is an appropriate percentage? Refer back to what value the partner will bring to the company.
5. What is the valuation of your company?
It is essential to know what your practice is worth and valuing a physical therapy practice is unique. This is a necessary part of the process if someone is buying into your business and should be performed by a knowledgeable professional.
6. Does my potential business partner share my vision for the company?
It is essential to choose a partner who shares your mission, vision, values, and entrepreneurial spirit. Having a shared purpose for all of the organization’s activities will be invaluable in driving the mission and vision.
7. Do I need funding?
Perhaps you are just starting your business, and you need funding to move forward. Is it best to have a partner or to get funding from the Small Business Administration (SBA) or your bank? If your partner is not contributing money, there are many other contributions such as credentials, expertise, client list, or business and industry connections that can be just as valuable to your business and improve your chances of achieving long-term success.
8. Does my potential business partner have skills I lack?
The more varied strengths your partner has, the better. Do they have sales skills and experience, networking, communication, or organizational skills? It’s important to do a critical analysis of your own and your potential business partner’s strengths and weaknesses.
9. Does your partner have skills that you will only need for a short time?
Once again, if you need specific projects completed, perhaps you should consider hiring a subcontractor or consultant, which would be much less expensive in the long-term.
10. What equity do you want to share with them?
When you are exploring the idea of a new partnership, you have to explore every scenario and find someone who brings something unique to the table. Then, you have to decide how much equity you want to share with them.
As with everything in business, “get it in writing.” Partnerships are legal bonds and all agreements should be in writing. Even with the right planning and execution, just like marriages, unfortunately it isn’t always “happily ever after.”
When you consider an existing employee or future prospect, make sure that your communication skills, values, goals, leadership style, and operational skills are compatible. You will need to be able to communicate effectively with your partner to drive the growth of the business. Last, it is important to share a sense of creativity and adaptability so you can weather the inevitable challenges you will face as business owners.
If you start with the end in mind of where you want your business to be, you can begin to assess if choosing a business partner is the right decision for you. After a careful analysis of your business needs and financials, you and your potential business partner’s skills, and reflection on your mission and vision, you can determine if this aligns with your goals. An in-depth evaluation will drive the right decision for your business and position your company for growth and long-term success.