Finding a great business partner is your #1 test as a business owner. More important than your business idea, your choice of a co-founder will either create a massive productivity boost or cripple your business.
Yet, most first-time business owners are terrible at choosing excellent business partners.
I sure was. Not knowing what to look for, I relied on mainstream advice (e.g., “pick your best friend!”) and paid with:
- Unnecessary conflict with my business partner.
- Unclear lines of responsibility.
- Poor communication.
- Low productivity.
Fifteen years and four successful businesses later, I’ve learned a lot about choosing great business partners and hope that by sharing my lessons, I’ll help you avoid some of my mistakes.
3 Key Characteristics Of Great Business Partners.
I assess my potential business partners through a 3-part checklist that I use to vet everyone on my team. I borrowed this idea from Naval Ravikant. In his view, you can never compromise on:
- Intelligence (capacity to wrestle with complex issues).
- Drive (desire to achieve outsized goals, and willingness to put in the required hours).
- Integrity (ability to take full responsibility, strong preference for telling the truth rather than being a master of “positioning”).
Why are these non-negotiable when vetting a potential partner?
- If your business partner isn’t smart, they’re headed in the wrong direction.
- If your business partner isn’t driven, they won’t have enough grit (I’m sure you know a lot of smart, lazy people who don’t have big goals).
- If your business partner doesn’t have integrity, you’re working end up with a smart, hard-working cheat who will eventually defraud you.
How do you score across these three criteria? Running a small business isn’t for everyone, and if you don’t over-index on these traits, it’s probably not for you, either.
How To Avoid Personality Clashes With Your Business Partner.
The Internet is full of reminders that you must find a business partner who offsets your weakness. Steve Jobs and Steve Wozniak are usually upheld as perfect examples of this business partnership style:
- Business partner 1: charismatic salesman and people wrangler.
- Business partner 2: nerdy technical genius.
Silicon Valley angel investors and VCs agree with this philosophy to choosing business partners, almost never funding solo founders.
(Related: How To Start An E-Commerce Business).
They understand that perfect people don’t exist.
I agree with this approach, but recommend that you go a level deeper.
People’s skills are dictated by their personalities, so you’re much better off focusing on the latter.
The big 5 personality traits are:
You score on a spectrum from high to low on each of these, and you can test yourself (and your potential business partners) using a free online personality test (it takes about 5 minutes).
Use the insights to decide which roles you and your business partner will perform in the business. Some thoughts to guide you:
- Great salespeople are usually high on extraversion and openness. A highly neurotic, low extraversion business partner isn’t likely to succeed in a sales role.
- People who are low in conscientiousness tend to suffer from “shiny object syndrome” and abandon projects. If you’re low in this trait, find business partners who are the opposite – and put them in charge of making trains run on time.
- Agreeableness is a trait of pleasant, “nice” people, but early-stage entrepreneurship is often rough, fast-paced and full of difficult conversations.
- Early-stage business owners need to be high on openness, as an aversion to novel situations will tank the business. If you’re high on openness, you could consider a more cautious business partner to keep you in check.
- Business is full of uncertainty, and highly neurotic business partners might find the environment too emotionally exhausting.
Who Is The CEO In Your Business Partnership?
Most business partnerships fail because two partners agree on a 50/50 equity distribution, assuming this translates to a 50/50 split in power.
This usually happens because both business partners avoid the difficult conversation that starts with:
You must pick a CEO.
Set up the equity, profit and debt structures in any way you wish, but the organisational structure must always have one person at the helm.
Yes, there are exceptions to everything. Even Golden Retrievers have been known to bite people. But generally speaking, if you want a guard dog, you should buy a Doberman.
How To Prevent Resentments In Your Business Partnership.
Successful companies are built by rare people willing to make considerable sacrifices. The word sacrifice is very subjective, and co-founders must agree on the definition upfront to avoid future resentment.
For example, business partner A’s definition may be:
- Do whatever it takes to succeed, even if I live as a monk for the next 3 years, working from 7am to 7pm and some weekends, without going to the gym, without partying and without buying nice things.
Meanwhile, business partner B may come from a cushy corporate job and view sacrifice as:
- Do everything I can within the boundaries of 9am to 6pm, (except Tuesdays and Thursdays – soccer practice starts at 6!), weekends are reserved for the family.
Resist the temptation to sweep huge disparities in alignment under the rug.
They will lay dormant while your business is doing well, but will show their ugly head at the worst possible time – when your working relationship hits hard times (which it inevitably will).
If you’ve ever met a successful entrepreneur or been lucky enough to be mentored by one, you understand that they operate on a different level.
As Grant Cardone says, ‘Be obsessed or be average.’ I recommend you always optimise for maximum commitment and expect this from yourself and your business partner.
(Related: How To Build A Top-Notch Business Website).
How To Pitch The Idea Of A Business Partnership To Someone.
How do you seduce a potential business partner into leaving a steady paid job or interesting university degree to join you in the mercurial waters of entrepreneurship with razor-thin odds of survival?
Richard Branson saw that consumers were receiving low value from haughty, established businesses that had no incentives to do better. He created an irreverent, fun brand that didn’t take itself too seriously and delivered mountains of value to the consumer.
(Related: 7 Best CRMs In Australia).
What will be the story of your small business, that gives meaning to its employees (and – gasp – your business partner)? To create one, you’ll need to decide on 3 components:
- The Villains (your established competitors).
- The Victims (your potential customers).
- The Hero (your business).
Creating a vision isn’t a hack for finding a better business partner or attracting better talent (though it helps). If you’re thinking this way, you’ve already lost the game. Vision is the DNA of your business – your reason for being.
Final Words About Finding The Right Business Partner.
Finding a good business partner who is willing to join you on the entrepreneurial journey is not easy.
Despite the advice you read on this page, you’re likely to make a mistake when setting up your first partnership.
If that happens, fire fast.
This is particularly true if you’re young and have no family commitments.
Under the age of 30, you can take on a huge amount of risk – because you have plenty of time to recover, and few other responsibilities than yourself.
Don’t squander that time by sticking with a less-than-ideal business partner.