Published Work

Should a Partner Allay Your Executive Loneliness?

In 1988, I dreamed of owning my own computer software business mostly because I wanted to sit in the leather chair of my boss. After starting three businesses with a great degree of success and failure, I now believe the saying "it's lonely at the top" to be true.

I have been there and it can get cold and lonely. However, it can be much more rewarding if you have the right partner to travel with you. Still, the question of whether you should form a business with a partner or have a partner join you in an existing business is a tricky question.

As with most questions, the answer unequivocally is: "It depends."

A partner gives you a shared responsibility for the company so you don't have to bear the entire weight yourself. Sometimes, two people together are greater than the sum of the whole (if they have a synergy of skills). Just as often, two people together are less than the sum of the whole.

Unfortunately, you may not always agree with your partner. Disagreements (if not settled) can kill your company. If partners don?t equally work as hard, conflicts arise. It is far easier to go into business with someone than get out of one alone.

The first thing you need to look for in a partner is skills that complement your own. If you are good at sales and marketing, team up with someone who is good at technology and operations. This will also provide an easy way to split up the company's responsibilities once you're both working there.

Partners also need to have excellent communication skills and should be able to talk honestly about any issue. I had a rule with my last partner that we would never to be angry with each other for more than 24 hours. It is your responsibility never to divulge your differences with your partner to your other employees. Never use employees against your partner.

Think about a few critical questions before you get started:

1. How well do you two argue together?
2. How does the other person react when the chips are down?
3. How has your prospective partner handled success and failure?
4. What is his or her attitude toward money?
5. What are your visions for how the company should grow?

Take my advice and talk to your attorney. Take the necessary legal steps when bringing on board a partner to help you run your business. Partnerships are basically marriages without child bearing. Figure out how you will get divorced at the same time you get married.

The rules for how married people should get divorced are defined rather clearly in our society. Still, the mechanism for splitting up businesses isn't often well thought out. There needs to be an agreement in place if somewhere in the life of your business the interests of the partners head down different roads.

Make a shareholder's agreement that states all these things. With a single partner and a 50-50 split in voting rights, there needs to be tie breakers. Talk to your attorney about a "Texas draw" provision. This is where one partner offers to buy out the other partner.

This partner then has the choice of either taking the buyout offer from you or buying you out for the same price. This ensures fair offers by both partners. Without a way for partners to resolve their differences, principals can get locked in a death spiral that can result in the demise of your entire company.

In terms of other things that should be included in your agreement, what happens to your business if one partner dies, becomes disabled or gets divorced? Do you want to be partners with the spouse of your partner?

This may seem silly at the beginning (especially when you and your partner are "just married and in the honeymoon phase") but I guarantee all this will matter if someone offers you millions of dollars to buy your company one day. Decisions are a lot easier to make when your company is starting out and it's worth nothing.

When my partner and I sold our business, we read through every word of the shareholder's agreement many times. It guided us in our decision-making process.

There are other financial steps you should take prior to forming a business partnership. For starters, decide who will keep track of your company's money and select an outside firm to provide oversight. Pick an accountant with which neither of you have personal ties. Put a good bookkeeping system in place and stick with its reporting. Understand cash-flow statements.

Also, be sure to find answers to these questions:

1. What is each partner's spending limitations?
2. How is your company's money spent?
3. In terms of personal finances, what are the limitations for each partner's investment now and in the future?
4. How do you account for if the partners put in different amounts of money?
5. What are the family economic needs of each partner?
6. How much does each partner need to get paid?
7. How long can each partner go without compensation?

With all this to consider, if you can find the right partner, do it. Since business is basically about people, go into business with people you know, trust and respect. The rule "don't talk to strangers" applies here. Ultimately, who you are in business with is much more important than the actual type of business you run.