Yes we all know that partnerships are like marriages, but are business owners really clear about this matter. In the last few years I have done consulting for many small and medium size business, and have often heard from such business owners is “I don’t want partners” to those that offer % of the company to anyone that is willing to chip in. This is something similar to that old movie Mister Ten Per Cent (Peter Graham Scott).
Entrepreneurs should really consider the long term concept of “Partner”, they could be a great asset in a new venture, but they may also be the biggest headache in the business or the greatest barrier to jump when business need to growth!
The questions that any entrepreneur should make before chosen a partner or investor may be:
- Thus, what can entrepreneurs consider?
- What added value does the new partner bring?
- Does the business owner want ideas, or solely funding?
- Would that new person be part of the management team?
Don’t get me wrong there may be a million things to consider, but these are only the first. Whatever is the case, lets be clear that every single detail has to be documented. This ranges from responsibilities, authority, financial accountability, to schedules and so on. In fact the small details that partners forget to explain are usually the trigger for the first wave of differences.
Now, lets talk about investors, should they have any kind of management function? Or should they just behave like any investment bank, solely defining guidelines that guarantee the ROI and the sustainability of the business. The investors need to understand their role in the business plan, and just act as a people that believe in a venture and expect a return for the capital in risk.
So one of the biggest challenges is to be clear when you looking for a partners or an investor?
Below is a formula or method that I believed can work:
If your investors are not completely satisfy with your business plan but still are interested, you may offer them to back up (as a collateral) their funding with shares, but unless they will interact in the day to day management of the venture don’t jeopardize the control of the organizations.
Another issue that usually rises in companies with many acting partners is micro management and excess beaurocratic control from multiple partners. “Muchos Caciques y pocos Indios” or “Too many Chiefs and not that many Indians in the tribe” (my humble translation).
At the end; each new enterprise is different from the other, but there is some general characteristic that allows businesses consultants and advisors recreated possible solutions. The best advice will be, before beginning to offer 10% of your shares ask for help or advice, don’t become a slave of lack of funding and make wrong decisions regarding potential partners. Don’t be the typical guy that gets married in Vegas after a one date.
Carlos M. Baldo
