5 Tips On How To Choose Your Business Partners (Wisely)
Unless you are a one-man show – and often even then, you will have to engage in choosing partners for you ventures. This is even more important than choosing your employees, as splitting up with a business partner usually comes with great difficulty (such as legals proceedings). As many venture capitalists like to proclaim and many studies have found, the team is the most important part of any business. Knowing this is an especially important insight and the first step to choosing successfully. Now the next question would be, what to look at? From my own experience, my family history and from many stories I have heard from current partners or mentors, we will cover some of the important points. As Warren Buffet says: “You cannot make a good deal with a bad person.” From my own experience Warren Buffet is spot on and on top I would like to add, that quite often choosing the wrong business partner can be the root cause of a crisis for you. Their behaviour and choices can cause heaps of trouble.
1. Put yourself in their shoes
As I have written in previous pieces about crisis managing, empathy is an important point. Before engaging in a business with someone you need to understand their agenda. Why are they doing it? Why are they choosing you? What are their goals? Do they have a personal purpose, and what is it? What are their values and principles? Do they even have any? And most importantly: Is your agenda and purpose and are your principles and values aligned with theirs?
If you can discover answers to these questions early on, you can save yourself an awful lot of trouble. I have had to make this experience very painfully. Having sold our family business due to a crisis, we started to reinvest. In this endeavour there have been many potential partners, some good and some bad. If you lack direction for one, you will not pick the right partners easily. If you are not careful with whom you trust, you will be taken advantage of. If you are not able to understand other people’s agendas, you will misinterpret their goals. And most important if you are not diligent in your due diligence (more on that later), you will lose your money.
To sum up:
1) Understand yourself: Purpose, passion and principles
2) Understand your counterpart: Purpose, passion and principles
3) Be empathic, listen, research and follow up
2. Look for givers and be aware of takers
Adam Grant has written a bestselling book on this topic. If you have not read it, please go and read it. In this book he describes 5 Types of people: Selfless Givers, Otherish Givers, Matchers, Agreeable Takers and Takers. Again, the first step is for you to try and find out who you are yourself. So, let’s have a quick look at the five types.
Givers are the kind of people who help whenever they can. As the name suggests they are people who give without expecting anything in return. It is people who believe in helping others, is the way to go. You know the people who make introductions and help you without charging fees for everything. People who will go out their way to help. And yes, they also exist in business. In his book Adam lists a few highly successful givers, such as David Hornik. If you look at the best performers in a certain industry, you will see that givers are the best performers or the worst performers, while matchers and takers are in between. This is where we differentiate between selfless givers and otherish givers. Selfless givers are people who do not respect their own boundaries, people who will work themselves into burn out helping others. They will help no matter what and they will not notice people taking advantage of them. Otherish givers on the other hand only help as much as they can. They defend their boundaries. Especially when someone is trying to take advantage of them, they will protect themselves.
Matchers as the name suggest are people who match. If you give them €100 as a present, they will give you €100 back when it is their turn to give a present. It is people who in business match what you do. If you ask for introduction fees, they will ask for one too in the future. If you do not ask, they won’t ask them of you either. It is people who believe in the “eye for an eye” mentality.
Takers are people, who are always trying to maximise their own gain. They are the worst enemy of givers. Here we also have 2 different types of takers. The first type includes people who obviously take and they don’t pretend otherwise. They openly live by the mindset of working only for their own gain. While agreeable takers are chameleons, who are good at pretending to be givers, while they enrich themselves. We are talking about people who will do a minor favour for you and are asking for much bigger favours in return. They convince you, that they are giving you a more than fair deal, but in reality, the deal has hidden traps. These people are exceedingly difficult to spot, especially early on. There are some famous examples of awfully bad CEOs who managed to operate for a long time, without being seen for who they really are. Therefore, understanding your partners and really spending time on this is of utmost importance.
A piece of personal advice from me: please try to be an otherish giver in your transactions. What goes around comes around, it always does. Here you can do a small test, to find out what your current mindset is, and please be honest, you are doing this for yourself: https://www.adamgrant.net/give-and-take-assessment-qualtrics
3. Analyse their way of speech
Try to pay special attention to the manner of speech of your business partners and what they talk about. Do they talk about how great they are? Are they badmouthing others? If they do, they lack integrity and might have an ego problem.
There are certain cues to pay attention to. Does the person say “I” all the time or does he use “we”/”us” when he tells success stories of the past and present? By paying attention to this you will get a feeling about their way of collaboration. If they are focused on what is in there for them personally, rather than what the group can gain from working together, they are very self-centred and use “I” a lot. From my experience they are not to be worked with.
Another cue that you can keep an eye open for is their form of communication. Do they communicate on a factual level or is it more emotional? People who will try to communicate with you on an emotional level try to hide their lack of competency. As an example: Imagine you are asking detailed questions on what they can bring to the project and suddenly they get out their phone and show you pictures of their kids and tell you a fun story from the weekend. You were onto something with your questions and they moved onto an emotional topic to draw you away.
Trades you actively want to look for in business partners are honesty, openness, integrity, humility, and generosity. The “perfect” (nothing is perfect) business partner will incorporate all adjectives! Really take the time to get to know them, before committing to anything.
4. Complement yourself
As mentioned early on, to pick the right partner you first need to know yourself well. Ideally you will find a partner who will complement you in the areas that you have your weaknesses in.
On the one hand, this means giving up control of these areas to a certain degree. On the other hand, if you are not good at certain tasks or you hate doing them, why not find a partner who excels at these?
In this case I am not only talking about professional skills, but also about personality traits. Skills and careers can be learnt, your personality is much harder to change. I use personality tests as the Meyer-Briggs Type Indicator®, The GC-Index® or CliftonStrengths to evaluate myself and potential partners.
I for example are a big picture guy, I can see complex systems and grand themes, but I despise detail orientated work. I don’t like doing it and I am also not good at it. I am also not such a great implementer of plans. I can make plans and spend hours thinking and researching etc. Putting things into place and getting them moving is not my strong suit thou. Now having told you a little about myself, the perfect partner is a person who is detail orientated and loves to get things onto the road and buzz about and get things done.
In summary, you should find out who you are on a personality level and a skills level (what are your talents) and then try to find someone who fills the gaps. Too often, I see people with identical attributes form a team and then phenomenally fail at the things they are both bad at. You will end up fighting for the tasks that you both enjoy - not a healthy work atmosphere.
HBR has a good article on the topic of the affinity bias:
5. Conduct a personal DD
Now to a more practical part of choosing your business partner. You need to do your Due Diligence properly. Many people spend a long time on checking spread sheets, KPIs and business plans. They will go visit a production site and have someone show them the working product or prototype. Only a small amount will conduct a proper personal DD on the partner.
You should not only conduct a personal DD if you are considering working with a person, but also when you choose a company to work with. Check the person in the company you need to work together with, but also the people who make decisions. If you want to go at it really “hard core” you can get a private investigator to check out a person. This is expensive thou and only worth doing, if you are talking about a large risk or a large investment.
First of all, do an online research on the person and check their social media accounts. Often here you will get a good picture of who they are and what they do. What car do they drive? How expensive are their clothes? Do the go out a lot?
People who consume drugs or live above their means will not be able to make good business decisions due to their vices. If they have a large need of money on a monthly basis to cover their costs, they will look for ways to acquire that money. Either they might start taking a lot out of the project or they will focus more on work that will bring them a direct financial result. If they earn a lot of money and even though their expenses are high, they have a good saving rate, then it is better.
Another thing is to see if they are loyal to their private partners. Have they got a history of cheating on their wife/husband? If they do, they will probably cheat on you in business at some point too.
Call up past employers, past investors past business partners and past employees and have a chat with them. If the person is of a good nature, the people they were involved with, will mostly say good things. If the feedback is mostly negative though, you should also stay clear. Be wary thou to do a little background check of the people they worked with. People of similar mindset tend to work together, thus if the person is an imposter, people he worked with may also be imposters. If that is the case, you don’t need to bother calling.
To test their honesty after conducting your DD on them, ask them some straight forward questions. For example, if you found out they lost their last job for not performing well and as a reason for losing the job they tell you something else, you can see they are dishonest. Also, the way they talk about past partners, tells a lot. People with integrity will hardly ever speak bad about people who are not present to defend themselves.
In our current time of uncertainty there are usually many opportunities and founding activity usually surges (2020 has seen a large surge of new small businesses in the US as people lose their jobs). Thus if you are looking at taking advantage of any opportunity out there, it is crucial to make sure you pick your partners well. One example from the pandemic: There was quite a big amount of fraud happening in the process of mask sourcing and selling. So make sure to be diligent when choosing your opportunities, more now than ever!