How to choose a new business partner

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6 mins read

You’ve built your practice with the help of a business partner, but now they want to move on. So how do you find a new business partner?

The end of a business partnership can sometimes be disruptive and unsettling. There may be uncertainty over the future of the business and possibly financial consequences.

So, finding a new partner is a top priority and, given that it can take some time, you want to start looking as soon as possible.

As the remaining business owner, it is likely you have a good idea of the skills, knowledge and experience you would like to see in a new partner. But, as you may have already discovered, partnerships are often about much more.

In fact, entering into new partnerships can be fraught, says Anya Johnson, senior lecturer in Work and Organisational Studies at the University of Sydney Business School.

Trust and letting go

“You become dependent on someone else for success, and that involves trust and letting go of control. In a good partnership, you relinquish some control and allow other people to have autonomy, and you develop a trust in the other person that they will do things in your interest,” says Johnson. They’re both things that are slow to develop for people.”

Johnson says that, without really understanding your own values, it can be difficult to find the right person to build your business with. It can also make it tough for potential partners to know if you’re right for them.

Business Queensland recommends a three-step approach1 to arrive at a set of values for a business. First, map out your personal principles, beliefs and categories. Next, reflect on the meaning of each. Finally, translate those into your guiding principles.

Assessing the prospects

Johnson says some staff selection strategies and techniques are helpful in weighing up prospective partners.

“The purpose is to see if there’s a good fit for culture, ethical orientation and values; what’s important to them and their way of working; their strengths and whether they’re complementary; and whether they’ll work in a way that enables you to build something that’s better than what either of you could do on your own.”

Ask them the top five things they hope to achieve through the partnership, says Johnson. “It gives you some sense of what is important to them, and then maybe why they value it.”

Ask around

Then it’s time to investigate what other people say – a bit like the reference-checking process.

“You want to know other people’s experiences of working with the person: how they work and how they react when the going gets tough,” says Johnson.

“Knowing how they deal with really challenging, sticky situations helps you to know if it’s going to work or not. What’s their approach: do they lash out and blame or do they accept they’re part of the problem and can be part of the solution?”

Consider a trial period

One way to test the waters is to “try before you buy”, says US business networking expert John Corcoran2.

He suggests that, after working out a basic agreement with a potential partner, you work together for a “relatively short period”.

“It gives you an opportunity to test out your compatibility for one another before you spend a lot of time, money and energy on creating a new business. And I guarantee it will help you grow more in the long term,” says Corcoran.

Plan for challenges

Conflict and disagreements frequently tear apart partnerships, so coming up with an agreed process for managing conflict and how you communicate to solve challenges can help keep the relationship strong, she says.

“I don’t think there’s a recipe that addresses this. It’s more that you need to work on the trust in the relationship so that when there is a problem you can be open and transparent with the other person,” says Johnson.

“That comes down to good people management skills in the sense that you’re able to approach the challenge as something you can work on together to improve your business, rather than: ‘I really hate it when you do that’.”

Get it in writing

Beyond the necessary legal paperwork you’ll sign, there may be a place for a document that sets out what you’re both bringing to the partnership and what you hope to gain from it. This will help clarify expectations, literally making sure you’re both on the same page, says Johnson.

“The other part to that is to include how and when you might envisage dissolving the partnership. It helps to clarify, when you get near that point, what each of you had in mind.”

“The reason for that is, unlike a marriage, it’s not till death do us part, it’s until retirement or until I decide to do something else.”

Johnson says that one of the challenges of partnerships is that your business affairs can become so entwined that it makes it very difficult if one partner wants to retire or has a change in life circumstances where they need to pull out.

“Any number of life events can massively change your plans for the future. If you don’t have some clarity around how to exit the agreement, then that end stage can become very fraught.”

It’s not about trying to include every possible scenario, she says. Rather, establish your principles and be mindful when you’re setting it up that it’s not impossible to unravel.

"You don’t want to do so much planning at the front end that by the time you enter the partnership you’re exhausted. You don’t want to suck all the joy out of it,” Johnson says.

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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Anya Johnson is external and not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Anya Johnson does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties, their products, services and materials. Past performance is no guarantee of future performance.