Pick Your Partner -- Carefully!
Three months after their first meeting, a chef who aspired to own a gourmet store signed a partnership agreement with a woman whose business background guaranteed success -- or so he thought. Then his real education began, not in the ways of running a small business but in the unseen consequences of forming a hasty partnership. "I didn't foresee the personality conflicts," says the older, wiser, and considerably less wealthy entrepreneur. Since the duo had neglected to take the possibility of personal friction into account when drawing up their agreement, the chef ended up minus his dream -- and much of his savings.
That cautionary tale wouldn't surprise the experts at Service Corps of Retired Executives (SCORE), which cautions that an impressive résumé doesn't necessarily guarantee a good partner. What matters most, they say, is the dynamic between the two individuals involved.
Psychologist David Gage, managing director of Business Mediation Associates in Washington, D.C., is the guy to consult before partnerships turn toxic. His Partnership Charter is a preemptive attempt to resolve conflict before it starts, in part by requiring the participants to lay out their reactions and responsibilities to "what if" situations. Says Gage: "When people go into business together, there are so many things to nail down [in the short term] that they often don't look into the future."
The 30-page Partnership Charter isn't legally binding, but it does serve as a guide when conflicts arise. This is why Glenn Matsen, president of North Carolina-based Matsen Insurance Brokers, chose to use the Charter before going into business with his three partners. "We went in with clear heads and definitive roles," says Glenn. "It took a lot of stress off of our shoulders."
RESEARCH EACH OTHER.
New York City attorney Mitchell Stern, author of Buy Your Own Business: The Definitive Guide to Identifying and Purchasing a Business You Can Make a Success, presents another option: Include a provision for third-party mediation in the partnership agreement. Another of Stern's tips: Make a point to spend time observing a prospective partner in a business setting. "People don't take the time to research each other," he says. "Approaching a company to work on a project together is a good way of doing that."
Since hammering out the financial breakdown of a company is often relatively easy while delineating decision-making roles and styles can be anything but, Stern also advises entrepreneurs to quiz prospective partners' former co-workers and associates. If those inquiries cause offense, chances are the venture will falter. It's nice to share risk and vision, but don't forget to do your homework!
By Alison Ogden in New York