Choosing a Business Partner Is Like Choosing a Spouse

MARCH 14, 2024

The core principles for a happy, successful, and long-lasting relationship with your spouse are remarkably similar to those for a thriving, enduring business partnership. While this might not apply if you’re only interested in short-term gains, focusing on what’s sustainable and meaningful is key.

Key points:

Common issues: The main reasons for divorce often mirror those for failed business partnerships.
Principle #1: Have difficult conversations early: if things aren’t working out, it’s best to address them quickly.
Principle #2: Test the waters before committing: just like dating before marriage, working together professionally can reveal compatibility.
Principle #3: Balance each other’s strengths and weaknesses: acknowledge where you excel and where you need support.
Principle #4: Check for compatibility: use a checklist to ensure you’re both on the same page.

Avoiding failure is a key aspect of achieving success. Whether it’s in marriage or business, preventing divorce or dissolution increases the chances of success. While you can’t plan for every possible failure, focusing on the most significant causes can help.

Understanding why marriages fail can provide insights into building better business partnerships. Research shows that most divorces are initiated by one party, with mutual agreement being rare. Additionally, many divorces occur within the first decade, highlighting the importance of recognizing issues early on.

A study from the US National Library of Medicine lists the top causes of divorce as:

Lack of commitment
Cheating
Frequent arguments

In my experience with nine different companies, I’ve found that the reasons for business partnership failures closely resemble those for divorce. Lack of commitment often leads to arguments, while cheating occurs when one partner’s attention is divided. Frequent arguments arise from not discussing important issues beforehand.

Principle #1: Have Difficult Conversations Early

Taking inspiration from the lean start-up approach, addressing potential issues early is crucial. Just like in a romantic relationship, discussing deal-breakers before starting a partnership is essential. Key topics to cover include chemistry, values, goals, and timing.

Determining chemistry is straightforward and can be done quickly. Similarly, values require deeper conversations to ensure alignment. Prioritizing core values helps establish common ground.

Questions to explore values include:

How do you handle money?
What kind of lifestyle do you prefer?
How do you deal with challenges?
What leadership style do you prefer?
Do you prefer working remotely or in an office?
What is your approach to debt?
How much capital can you invest?
What motivates you?
How much time can you commit?

Discussing goals, both short-term and long-term, is essential for alignment. Considering personal and professional goals, as well as future plans for the business, helps set expectations.

Lastly, discussing timing preferences is crucial to avoid conflicts down the line. Misaligned timelines can derail even the most promising partnerships.

In conclusion, having these conversations early on lays the groundwork for a successful partnership. Formalizing agreements through a shareholder’s agreement is essential to clarify rights and responsibilities.

Principle #2: Test the Waters before Committing

Just as you wouldn’t marry someone after the first date, it’s essential to evaluate compatibility before committing to a partnership. The initial stages of any relationship often involve guardedness, necessitating time and shared experiences for authenticity to emerge. In the business world, this translates to collaborating on projects or side ventures to assess compatibility.

Principle #3: Balance Each Other’s Strengths and Weaknesses

Recognize that business success requires a diverse set of skills. No one can excel in every area, so partnering with complementary strengths and weaknesses is crucial. Being honest about your weaknesses and finding partners who excel in those areas increases your chances of success.

Principle #4: Check for Compatibility

Using a checklist before committing to a partnership ensures alignment on critical aspects such as investment terms, roles, compensation, personal goals, and exit strategies. The following is a suggested checklist I use:

Are you in agreement on the investment terms and how the equity will be divided?
Are you clear on the time commitment and the specific roles of each in the business?
Are you clear on the financial compensation each will receive from the business?
Do you know each other’s personal goals?
Are you in agreement on the business’ exit strategy?
Are you in agreement on the dividend policy or how the profits will be shared?
Are you in agreement on debt policy?
Have you discussed the scenarios of what happens if the business goes bankrupt?
Do you know each other’s leadership, communication, and working style?
Have you worked together before?
Do you know what happens if one partner wants to leave the partnership?
Are each other’s spouses/family supporting the partnership?
Do you have clear rights and responsibilities for shareholders?
Are you in agreement on the long-term vision for the company?
Do you have a written and signed shareholder’s agreement?