Over the past 20+ years, I’ve experienced a mix of good and not-so-good business partnerships. Having shared
insights on many investor tele-summits, I want to summarize key points here—especially to help you dodge potential pitfalls.
Here are some tips on how to choose a business partner.
In the fast-evolving business landscape, many entrepreneurs still assume that having a partner will lighten the workload. But what are the underlying reasons for wanting a partner? Sure, it might seem appealing to have someone to brainstorm with or to complement your skills. But have you considered why a partner might be preferable to an employee?
Critical Question: Why a Partner Instead of an Employee?
Consider these motivations:
- Are you seeking a creative collaborator?
- Do you need someone with skills you might lack?
- Is companionship in the entrepreneurial journey important to you?
- Or, are you primarily looking for a financial contributor?
Remember, partners typically retain a portion of your business—permanently. When deciding how to choose a business partner, if you can fill this need with an employee instead, who won’t expect equity, it can substantially reducing your long-term costs. Employees can provide relief and contribute to your growth without diluting your ownership.
When Equity Comes Into Play
However, if your growth strategy requires an equity partner to inject significant capital, consider a structured vesting schedule. For example, instead of granting substantial equity upfront, let it vest quarterly. This strategy ensures partners are incentivized to contribute to the company’s success over time.
I learned this the hard way after losing a significant share of my handbag company to a partner who exited early, leaving me without options for future partnerships. A good attorney can help structure these agreements, ensuring they align with both your personal and business goals.
Legal and Strategic Considerations
It’s also crucial to:
- Establish clear, achievable goals for vesting shares.
- Reassess roles and goals periodically, allowing flexibility as roles evolve.
- Ensure you have personal legal representation separate from your company’s attorney to focus solely on your interests.
Protecting Your Intellectual Property
A final tip—consider the ownership of your trademarks. If possible, register key trademarks in your personal name and license them to your company. This safeguard can protect your rights, especially if your business relationship sours or if the company closes.
As business dynamics continue to evolve rapidly, these considerations are more relevant than ever. Protecting your interests and ensuring clear, fair partnership terms can set the foundation for sustainable business growth and personal peace of mind.
Book a call with me and let’s chat about your business. Book here: Talk to Sarah
the website looks great. I am so proud of it now it looks so professional. I was thinking about giving up because I felt so buried and had no direction. I am happy I hired you to help me.
