Forming a business partnership means sharing ideas, responsibility and success. The effectiveness of that sharing depends on how compatible the partners are in terms of two major life areas: money goals and values, and family commitments. Money and family are both emotionally charged topics for almost everyone, so good compatibility in these two areas can help a partnership run smoothly.
Extensive research with women business owners about all aspects of
business ownership reveals the importance of due diligence when selecting a business partner. Further, research shows there are seven main characteristics to consider in prospective partners. This article discusses the details of two of those characteristics.
Characteristic 5: Compatible Money Goals and Values
The question: « Do the prospective partners view money and risk in basically the same way? »
Surprisingly, conflict over money is just as prevalent in successful businesses as it is in unsuccessful ones. When a business is struggling, the partners are worried about having enough money to pay family bills. When the business starts to make money, the partners are worried about getting their fair share. When the business is very successful, partners may still fight about who is contributing more time and effort than whom. Finally, when the partnership finally ends, partners may argue over financial terms. Money negotiation will be present at every stage of a partnership – so partners should share goals and values about money.
Money discussions may feel like they are too intimate – like they cross an invisible boundary of social etiquette. However, it’s important to determine early in the relationship whether the prospective partners share similar money goals and values.
Here are just a few of the questions two partners can use to determine whether they share expectations about money:
- What kind of income is necessary to support the partner and his or her family?
- How long can each partner go without income, if that’s what the business requires?
- What are each partner’s three- to five-year financial goals? What is each partner’s long-term financial vision? What would each partner like to be doing ten years from now?
- How much does each partner believe his or her time is worth, per hour? How many hours is each partner willing to work in this business to reach his or her financial goals?
- How much money, or percentage of revenue, does each partner believe should be reinvested in the company once it’s profitable? Does each partner envision forgoing a significant portion of salary and profits to expand the business?
- When it comes to money, would the partners consider themselves risk averse, risk inclined, or in between? What financial risks has each partner taken in the past? If partners have invested in the stock market, what level of risk have their portfolios been?
Considering the topics in each of these questions – and more – will help partners ensure they are suited to work together when it comes to money, a highly charged and important topic.
Criteria 6: Family Commitments
The question: « How will each partner’s family obligations impact his or her time spent on the business? »
Because each partner’s family relationships and obligations will directly impact his or her daily actions in the business, the prospective partners should discuss their commitments before entering a partnership.
Research showed that many female entrepreneurs said one of the greatest rewards of their partnerships was the support of their partners when it came to caring for family matters. It’s important that if one partner’s family demands require schedule shifting and attention, that she gives her partner the same understanding and consideration.
Consider things like children’s school and extracurricular activities schedules, as well as children’s and elderly parents’ doctors’ appointments. Also keep in mind joint custody schedules for single parents.
Money and family may be two of the most important issues in a business owner’s life. Therefore, each of these topics must be treated with care and consideration when two business owners are creating a partnership.