Starting a new business is a stressful, time-consuming process. Even seasoned entrepreneurs understand that no company will be guaranteed success.
However, Forbes reports that working with a business partner can increase your chances of success. A partner might bring experience, professional contacts, or much-needed funding. Nevertheless, you need to ask your partner the right questions to make sure they will benefit your business. For any further questions, please reach out to speak with a Florida business lawyer.
Why Ask Your Business Partner Questions Before Starting a Business?
Jim Schlecker of the CEO Project says that a business partnership is similar to a marriage. He advises that you “take your time to vet the other person and make sure you have the kind of chemistry that will last through the good times—and especially the bad ones.”
Asking the right questions is one of the best ways to get to know someone. Spending time with a partner and understanding how they think will help you plan your business. You can learn what motivates them, how they react to certain situations, and build trust. These questions to ask your business partner before starting a business will help get the ball rolling. After you review them, try to think of additional questions that might be more specific to your line of work.
7 Questions for a Business Partner
1. How Much Business Experience Do You Have?
See what type of experience your partner has and what role they can play in the business. Try to picture how their talents help your business operate.
Your partner does not need to have experience running a business, although that helps. Instead, see if your partner is a leader, understands how a business functions, and knows how to work with others. Many great companies are started by employees who have no management experience but understand what the customer wants.
2. What Do You Expect to Gain from this Venture?
Some people think that owning a business is a surefire way to success. After all, over 68% of millionaires with net worths over $20 million are self-made.
Yet, money cannot be the sole motivation behind starting a business. Too many new entrepreneurs want a quick payday and lack the tenacity to keep working hard when times are tough.
Try to see if your business partner expresses other interests aside from profit. Perhaps they want to grow a brand, manage others, or look for ways to benefit customers with the business.
3. What Role Do You See Yourself Playing in the Business?
Your business partner should serve in a way that compliments your skill set. If you are a creative person who dislikes math, it may be wise to have a partner who understands bookkeeping. Maybe you enjoy negotiating with vendors but dislike managing employees. In that case, your partner can manage personnel while you oversee operations.
Use this question to see if the partner is serious about leading the business. For example, a “bad” answer would be one that indicates the partner simply wants to manage others or make money but doesn’t offer skills or ideas that contribute to the company’s growth.
4. What Will Be Our Company Values?
A business is not a faceless, ambivalent entity. It comprises individuals who must interact with each other, clients, and customers. As the leader, you will need to make decisions that could upset employees or community members. Your values can affect your bottom line. According to a report by LendingTree, nearly 40% of U.S. consumers boycott brands due to their political beliefs.
Regardless of your values, you must ensure that they align with your partner’s. Otherwise, you may end up in unnecessary conflicts that lead to gridlock, employee attrition, and even failure.
5. Are You Comfortable with Risk?
Data from the Bureau of Labor Statistics indicates that 20.8% of new businesses fail within one year and 45% fail within five years. These statistics don’t need to scare you away from forming your own business, but they should give you some pause. Starting a business is a risky venture, and you need a partner who can thrive in uncertainty.
Share these figures with your partner. See if they are hesitant or overconfident. Ask them how they would react if the business failed and you both lost your initial investments. Only then will you know if your partner is ready to move forward.
6. What Future Plans Do You Have for the Business?
Entrepreneurs view business differently. Some like to start a company that becomes an extension of themselves. Others want to grow a company and sell it once it reaches a high valuation.
Think about what your plans are and then discuss them with your partner. Some partners never have these conversations and find themselves in a stalemate. What’s worse, courts can dissolve a company when a deadlock occurs, which is the last thing you want.
7. How Will We Share Profits?
Fifth Third Bank reports that business owners typically reinvest 20% to 30% of profits into their businesses. Make sure your business partner agrees on how often you use profits or when they can make an owner’s draw. Otherwise, you may be looking to grow the company while your partner is drawing profits for their next vacation.
Schedule a Consultation with a Business Attorney
These questions to ask your business partner before starting a business only help to get you both on the same page. Once you are ready to start the business, you need to document everything in a formal operating agreement. That way, your partner cannot change their mind and make decisions that differ from your original plan.
The business attorneys at BrewerLong have helped many new businesses get up and running. We will help with everything from business formation and registering your intellectual property to selling your business when the time is right. Call us today to schedule a consultation.
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