Marvin Russell
Entering into a business partnership is a big step. Whether you’re launching or growing your business, choosing the right partner can be the difference between success and failure. To help you avoid some common pitfalls, here are 5 business partner rules that can help save your business from unnecessary headaches and ensure that your partnership runs smoothly.
Table of Contents
Rule 1: Give Your Partner Enough Equity
One of the most important rules for any successful partnership is ensuring your partner has enough equity in the business. If you’re only offering them 1% or 2%, how committed will they truly be? When a partner has real skin in the game — think 10%, 20%, or even 30% equity — they’re more likely to treat the business as their own. When the success of the company directly impacts them, it will be their top priority.
In a business partnership, the more engaged and invested your partner is, the better. They need to wake up thinking about the business and go to sleep thinking about it too. That kind of commitment can only happen when they have a significant piece of the pie.
Rule 2: Keep 51% of the Business for Yourself
While giving your partner equity is important, it’s equally important to retain majority ownership of your business. Holding 51% of the business ensures that you stay in control of the most critical decisions. This isn’t about being greedy or controlling; it’s about protecting the long-term vision of the company. As a business grows, partners might have different ideas on direction, and if you don’t have majority ownership, you might lose control over the future of what you built.
It’s not just about power—it’s about safeguarding your dream and ensuring that any shifts or changes align with the original vision.
Rule 3: Choose a Partner with Complementary Skills
If you and your partner are good at the same things, you might run into problems. One of the biggest mistakes entrepreneurs make is choosing a partner who mirrors their own strengths. Instead, look for someone who can fill the gaps in your skillset.
For example, if you’re the creative visionary, you might need a partner who excels in operations or finances. Or if you’re non-technical, consider partnering with someone who has technical skills, such as coding or web development. Complementary skills prevent conflicts and help the business grow in areas you might not be able to handle alone.
How do complementary skills improve your business?
- They create balance, ensuring that all business areas are covered.
- They prevent partners from stepping on each other’s toes.
- They increase overall efficiency by dividing tasks based on strengths.
Rule 4: Treat Your Partnership Like a Marriage
A business partnership is a lot like a marriage. Trust, communication, and mutual respect are the foundation of a successful partnership. Just like in a marriage, you need to invest in the relationship to make it work long-term.
Consider hiring a business coach who can act like a “therapist” for your partnership. They can help you both improve communication, resolve conflicts, and stay aligned with your goals. Treating your partnership like a marriage means acknowledging that there will be challenges, but with the right tools and mindset, you can overcome them together.
Rule 5: Have an Operator’s Agreement in Place
No one wants to think about their business partnership ending, but it’s a possibility you need to prepare for. Having an operator’s agreement is crucial. This agreement outlines the roles and responsibilities of each partner, decision-making processes, and most importantly, what happens if the partnership doesn’t work out.
An operator’s agreement is like a safety net. It ensures that even if things go south, both parties know what to expect, and there’s a clear plan in place to protect the business. It’s always better to be prepared than to be caught off guard by an unexpected split.
Final Thoughts
Starting a business with a partner can be a rewarding experience, but it’s important to approach it carefully. These five business partner rules can help you navigate the complexities of partnership, avoid common mistakes, and ensure the long-term success of your business. Remember, every partnership is unique, but these principles will give you a solid foundation to build on.
