Guest post from Laura Schmitz
Being a counselor at the Milwaukee Small Business Development Center, I am often asked for advice by small business start-ups and existing business owners who want to grow. A common question is “Should I take on a partner?” Here’s my answer…it depends.
Taking on a business partner can be an excellent strategic decision in helping move the business forward. It should be well thought out, not only for the business owner, but for the partner as well. The relationship needs to be synergistic – financially, emotionally, and operationally – for both parties. Both parties need to do due diligence to ensure no harm to the business or either potential partner.
DATING and COURTING – Finding out about the other person and if there is a match
Step A: Personal Assessment – you and the partner
1. Commitment – Is the potential partner in for the long haul?
2. Unique contribution – Does the potential partner bring specialized knowledge, skills, leadership, or experience that you don’t have?
3. Personal goals – Are each set of goals consistent with the other person’s, e.g., personal wealth, business success, autonomy?
4. Trust/similar values – Is there trust between the two parties? Do they both share a set of common values?
Step B: Clarify goals of each partner – both personal and business
1. Equity – What will the new partner contribute, e.g., cash, assets, equipment, connections? Whatever it is it should increase your share of the value of the business.
2. Compensation – What type of and how much compensation does the new partner want, e.g., regular salary, owner draw, weekly, monthly, etc. Can the business afford it?
3. Control – What type of control does the new partner want, some percent of ownership, being a director/officer? What are you willing to give up?
4. Brand image legacy – Is the new partner dedicated to ensuring brand continuity or just ride on an established quality brand image?
NOTE: It is suggested that the current owner and the new partner do Steps A & B independently. Then review together and determine where there are commonalities/synergies and where there is polarization in responses. If necessary, bring in an impartial third party to facilitate resolution.
About our Guest blogger Laura Schmitz
Laura Schmitz is the Business Development Manager at the UW-Milwaukee Small Business Development Center (SBDC). She provides individual counseling to second stage companies who want to develop and grow their business. Specialties include marketing strategies, market research, customer relationship management, and cash flow analysis. Since joining the SBDC in 2007, she has counseled over 200 clients. Laura also teaches classes in marketing and business planning. Prior to joining the SBDC, Laura formed Cornerstone Corporate Services, Inc., a consulting firm providing corporate record services, business planning, and business infrastructure support, including business plan development, employee manuals, position descriptions, operations plans, etc. She has been owner/president since 1995.
For more information visit the Milwaukee SBDC website: www.sce-sbdc.uwm.edu.