Choosing a business partner a serious business

October 16, 2010 

Real estate investing often means having partners. By pooling resources, investors have more money to work with, more skills to benefit the partnership and greater sharing of responsibilities. Having a successful partnership means choosing good partners.

Selecting a business partner is an important undertaking. A partner can be a tremendous asset but also can be a disaster. You need to choose the right partner the first time.

Below are tips I have pulled from a variety of websites. For more information, search for "how to choose a business partner" to find sites with advice.

Shared vision is critical. A good partnership is like two people about to take a trip. They have to agree on where they want to go, how they want to get there and how they can best communicate with each other.

A partner should bring to the partnership something of value, such as money, skills, expertise in the business, credibility, contacts, experience or the like.

Avoid partners with personal baggage. Partners' personal problems often will spill over into the partnership. A partnership should deal only with the partnership business, not partner personal problems.

Seek a partner with high values and integrity. A partner must be trustworthy and honest, and have strong ethics. You should have high respect for them.

Financial capability is essential. A partner must be able to keep up his or her financial end of the partnership over a long time. Partners must have the necessary current financial resources and the ability to maintain financial stability. A partner's financial crisis could drastically and negatively affect the partnership.

Be coldly objective and take your time. Disregard personal ties and friendships. Search for the partner you need. Draw up a list of attributes your partner must have and match those desired characteristics with prospective partners.

Find a partner who complements your skills. No one person is best at everything. You want a partner who provides skills you do not have. For example, you might be great technically but lousy at going out and finding business. If so, find a rainmaker type of partner.

CUP, SWORD & WALLET

One of the most interesting websites I found is Wise Words by Sean Wise (July 16, 2006). He describes advice for picking a partner from the Babylonian Talmud, written more than 1,500 years ago. This ancient script recommends evaluating a person's nature in different situations when their inhibitions are lowered so you can judge how well that person's true nature matches yours. This test is known as "The cup, the sword and the wallet."

It goes like this.

The Cup suggests having a few drinks with the person because their true nature will come out when they are a little drunk. You can get a good measure of the person's ideals and character.

The Sword refers to seeing how someone acts when they are angry or at their worst, and how they handle success and failure. Does the person celebrate success, or critique how it should have gone? In failure do they lash out at others, stew, accept responsibility or lay blame on others? Does the person focus on learning from the situation?

The Wallet refers to how someone handles money issues. This includes integrity and their financial hierarchy. Does the individual give to charity or hoard wealth? Is money a means to an end or an end in itself? What motivates participation and how do they view the other partner's contribution to the partnership. If views are not aligned here, serious problems are likely.

Finally, you have to be able to get along with the person: not as a friend, but as someone with whom you can talk and communicate. If you and your potential partner are like oil and water and don't get along, a partnership is going to have problems.

Choosing a partner is serious business. Take it seriously and be deliberate.


Chris Stephens, CCIM, is a local associate broker specializing in commercial and investment real estate. His opinion column appears every month in the Anchorage Daily News.

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