As an entrepreneur, it’s easy to think that once you find the right person to partner with, your business relationship will be simple and straightforward. When a co-founder relationship doesn’t work out, most entrepreneurs resort to solopreneurship because “I can never trust anyone again.” Personally, I’ve found that having business partners is advantageous, especially if you find people with shared vision and values. Although not a necessity, If possible, find people with similar goals, and interests too. However, it’s important to understand that solid business relationships don’t materialize out of thin air. The best co-founder relationships are built over a period of time, through patience, understanding, and experiences. As with personal relationships, it takes two to tango in co-founder relationships – the best relationships are those where both parties put in continuous effort to maintain the trust. Here are a few considerations to keep in mind while building your business relationship.
Clarify your vision:
Decision making within your business becomes easier when you and your co-founders have a shared vision, because they are continuously thinking about what is best for your business, and whether each decision will take you all closer to your goals, or pull you back. With my business partner, we discussed our business vision over a period of 2 years, and worked together as independent consultants before we decided to come together and build together. This period allowed us to think about things alone, and discuss any clarifications and concerns we had. We discussed everything from company culture, to products and services we wanted to offer, ethics, values, roles, and even where we wanted to have our office situated, ensuring that it was convenient for all parties. In the long run, this is one of the solid foundations in our business partnership. We understand that we are working for a cause that is bigger than us, and we can only get there if we all put in effort, and trust each other to make the best decisions for us as a company. With my business partners, I trust that I can leave our business for a year, knowing that our employees lives will be prioritized, and they will cause no major disasters.
Have Shared values:
Shared values will build the foundation for a strong company culture, and will prevents you and your partners from working against each other. If integrity is important to you in business, then you don’t want to have a shrewd business partner who picks money over business integrity. In the same light, if your people are a key part of your business culture, you don’t want a business partner that chooses to pay themselves first, to the detriment of your employees. Having business partners with shared values cannot be over-emphasized. In the long run, it will save you the headache of continuously second guessing what your partner is going to do that may cripple the business.
Sign a Co-founder agreement:
No matter how friendly you and your co-founder are, the reality is to be found when emotions come to actions. Many entrepreneurs enter business relationships 100% sure that their business partners have a certain skill, and share a similar drive as them. Relationships breakdown when they find that some people are underperforming and not delivering as expected. In some cases, the nature of the business may be such that the predominant skill needed is technical, and the other partners bring intellectual property, or execution on a non-technical level. In such cases, it is natural for the technical person to feel as though they are doing the most, not considering what the other partners are bringing to the table. This is what co-founder agreements are for. These contracts stipulate roles and responsibilities, as well as penalties for non-delivery. It will help you focus on other aspects of your business, other than what your co-founder is doing or not doing. Here’s a case study (Smart Company) to help shed light on the importance of a co-founder agreement.
“If you watched the classic startup documentary Startup.com, you might recall there were three co-founders at govWorks.com. Two of them, Kaleil and Tom, worked their asses off while the other one, Chieh, never joined their company full-time. He kept his full-time job and worked “after hours”. It seemed, however that nobody knew what he was actually doing.
When the startup got their first venture capital investor, the VC required Tom and Kaleil to buy Chieh out, subject to investing. But he suddenly demanded $800k for ‘five months’ of his after-hours work.
Kaleil and Tom ended up settling with Chieh for $700,000, making up the $290,000 out of their own pockets. GovWorks.com hit the bricks soon after, due to several disputes between Kaleil and Tom, who were also best friends.
In some parts of the movie, you can see Kaleil saying one thing to the team and then Tom completely negating what Kaleil said. The same thing happened when the two talked to their investors. That’s not the best way to present yourself when raising funds.
This entire situation resulted in the firing of Tom followed by company turmoil and a drop from 200 employees down to 50.
The moral of the story is to sign a co-founder agreement. Stuff like that doesn’t happen if you have a proper contract with a vesting provision. That means no-one gets the shares unless they deliver what you agreed on.
In both of the examples above, the co-founders were friends, yet it still happened. Just because you get along in private life well, it doesn’t mean the same dynamic works in different social conditions. And startups can be quite extreme, bringing out personality aspects you didn’t know of.”
As your company grows, your vision, and opinions can change too. The question here is how are you going to resolve deadlock situations ?
Define your Roles:
Partnerships can be tricky, especially when you have people with equal stake in the company, and the same level of authority. For example, an employee may decide that they will report to your partner, instead of reporting to you, even where they know that you are entitled to the information presented. It is important to put structures in place that define your roles, and decide who will take ownership of distinct parts of the business. All duties should be outlined in a Standard Operating Procedure document, and all team members should be aware of these clear roles, so they can ask the appropriate partner when they have requests. The follow up to this is trusting and respecting the authority of your partner to make decisions within their area of concentration. There will be situations where you have issues with the management of their department, and it’s important to discuss these issues and solve. However, it’s more important to ensure that the discussions are had in private, rather than in front of your employees, as you want to make sure that you aren’t contradicting your co-founders decisions.
Discuss Big Decisions In Person
At the start of the business partnership, you and your co-founder should agree on who will be in charge of making which type of decision, and what steps you will take if you all don’t agree on a decision. If you hang around your co-founders long enough, you will all start to make similar decisions. In fact you swear that you know what they want, and can make decisions on their behalf without notifying them. While it’s tempting to assume what they want, you have to ensure that decisions are made together. Even when you’re sure that they will align on your strategy or idea, you should schedule face-to-face time to talk through everything, and ensure that you’re on the same page.
Have a track record
Succeeding as business partners doesn’t require having run a business together or even having worked together before. It does require a track record of going through similar challenges together successfully. Look for a partner you’ve handled conflicts with, achieved common goals with and survived tough times with in the past. Many entrepreneurs look for co-founders at networking events, and through referrals. This is like getting married to someone you just met at an event last night. When you understand that business partnerships are like a marriage, you will appreciate the importance of dating and courtship. These are people that will share decisions, your future, risks, and rewards. If you’ve worked together before, it allows you to have open discussions, and learn each others strengths and weaknesses.
Avoid Gossiping about each other
As co-founders, you are human beings first, before you are business partners. As human beings, you all have emotions which can either do great for the relationship, or wreak havoc in the relationship. Refrain from gossiping about you partners, not just within the company, but also with your spouse, or friends. Remember, this is a marriage, and what you tell 3rd parties will determine how they treat your partner. If you want them to respect your partner, then you must keep your challenges, fights, any dirty laundry, between the both of you. This point is important, because many partnership issues are often caused by 3rd party – in many cases, spouses. Your spouse will usually take your side on matters that you discuss with them, and the more you discuss your business partners issues, the more your spouse will grow a bias towards them. In such cases, they’re rarely thinking logically, when they give you advice. When you allow this to happen, you’re setting up your business partnership for failure. Don’t gossip about each other, always push to resolve amicably. If you need to bring in a 3rd party for conflict resolution, try to ensure that it’s a mentor or someone that you both trust and respect to be professional about the discussion.
It’s ok to walk away:
Your business partnerships will not always work out as planned, and that’s alright. The sad part is staying in a partnership that is no longer viable, and forcing it to work for fear of losing out on your investment, or on the potential future success of the company. Personally, I have ended partnerships that weren’t working out, and some of my former partners have become strong alliances in the work that I create, with each person bringing in their skill sets, and collaborating on successful projects together. In many cases, you will find that the issue isn’t that you can’t work together. The issue is that you can’t work together in a business partnership, for several reasons sometimes beyond your control. Rather than sit in the partnership and stew over your frustrations, you must know when to call a spade, a spade, discuss it with your partners, and then move forward amicably.