Whether it’s a formal business partnership, a joint venture, or a significant strategic relationship, partnerships can be an incredible source of business leverage. Like all forms of leverage, a partnership’s power can magnify good or bad.
Over the years I’ve moved into and out of literally dozens of joint ventures and partnerships. And over this time these partnerships and joint ventures have made me millions and millions of dollars. But I’ve also learned a lot about using partnerships, whether they be one off or long term, along the way.
Here are 27 critical questions to ask before you invest the energy in any partnership.
List of PRE-Questions:
Ask these before you start to negotiate a partnership. These are the questions designed to help you think through is this a party you want to be significantly tied to.
1. Do you share similar values?
2. Is your approach to doing business compatible?
3. Are you both fundamentally be moving in the same directions?
4. Is this likely to remain true in the near term? How about in the medium and long term?
5. How does your prospective partner deal with conflict?
6. Is this a match for your style?
7. In times of stress will your partner stay the course, cut and run, or bring in the litigators and sue everyone who moves?
8. How have they dealt with conflict in their past personal and business relationships?
9. What clues are you able to uncover that reveal how you can really expect they’ll behave in emotionally tough moments?
10. How does that individual or company get work done?
11. What is his or her individual work style or company culture?
12. Are they compatible with yours?
13. Do you trust this person or company to keep his/her/its word?
14. Is that trust based on real data or an emotional connection?
15. How has this person or company behaved in their past?
16. Have they consistently meet their commitments, big and small?
17. Will they do what’s right, especially when it hard?
List of Partnership Formalization Questions:
Once you’ve made the decision to enter into a long term business partnership with someone, it’s time to talk through some of the nitty-gritty details that too many business people skip (usually because it can be awkward or uncomrtable to think about, let alone discuss, these items.)
Some of these items won’t apply depending whether you are negotiating a full partnership or arranging a joint venture or strategic partnership.
18. Who will contribute what to the partnership? This includes time, relationship capital, reputation, money, recourse risk, etc.
19. What are each parties responsibilities to the partnership?
20. What have each of you agreed to do? By when?
21. What happens if you or they don’t meet all your responsibilities, what happens then?
22. What are the main expectations that each party has in this partnership?
23. What does success look like for each party?
24. What would it functionally look like if it was working smoothly and well?
25. What would it look like if it was not functioning well?
26. How will you measure and get feedback about the progression of the partnership along the way?
27. Who owns the output of the partnership? This not only includes the revenue generated, but also includes any intellectual property (e.g. database, written materials, software, proprietary processes, etc.)
28. Are there any non-compete expectations during the course of the partnership?
29. How about at the conclusion of the partnership?
Now I want to turn special attention to formal, full partnerships by looking at the five final elements that you must discuss and formalize in writing before you form a full, formal partnership. We call these the “Five D’s”.
The Five “D’s” of Full Partnerships
- DEATH: What happens if one of the principals of the partnership dies? Will you use life insurance to fund a buy-sell provision? How will you establish the value at which that buy-sell operates?
- DISSAGREEMENT: What happens if you and your partners reach an impasse? How will you handle it?
- DEBT: What happens if any of the partners becomes financially insolvent and declares a bankruptcy, will you have to take on that partner’s creditors as your new partners?
- DIVORCE: Let’s say you’re a partner with Jim. But he and his wife Sandra get a divorce and in the settlement Sandra gets half of Jim’s interest in your partnership. Do you really want to be forced to take Sandra into your partnership? You need to decide up front how you want to handle this contingency.
- DISABILITY: The final “D” is disability. What happens if one of the partners is hurt and is no longer able to contribute time and talent to the partnership, how will this effect their ownership interest and the way profits are split?
You’ll need to consider all five of the D’s and incorporate your answers in your written partnership agreement.
I wish you the best of luck as you move forward in your partnerships. Remember, your roles and needs in the partnership will change over time. Make sure you keep the dialogue with your partner(s) open along the way.
By David Finkel, CEO of Maui Mastermind®, one of the world’s premier business coaching companies. He is the Wall Street Journal bestselling author of ten books, with his 11th book, Scale: 7 Proven Principles to Grow Your Company and Get Your Life Back, due out August 14th from Penguin Random House.
What do you think? Join our discussion by leaving a comment below! Looking forward to hearing from you!