Five golden rules for 'choosing a business partner

The scenario is familiar: ?a partner in a business approaches you to ask for legal advice after some damaging decisions were made by another partner or director. As a solicitor, you advise them that the implications of the ill-fated actions could be far reaching, and the cost to the business, both financially and reputationally, could be both significant and unrecoverable.

The client heeds your warning and takes measures to resolve the issue as swiftly as possible, and with minimal disruption, cost, and pain.

In due course, harmony returns to the client’s day-to-day operations and business as usual resumes. And you might just be tempted to think to yourself: ‘There but for the grace of God go I.’ 

The truth is that legal firms are no different, fundamentally, to any other kind of business, with the same pressures, ownership dynamics, and issues at play. ?And the advice that we as lawyers dispense to our clients when they’re considering a new business partnership is just as applicable inside the legal profession as it is on the ‘outside’.

Golden rules

There are five golden rules which practice owners and equity partners should consider when looking for a new business partner:

• Rule one is about integrity: find someone you trust. Taking on a new business partner will mean that person’s actions becoming associated with your business and, by extension, with you. In good times, trust between partners may be strong, but consider carefully how this trust will stand up to times of stress. Choose a partner who is reliable and honest and has a reputation which aligns with your own. So do your due diligence on character;

• Rule two is that there is no substitute for experience. ?A business partner needs the experience and skills to do their job successfully and to work with others to manage the business. Partners need to be able to count on each other to deliver results and a business partner without the right experience or ?skills can lead to poorly designed services, dissatisfied customers, and, ultimately, a declining client base. Seek independent evidence of the experience and skills they say they have;

• The third golden rule is to say no to ‘yes men’ and ‘yes women’. Someone who is going to agree with all your decisions without a sense ?of perspective or honest critique is not a true business partner. Seek a business partner who will add new angles to the decision-making process, bring a different perspective, and is capable of objectively evaluating your ideas to avoid wasted capital expenditure and management time;

• Rule four is to ensure you and your prospective partner have both a shared work ethic and shared vision. Resentment can quickly build if one partner feels they are contributing significantly more than another. And it can arise equally quickly if it becomes clear that your personal objectives and business vision are poles apart; and

• The fifth golden rule is to consider the granular as well as the strategic. When you think you’ve found the right partner, establish how the partnership is going to work on a day-to-day basis and agree a set of well-considered procedures to run the business, including areas of individual responsibility and how potential disputes will be resolved. 

None of this is rocket science, of course, but it’s the most basic principles which can get overlooked in the heady excitement of a new business ‘romance’. It’s the kind of advice I give to clients every day. And it’s the kind of advice lawyers should give to themselves when they consider their most important business relationships.

Alison Brennan is a partner at North West commercial law firm DTM Legal @DTMLegal www.dtmlegal.com