I’ve had some experience in choosing partners and helping others make that choice. At Vahura, we successfully help firms merge and also help firms recruit partners. As an entrepreneur, in my first venture (which I have since exited) I had partners, who I knew from law school, but didn’t really choose them at the outset, as we were brought to together almost by circumstance. That real choice was made later, in tough and trying times.
At Vahura, I’ve had serious discussions with potential partners, have come close to working together and learnt much from them. In my personal life, I’m fortunate to have found an amazing life partner in my wife.
The right partner, can make all the difference and can really transform our lives and ventures. The wrong partner, can destroy everything we’ve built, in a heartbeat. I’ve made an attempt to put down 7 steps, that I’ve begun to now apply with success.
1. Articulate what you want
I’m a first generation entrepreneur, from a middle class family in Bangalore. Politeness was a hallmark of being middle-class and therefore well-mannered. On visiting a friends house, and being offered refreshments, I would politely decline. Only when asked twice or thrice, would I politely say ‘thank you’ and accept what was offered. It was considered rude and impolite to ask for what you really wanted. You were told to accept what was offered and not make demands.
This same politeness as a default setting, is often misplaced in the entrepreneurial context – especially when dealing with partners and peers.
Politeness becomes a cover for us to avoid issues, not clarify positions and brush things under the carpet.
We also live in a time where ‘”equality” is the norm. This is wonderful and much needed in the social context, to overcome centuries of prejudice and exploitation. In the business context, it can can cause misplaced expectations and entitlements. For example, the word “employee” today, is almost a bad word. Potential partners often say – “I don’t want to be just an employee. I want to hold significant equity and be on the board”. The ambition is great, but should not be considered a free-ride to get there. Not clarifying this up front, will cause mismatched expectations and a lot of pain down the road.
In a business context, it’s important to get clarity on whether you want:
A primary partner (alpha) : This is someone who is going to drive the business. The venture is built around this person(s).
A peer partner : I’ve avoided using the word “equal partner”, as it may mistakenly indicate ‘equality’ in all aspects, especially in relation to equity.
A secondary partner (beta) : This is someone who is a ‘junior partner’, or a ‘non-executive’ partner. A pure financial or strategic partner, would fall in this category.
A person in top management (employee), with a potential earn-out and the halo of partnership.
Once you are clear about the kind of partner you want, clearly articulate your expectations and standards for that kind of partner. Also, set out the path for how that partnership track could develop as the venture evolves and grows.
2. Spread the Network
I’m a non-practicing supporter of the arranged marriage system. The great thing about arranged marriage is that you have a choice beyond your limited social network. An arranged marriage system that incorporated both family and friends, in a cool way, would be a money spinner. Back in the day, a venture MarryMyBuddy, was perhaps a step in that direction.
In business, the easy path is to partner with friends and family, not because they are excellent at what they do, but because we trust them. As an entrepreneur, you have access to connections, services and technology that will give you a wider choice, to make the right decision. Don’t be shy about using a specialist search firm like Vahura.
A good search firm will expand the network, filter probables and bring important business information for your consideration.
Use every means possible to widen the net – social media, conferences, networking, online portals, well-wishers and friends.
3. Play Date
During my single days, I really liked this one girl, but I was in Delhi and she was in Bangalore. We would travel often enough to the other city, but our time together was limited, and mostly long distance.
I wanted to take the next step and make it official, but wasn’t sure given the actual time we had spent together. We decided to take a holiday together, which proved to be the turning point. It gave us a chance to plan something together, have differences, make compromises and face minor difficulties. We both came into the holiday with the same idea, talked about it and finished a memorable holiday as an official couple. A year and a half later, we decided to get married.
In a business context, I’ve tried the same approach through mini-projects, that gave us an opportunity to work together.
Setting the conditions of the project, close to actual work conditions is important. In one case, a person was really good as a consultant, but failed to live up to his promise as top management, because he was unable to operate effectively in the corporate context.
Playing sports, is another great way to get a sense of someone’s character, particularly fairness, grit and mental strength.
4. Meet the Parent and Friends
As a teenager, my father would often say “Choose your friends well, they will shape the person you become”. Over the years, he would positively endorse my choice of friends, thereby reinforcing his initial advice.
His advice is also backed up by research. A 2013 Gallup Consumption Survey, showed a strong association between a person’s (consumption) habits and their circle of friends and family.
In choosing a partner, it’s good to meet the close social circle of the prospect. You will get a sense of what drives and shapes them outside of work. Habits and social pressures will also become apparent.
Also, consider the impact of your proposed partnership on one’s social equity. How prestigious is it for the prospect to introduce themselves as a partner in the venture.
Get your friends, colleagues, advisors and family to meet with the prospect as well. They may give you insights and perspectives that could prove useful. I have three advisors, who help me evaluate future prospects. They include, a senior HR and Behavioural expert, A former business partner and mentor, and my Life Partner (wife).
It is important to remember that the advice or feedback of your advisors or friends, are merely data points. The decision is ultimately yours to make.
5. Future Planning – Business Plan
Recently, I explored a partnership with someone I saw a lot of promise in.
Our advisor recommend that we each forecast the next 3 years financials. Separate financials for two scenarios: (i) individually and (ii) if we came together. We did this independently, yet arrived at the same conclusion that financially it did not tally with our expectations of the partnership.
The discipline of putting this down and discussing it, was an eye opener. We mutually decided not to go ahead on that particular venture.
It’s vital that you and your partner, want the same thing in the same sense.
The “same thing” is what you want.
For eg., to be a national full service firm in 3 years.
The “same sense” is how you get there.
For eg., you could get there by a franchise type model that is quick, fewer hassles in the short term, but maybe unstable in the long term. Your partner on the other hand may want to build an integrated partnership slowly and organically.
A business plan is an excellent way of putting this down. At Vahura, we help senior lawyers draft business plans for their practice areas. We find that it is an excellent way for someone to honestly evaluate where they are and where they want to go. An important outcome of future planning is also the identification of clear goals.
6. Propose & Close
The previous 5 stages would have given you enough information to put together a strong proposal.
What tends to hold us back at this stage is fear and resistance.
The WFWAB (why fix what aint broke) monster will tell you that things are great as it is, and that you may regret this, if things don’t work out. It is easy to confuse this natural fear, with our “gut-feel” that this isn’t right.
Examine the root cause of the fear and resistance, to know the difference. Once you have moved past the WFWAB monster, put together a proposal that covers not just the entry point, but also future developments in the partnership. The formula or system can be closely linked to the goals that emerge from step 5 – “Future Planning – Business Plan”.
Time is of the essence in making a proposal and closing it. I’ve seen too many partners be indecisive and use ‘busy-ness’ as an excuse to delay and drag the process.
If the decision is not to go ahead, closing the loop quickly and clearly is also important. As Shri Krishna said in the Bhagavad Gita “Indecision is the worst sin”.
7. Legalize It
When we started Rainmaker, the four of us were all lawyers. We were also friends from law school.
We had an informal understanding of our equity sharing, along with our angel investor. In the excitement of getting to work and by being over polite, we neglected getting the paperwork done.
Four lawyers and no paperwork! A couple of years later, when we wanted to buy out our angel investor, this neglect made things difficult for us.
The middle class mentality is to view “legal documents” and paperwork as a signal of distrust. We forget that it is the standard thing to do – especially in business. It is the rule and not the exception.
It’s important to sign all the documents (after reading it carefully), issue shares, update the registers, sign the partnership deed and complete all formalities in writing, that are fully reflective of your verbal understanding.
Some of us may seem reticent about pushing this through. If that is the case, get your lawyer or advisor to do the pushing for you. If you are on my own, treat yourself like a client and act accordingly. Remember, its not fully done, till you sign.
What about my gut feel about a person? Why bother with all of these steps?
Daniel Kahneman is a renowned psychologist and Nobel Laureate in Economics. He has written one of the best non-fiction books, that I’ve ever read (and re-read) – Thinking, Fast and Slow. Kahneman reveals where we can and cannot trust our intuition. He offers insights and tips that we can use to apply our ‘gut thinking correctly’ and when we should slow down and make more thoughtful decisions.
To answer the question in the words of Kahneman, “The effort invested in ‘getting it right’ should be commensurate with the importance of the decision.”