Banking

Answer these five questions before choosing a business partner

Consultants who go it alone take on added risk when the market for their services changes or the economy sours. To help protect themselves, many consultants partner with another business. Consider five questions when making such a move.


Launching a business with a partner is a commitment not unlike marriage: It demands loyalty, a shared vision, dedication, honesty, responsibility, and mutual respect. Among IT consultants, the practice could be on the rise. In a recent TechRepublic poll, for example, nearly 40 percent of the respondents said they would partner with another consultant to survive lean times. (Sixty-one percent said that they would not.)

Several IT professionals whom we spoke with suggested that establishing a partnership can double the experience and manpower, allowing you to take on larger clients and increase your customer base. Before you sign on the dotted line with your future business partner, ask yourself five questions to determine whether it’s a good match.

1. Have you worked together before?
A history between the two partners is critical, according to Ilona Berzups, CEO and president of The Next Page, LLC, an IT consulting company in Long Island, NY. Berzups and her partner, chief technology officer Al Dockett, met at a Fortune 500 company in the early 90s and, after joint assignments on several projects, discovered they worked well together.

"I think one of the most important things is to work together ahead of time if you can,” she said. “I was familiar with [my partner's] work ethics and his style, and it was really important that our expertise complement each other."

The pair quit their jobs after several years. Dockett moved to another major company, and Berzups formed her own business. The duo continued working together on a full-time basis during a steady stream of projects and clients through their respective jobs.

By the end of 1999, Berzups and Dockett were ready to formalize their business relationship; they incorporated and moved into a full-time office together.

2. Which roles do you both fulfill?
Berzups credited the partnership's success, which counts jetBlue Airways among its clients, to the pair's complementary skills and clear roles. The company has four employees and a team of up to 15 contractors.

"We bring very different things to the table. [Al's] background is extensively in programming. He has a very strong technical vision in terms of keeping up with the latest technology," Berzups said. "My background is very strong in project management and strategy—more the visionary from the business side of things."

Berzups says their divergent backgrounds help the two tackle clients’ problems from both perspectives, offering an overall analysis of a company's business and technological well-being.

Such complements are a critical element of the business relationship, said Evan Hill, president of Hill Financial Advisors, a technology merger and acquisitions firm in Palo Alto, CA. Hill, who routinely counsels prospective clients and potential partnerships, suggests that it’s more important to find partners who are skilled where you are weak than settling on people who are just like you.

3. How do your partner's personal finances rate?
Even partners who may be able to work well together will find that the greatest hurdle is determining how well you both can run the business aspect of your consulting firm. Keeping track of invoices and receivables, paying bills, and paying employees and yourselves on time is what keeps the Open sign hanging in the door. The ability to operate a business is also affected by a partner's own personal financial state.

"Seldom when people go into these kinds of situations do they work through the personal financial situation of each of the two partners," said William L. Haeberle, professor emeritus at the Indiana University Kelley School of Business.

As director of Command Equity Group, a venture capital fund, Haeberle has seen his share of partnerships, counting as many as 40 partners over the course of his 53-year career. He recalled one partner who, in the course of their business partnership, had five children, built and remodeled an expensive home, owned several cars, and had other "expensive habits."

"Before you know it, his net worth was zero. Mine was growing, while his was declining, and it went to hell from there," he said.

Haeberle said that partners must clearly communicate personal financial decisions that could affect their professional life.

"Anything that's going to change their credit worthiness" must be discussed, noted Haeberle, adding that even one partner's credit card debt or alimony payments can inhibit a business from receiving future bank loans.

4. Do you share a similar business vision?
In addition to having a sound personal financial background, Haeberle said partners must make a long-term financial commitment to each other and share like-minded business goals.

"We hooked onto the same vision," Berzups said.

Dockett and Berzups rely on their roles and their mission to help sort out nuts-and-bolts business matters such as signing leasing agreements, hiring employees, and making major purchasing decisions.

"We review cash flow, forecasts, prospects, etc. and decide on [our] threshold," Berzups said. "So, for instance, when deciding on hiring, we determine what the need is short- and long-term. It may make more sense to use a freelancer or a consultant at times rather than hiring a full-time employee."

Berzups acknowledged that she and Dockett have had a few blowups, but their common vision for the business—and open communication—brings them back in sync.

"I'm brutally honest," Berzups said. "If we're talking about an issue in general, and things start to feel tense, we say, 'Time out. Let's go sit down.' And we go into the conference room and talk quietly."

5. Can you spend plenty of time together?
More often than not, the success you reap from your partnership will depend on the amount of time both partners spend contributing to the businesses—personally and as a pair.

“The partnership can absolutely fail if one of the partners becomes a deacon of the church, a member of the zoning board, or runs for office…all of which become more fun than running the business,” Haeberle said.

If you and your partner commit your time and energy to running the business, the question becomes whether you can tolerate spending a large portion of your working and personal time together. "You have to imagine spending time with them hours on end and not hating their guts," Hill said.

When Berzups and Dockett moved in to an office together, it took some adjustment to become accustomed to spending so much time together.

"Saying you've known someone a really long time, it's not the same when you get into a work situation."

What did you consider before becoming a partnership?
What did you search for in a business partner for your consultancy? Post your comments below or send us an e-mail.

 

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