Finance expert Peter Cox advises on the best way to choose a partner for your business ventures.
A rule of thumb I have always been taught and have seen in real life is – good friends make poor business partners. Like oil and water, business and social relationships simply do not always mix.
The problem is one of emotions. Friendships are based on emotional ties – on sensitive handling of personal needs and feelings. The idea is to shield, protect and support friends in the trials and tribulations of their daily lives.
Although admirable in a social context, this protective instinct can have adverse effects on a pest management operation. To be successful in this industry given the competitive nature and required profit margins, owners require accurate, straightforward and timely information at all times. Owners and management need to insist on a policy of ‘no surprises’. Tough, negative and even devastating information must come to the surface immediately. To me, that is the only way to deal with a problem before it mushrooms out of control.
By attempting to shield a partner from this kind of bad news, the friend is actually doing the business a severe disservice. That is the very reason for avoiding friendship or partnership relationships. Partners simply cannot always be relied on to serve up clear and objective business opinions. The pre-existing emotional binds confuse and distort what must be a simple and responsive business relationship.
For a partnership to be effective, both parties must pledge their basic allegiance to the business, rather than to each other. This is for the good of the operation. It is far more important for the partners to worry about the performance of the operation than to worry about each other while the business goes to the wall.
Whilst the tendency to choose a friend for a business partner is understandable, it should not be the only basis for selection. The best partnerships I have found are based on pure business, usually with each individual bringing certain strengths to the operation of the business.
The following is a checklist that can be used to help in selecting a business partner or second in charge:
- Seek an individual capable of balancing your strengths. If you are good at selling then look towards a person who possesses better skills in other areas of management. Pest management operations need well-rounded management.
- Be certain the prospective partner or senior executive has had experience working with others. In most cases I have found a loner is a loner. In a business, cooperation is crucial to a partnership. Make sure you get it from the start.
- Enquire about the person’s past business experience. I have found the best bet is to go with an experienced entrepreneur, one who has had experience in either owning or running a pest management operation. Inexperienced and incompetent management accounts for a lot of business failure.
- Ascertain that the prospective partner will be equally committed to the company’s success. Nothing causes more bad blood in partnerships than the feeling, right or wrong, that one partner is carrying most of the load. In most cases, I have found that demanding your partner contribute some capital to the business will help to encourage commitment, and most people will work harder when their own money is at stake.
So if you are looking at succession planning into the future, and looking at either a current staff member or an outsider, use these four points as a checklist.
Peter Cox, Peter M Cox & Associates