Entering a new business partnership can be as frightening as it is exhilarating —especially if it’s your first venture into entrepreneurship. As most entrepreneurs and business owners know, the creative, big-picture ideas are often where the passion lies. On the flip side, the finances can be a bit of a dreadful subject.
However, having those tough conversations about money up front can save you from world of struggle later. Finding the right tact and timing are key to a successful, productive exchange. Here are a few things to keep in mind before setting up a meeting with a potential new business partner:
Get clear up front about each other’s intentions. If you discuss nothing else, in the very least you must have a conversation about how much you’ll each be contributing financially to the business. And subsequently, how you’ll divide the profits down the road. Also, if one partner plans to make a quick exit and sell their shares, make sure you understand the impact of that decision. While it’s impossible to predict the future, having these contingencies in writing will only set you up for success.
Understanding how they manage their personal finances will help you get a feel for how they might handle business finances. Although some debt may not be a reflection of poor money management, (think student loans) someone who is in massive credit card debt might not be the best person to go into business with.
Seek out someone who compliments you. That means if you’re a risk-taker, you may want to find someone who is more financially conservative to help create balance. Having too much of either won’t serve the business as well.
Check out this helpful infographic from Credit.com: