How to choose the right business partners

By Pavlo Phitidis

Spats between shareholders can signal the beginning of your business’ end, just as it seems to have been for Stuttafords. This week on The Money Show with Bruce Whitfield, we reflected upon the recent shareholder/board fights at Group 5 and shareholder fights between Cell C and their BEE shareholders CellSAf who within themselves are also reportedly fighting. I also had a week of it with 3 businesses that I met, all with shareholder and partner issues. We considered the best ways to ensure you find the right partners for your business, and what kind of opportunities present themselves in company conflict situations:

The best way to avoid internal squabbles is to ensure that you’re working with the right people. Here’s what you can do to make your business spat-proof:

Pick your partners

While the idea of building a business with your high school best friend sounds idyllic, the needs of a business relationship are vastly different to one first created on the sports field. Typically, in business, the first two or three partnerships you make are going to be learning experiences and, by that, I mean, they’ll need to be mistakes – you learn far more through error than you do through success. An ideal business partner will be someone who you have good chemistry with and respect. Respect is vital.

Growth businesses are seldom, if ever, built by one person alone. A business needs three capabilities to grow: a technically obsessed capability to oversees the technical side of your products and services; an entrepreneurial spirit, that brings marketing and relationships and administrative disciplines paying attention to the all-important paperwork that makes your business work, and ensures that it adheres to all necessary legal frameworks. If you go the partner route, be sure that between you, you bring these three capabilities to the table, in effect ensuring that one plus one equals three. Avoid a partner that brings exactly what you bring because when one plus one equals one, conflicts will emerge.

Talk, then walk

Truth is found in action, and that’s why you need to talk with your partner, before you walk a business journey with them. Before you sign a long-term contract with a new partner, start with a small project. That way, you’ll learn more about your individual strengths, weaknesses and, importantly, how each of you face a business challenge. 

Sign the contracts

The best business partnerships are based on clearly defined roles and a robust contract. Set out the rules of your partnership, and directly detail everyone’s roles within the business. No matter how great your partnership may be, it always needs a contract. 

Be clear on why you do business

You need a business partner who is, as they say in Thailand, “same-same, but different.” Your objectives for the business must be the same, but each of you approach problems from different angles.  

Conflict within a business – especially that of your competitors – can also be an opportunity. Here’s why: 

The best people leave

If you’re scouting for great talent, a rival company may have the people you’re looking for. In times of business uncertainty or conflict, the best people often leave, giving you the opportunity to make them part of your team. 

A fresh start

If your shareholders are in ceaseless conflict, it gives you an opportunity to take the next exit and go put your energy into something new. Alternatively, they can take an exit and you can sail your ship with a new crew. In both cases, there are opportunities but action is the key. Time runs out for us all and maintaining the status quo of conflict serves no person and will certainly erode what value is left in the business. 

Time to acquire a stake

When a shareholder takes the exit sign out of a business, you may be able to buy your way into owning a piece of that business, at a far cheaper rate than if the business was not experiencing a conflict situation. If you opt for this route, the likelihood that you get cooperation from both the exiting and remaining shareholder is high. The exiting wants out, fast, when that’s the decision he has taken. The remaining shareholder wants to get the business going once again with its progress having been stalled during the period of conflict. 

Reflection leads to reinvention

If shareholders or partners manage to resolve the internal conflict, it’s a great opportunity to reinvent, or transform, the business. A shakeup can give your business a whole new lease on life. It might also be a good time to get a 3rd party facilitator involved. Someone who understands business and specifically can moderate and add to the discussion as to where to take the business and how.

At Aurik, we’ll work with you and your partners to get this done. We will talk Asset of Value language only bringing you, your partners and the whole business onto a road of growth and wealth creation. That’s what we do best.

Tags: AoV Mindset, Shareholders, Acquisition Opportunities, People Problems

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