Despite his God-given abilities and otherworldly skills, Michael Jordan could not win a single title for the Chicago Bulls. Fast-forward five years after Jordan’s final game in the NBA, another player seemingly kissed by God upon birth, LeBron James has failed to win a single title for the Cleveland Cavaliers. Even when Jordan and James had a solid team around them, it took them one or two years to win their first championship title.

Building a business goes through the processes same as those in building a championship team. Despite your individual accomplishments, skills, experience, and levels of competencies, you cannot hope to succeed on your own. You can achieve a certain level of success under your own merits, but doing so is not representative of what you can accomplish under fully optimized conditions. You need to build a team of people who will comprise the final components to a winning business model.

When you are in the process of organizing your business, you will inevitably come across this question: “Do I need business partners?”

The general description of a business partner is one who contributes equity to the enterprise in the form of capital and/or expertise to ensure goals are met and interests are protected. Deciding on having a business partner does not mean your business structure has to be a partnership. You can set up a corporation with four other individuals who are viewed as “partners” in the context of running the business but have different participations in terms of equity and function.

There are several types of business partners, each with its own legal implication in the distribution of equity, level of participation, and obligation in the enterprise.

For the purposes of this article, I will only discuss the two types that are predominant in a corporate structure: active and dormant business partner.

An active partner is one who is directly involved in running the business affairs of the company. He or she owns equity and is designated to manage or oversee a specific area in the company.

A dormant partner is one who is not involved in the company’s business affairs. He or she owns equity, which is typically less than that of the active partners. He or she also shares with the profits and is accountable for the company’s debts.

Before you can decide on which type of partner you need, you first have to decide if you need to have business partners. Here are a few questions you have to ask yourself to make that decision:

  1. Do I have enough capital to start and sustain the business for at least six months?
  2. Am I confident of my skills and competencies to get the business running efficiently during the start up stages?
  3. Am I strong enough emotionally and mentally to forge through the most stressful periods of operation?
  4. Can I handle all the essential tasks of the business without missing a beat?
  5. Do I have the ability to expand the business on my own?

If the answer to all of the above is “no,” then you definitely need to have business partners. As for the type of partner you need, opt for a dormant partner if your reason is primarily for capitalization purposes. If your purpose is to distribute responsibilities so you can focus on your core competencies while being assured of capitalization when needed, finding an active partner is the best.

In finding the ideal business partner or partners, the immediate go-to solution of first-time entrepreneurs is to invite close friends or families. The reasoning is obvious. Venturing into business for the first time can be a daunting task; it is the “Great Unknown.” We don’t know how to start, what to expect, and what to do. In some ways, it’s similar to your first day in school; you’re either looking for a familiar face or someone you can latch on for security and assurance.

Our friends and family are familiar. They’ve been with us through the good times and bad, and our relationships have stood the test of time.

But does the history of friendship enough to merit our trust in the context of business?

Is blood truly thicker than water when it comes to managing a business?

Perhaps familiarity is not ideal for business. Who was it who said, “Familiarity breeds contempt?” It was Apuleius, a writer whose own family accused him of deception through magic spells!

I’ve heard all of these before.

“I got him to be my business partner because he stood by and helped me through the toughest times. There’s no one else I would rather start a business with.”

“I’m lucky he accepted my offer to invest and become a partner in the company. He’s so smart and has been responsible for the success of all the companies he’s handled.”

“I’ve confided with her all my life. She knows my deepest secrets just like I know hers. I’m sure I can trust her in business.”

If at this point, it seems that I’m discouraging you from inviting friends and family from becoming business partners, I’m not. But the reality is business is not an incidental experience. It’s not a one-time thing. It’s a long-term commitment to an endeavor where the objective is to increase shareholder value over time.

In some ways, it’s like being married. There are trials, tribulations, as well as milestones and triumphs. Through it all, you stay committed, work through the most difficult situations and celebrate the victories together. People have said, “You won’t really know your partner until you’ve married them.” You stay together for richer or poorer, in sickness and in health, ‘til death do you part. But in business, death could be bankruptcy or insolvency and it is similar to a divorce or a separation. As in the case in the Philippines, collateral damage can be extensive, and the consequences can be beyond repair.

I’ve heard this one before. Perhaps so have you.

“We should have never gotten married. We were happier and the relationship was in a better place. Marriage ruined it.”

By the way, that was the G-rated version.

I know what I speak of because I’ve worked for the family, and I’ve had friends as business partners. These did not result in long-term, sustainable business success, and in fact, these caused long-term, irreparable damage to the personal relationship.

Failure was not anyone’s fault. We were simply not right fit.

Right fit is not a consequence of blood ties or shared experiences. It is a function of discovery. Everyone is unique, and that makes each person different. But having aligned values doesn’t mean having the exact same core values.

Right fit means having the predisposition of arriving at the same ideal, goal, or objective.

So how do you find right-fit business partners?

1. Identify Five Nonnegotiable Core Values

Right fit means having aligned values, purpose, and vision. Your core values distinguish who you are. They guide you in every single decision you make—how you respond to failure and maximize success. Your core values influence how you think and react and how people perceive you. By determining your core values, you will identify your purpose and vision. Selecting your five nonnegotiable core values means you will not compromise them under any circumstance in the face of any situation you may find yourself in.

Mine are commitment, discipline, competence, respect, and trust.

One of my previous business partners was frequently late and unprepared for meetings, kept getting distracted by the women in the coffee shop, and never bothered to go over the studies that took me two hours to prepare. Having to go over the studies point-per-point when we could have used the time to discuss the findings was frustrating.

2. List Your Competencies

A great partnership is one where skills and competencies are complementary. My strengths have always been on strategy design, organization, technical and fundamental analyses, and implementation. But networking and IT were glaring weaknesses.

I recently invited one of my contacts as a partner because of his experience in developing businesses through his network. I made it very clear that his area would be on client acquisition without any involvement in operations, which was my forte. Our arrangement was detailed in a notarized Memorandum of Understanding or MOU.

The arrangement has been productive as he has been able to deliver business to the company. To be clear about it, he and I were friends but not great friends. I don’t even know what his favorite NBA team is or what he does in his spare time. But maybe that’s why the relationship works well. There are less emotional ties and it’s easier to run things professionally. As for IT, I did not find a partner but instead reached out to a long-time former associate to render services in case we needed it.

 3. Share Your Business Experiences

In a company I cofounded, my business partner, a coequal in terms of equity, never experienced what it was like to work a regular 9-to-5 job. Straight from college, he worked immediately for the family business.

In my case, I worked as a regular employee for two years starting from the bottom and made my way to middle management. I had the great experience of working with people of my own peers and learned how it was to be on the other side. I went through the processes of the time card, filing taxes, managing my life with meager income, and being critiqued, sometimes heavily, by my supervisors.

I cherished those two years because they were both enriching and humbling. But best of all, I experienced what it was like to compete in the “rat race” or the “concrete jungle” and win.

My business partner did not have these experiences and had limitations because of it. He had issues speaking to people, dealing with numbers, and discussing business with clients. On my end, I had gone through so much tribulation that I tended to complicate even the simplest situations. We were aware of these limitations before we started the business, and we tried to overcome them. Just like a doomed marriage, irreconcilable differences eventually broke the relationship.

4. Address the People Perspective

One of the issues that you have to address right away with any potential business partner is his or her perspective on people. In the Philippines, I’ve come to understand that most businesses do not trust people.

Our history has been punctuated with cycles of colonization and rebellion that our culture itself has been influenced by the fear of uprisings.

Companies are reluctant to regularize employees for fear of being infiltrated and unionized. You see it in the rise of staffing companies the last few years. In theory, you regularize people who have consistently attained benchmarks. By not regularizing, you risk process standardization.

It’s a risk versus reward conundrum: do you believe that the risk of regularization outweighs the reward of rendering consistently top-notch service to your client and customers? If so, then you must believe unionization is unavoidable and an abject reality in business. The truth is the right to unionize is protected by our Constitution. Unless you can enforce a Constitutional amendment, you cannot do anything about it.

In my view, people are the most valuable yet the most misunderstood asset in any organization. I do not fear regularization because I need the best, right-fit people to help manage the business. If you manage with the intent of increasing the value for the stakeholders, everyone will benefit.

5. Discuss Great Expectations

Sit down with your prospective business partner and have a casual discussion on what you expect from each other. Determine your strengths and weaknesses and come up with solutions to potential problems. Create scenarios and ask how he or she would work to resolve them. Share your thoughts on work ethics, business philosophy, and ideologies and assess if your prospective business partner subscribes to these in his or her own way.

One of the conflicting ideas I had with a former business partner was on the argument of image versus substance. He had the belief that image is everything even if it conflicted with the general purpose, that is, as long as you wore nice clothes, looked the part, and was nice to people, you can represent a company.

On the contrary, I’ve always felt that image without substance is nothing. Content has always been king. You always have to be prepared and remain updated in business. The worst thing that you can do to a company is represent it and then appear incompetent. You can wear an Armani suit, but if you don’t have a clue on how to position the client’s campaign in the next five years because of ASEAN Integration, what good will it do?

Having business partners is a good option in managing your business. But focus less on personal relationships and more on right-fit relationships. And even if you do find right-fit business partners, don’t believe that conflicts won’t arise. They will, because conflicts are part of a business. However, right-fit relationships allow you to work it through.