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from Aug 2008 issue of Houston Real Estate Experts - FREE subscription

The 7 Step Partnership Acid Test - How to Choose the Correct Partner

by Joe Moughon


The purpose of the partnership "acid" test is to evaluate your potential partner. More partnerships fail not because the business fails, but because the relationship fails.

  1. Check the track record.

    With a "working" partner you want a doer, not a talker. Past performance counts. Check out education, experience and career growth.


  2. Investigate personal history.

    How is his or her health? Gambling, alcoholism, drugs or other personal problems can be fatal to a working relationship.


  3. Probe prior partnerships.

    You will be amazed at how many potential partners have had prior partnerships. How did they work out? This is especially important with "money" partners, to test if they did what they said they were going to do or if they were chronic troublemakers.


  4. Meet the spouse or significant other.

    How is their relationship? Troubled personal relationships may mean troubled business relationships. Is the spouse or significant other in favor of the partnership? Futhermore, you will soon discover the amazing similarities of marriage and business partnerships.


  5. Examine the lifestyle.

    A shoestring start-up needs every penny it can get, and that means profits being plowed back into the business rather than being harvested by a high-roller living for today.


  6. Talk about business.

    What does he or she know about it? Do you both want to achieve the same things from the business? Let him give you his ideas and compare them with yours. Listen carefully. It won't take long to find out whether a partner can match your business mentality.


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  7. Do you think alike?

    On one hand, it is healthy to be opposites; on the other hand, you must have a lot in common, for example, work ethic. One partner may be the idea person, while the other puts the plan into action. One partner may be comfortable with sales, while the other is good at managing operations. Check whether his ideas are compatible with yours on such issues as hiring, firing, the need for planning, hours worked, what time to go to work, what time to get off from work, salaries, and finances.

Bonus step.

Do not rely on a standard corporate book or a partnership agreement to seal the deal. You should supplement it with a written pro-active business plan that outlines the specific objectives and steps to be taken by whom and when to meet those objectives. This can eliminate many arguments and misunderstandings.

One more thing: never choose a partner that can't come up with at least $10,000 within 48 hours.

This article is reprinted from "Successfully Starting and Operating a Business" by Joe D. Moughon, with author's permission.

Joe D. Moughon, CPA

Joe Moughon has helped hundreds of entrepreneurs achieve their American dream. He works with Houston-area businesses and individuals in the areas of marketing, accounting, taxation, planning and coaching. Joe teaches "Successfully Starting and Operating a Business" and other popular classes at Leisure Learning Unlimited. He may be reached at 281-924-6739 or by email.