Building Your Team & Finding Partners for Your Business

The secret of the success of Standard Oil was that there had come together a body of men who from the beginning to end worked in single-minded cooperation.
                            - John D. Rockefeller

Many aspiring entrepreneurs have asked me how they can find a business partner. I always answer that a partner is not someone that you can find overnight or in a few weeks. It usually can only be someone that you have been friends with for a while and have developed trust in and established trust with, someone that has worked for you for some time, or someone you’ve worked with in the past.
Until April of 2003, I had never had a business partner. Today, I have four.  Three of them I met initially through the Carolina Entrepreneurship Club at UNC—the other I met through the Alpha Kappa Psi business fraternity.
Having a business partner can be very helpful. Partners can help with financing, industry contacts, or taking over roles you have less experience in. They can allow you to get twice the work done in half the time, and can give you that needed motivation when things are tough.
If you do wish to find a partner, start networking. Join your local Chamber of Commerce and volunteer for committees and in your community. If you are a student, join business clubs or business fraternities. Talk to people about your business whenever you can. Put up flyers looking for a partner in an entrepreneurial business. If you receive any replies, meet with that person and if you feel it would be good to do so, start them in a role where they can began to learn and show you their commitment. After a few months, you may be ready to offer them part ownership in your company.
I have found that one of the toughest conversations to have with someone is the discussion regarding equity distribution—what percentage of ownership each partner gets. It is often hard to negotiate with someone who is a close friend of yours. Because of this, some partners simply decide to split things equally. Unfortunately, it is a rare occurrence that all persons involved contribute equally to a company. If the proper steps are not taken, such an occurrence—when one partner is not living up to his or her end of the deal—can destroy long lasting friendships.
To protect against this, I would highly recommend two things. First, no matter how difficult it is, have a serious conversation with your partner(s) about who should get what. Base your discussion on the following four factors,

1.    Work completed in the past;
2.    Monetary investment into the company;
3.    Who will be doing work in the future; and
4.    Experience and contacts in the industry.

Secondly, I’d very much recommend vesting your shares and having a stock restriction agreement. Vesting is simply the granting of the decided upon amount of ownership over time, instead of all at once. For example, if you give a partner 30% of your company without vesting his shares and he leaves a month later, he’ll leave with 30%. On the other hand, if you vest that partner’s shares over 3 years, he will leave with only 0.83% of the company. In this case, he would have to work for the full three years to receive the 30%. Vesting is used often by venture capital companies to put ‘golden handcuffs’ on top executives. If you do use vesting, you’ll need to have a stock restriction agreement that spells out these terms, including the terms of sale and transfer. If you are in the United States, you also may wish to file an 83(b) election with the IRS to shift your tax burden from the year of sale to the current year.
Before you launch your company, you may wish to bring additional persons onto your Board of Directors. You may wish to ask industry veterans or key investors to join. Simply keep in mind that you should have an odd-numbered board at all times, as decisions will not be able to be made with an even number since a majority vote is needed. In order to attract experience to your board, you may need to offer stock options or a yearly stipend for members. You also may wish to set up an informal Advisory Board for your company.
As your company grows, you will have to add on certain professionals and outside advisors to your team. You’ll want to have a good accountant, attorney, financial advisor, insurance agent, and banker. These important advisors will be a big part of your company’s success or failure. As Robert Kiyosaki says in Rich Dad’s Guide to Investing, “First dream of having a team of full-time accountants and attorneys. Then you can have the big boat and the free time.”
As you grow your team and begin hiring employees, you’ll have to quickly learn to evaluate applicants and resumes, and do interviews. As it is very hard to tell how good someone will be or how they’ll fit into your company’s culture from just an interview or resume, I ask that all new entry-level hires work as an intern for me for four weeks. During this time, I evaluate the two most important qualities that a good worker can have—initiative and work ethic. You’ll quickly learn that no matter what someone’s experience, if you can find someone that has a bias toward action, takes initiative, and has a solid work ethic, you’ll have found someone that you’ll want on your team permanently.