BEYOND SIGHT: Choosing Your Business Partner

By Monsi A. Serrano

I chose this topic upon the request of one of our readers who is planning to put up his own business with some friends and siblings because he lacks the capital he needs to jumpstart a good business idea. He saw that his siblings and friends have shown some interest in supporting his project and they would like to bankroll on his business idea. However, he is just afraid of what might happen in the end like if they quarrel or the business venture they put together will fold up in the end. He sent an email asking how he would deal in partnering with his friends and siblings and what would be the implication if he chose to partner with them. Some other issues he brought up with me cover the following: What would be his role and how to choose the right business partners? How would he know if the business partners he will choose are the right people, and so on? Is partnering with friends and siblings a good idea? What are the possible scenarios if the business venture fails in the end?

These are common questions I often encounter in my dealings with friends and the people I meet. But quite honestly, I would say there is no absolute answer to his questions as no one can really predict the behavior of his partners, whether he is his friends or siblings.

For the interest of the friend who asked my opinion and that of our other readers, let me point out the following pieces of advice in choosing your business partners.

First of all, it does not really matter whether you are partnering with siblings or friends. What really matters to me is whether you all understand the respective roles that each of you need to take and contribute to the growth and development of the company. Partnering is built on trust. While others want a written contract to be written down, which is quite understandable, as someone who has been dealing with Japanese, I learned the value of getting the trust before one is asked to sign a document for the agreement.

We have to understand that there are two types of partners, the active partner and the silent partner. The active is usually the one directly involved in the day-to-day operations of the business, while the silent partner is the one who bankrolls the business and would not like to meddle in the operations. The active partner can be both an investor and the manager of the business, handling the whole gamut of the business. While a silent partner normally waits for the share he will get from the business based on the equity he puts into the venture.

Here’s the important thing, when you are chosen as a partner you have a moral and professional obligation to ensure that you will do your best to keep the business not just afloat but also to perform at its best by also doing your business. It is a 24/7 duty and responsibility, and not the 8AM to 6PM routine. If you are not willing to give your all, and your very best, better not to take the road less travel of an entrepreneur!

I have seen a lot of successful businesses that came into being because of fruitful partnerships of family members ranging from husband and wife tandem, siblings’ partnership, father and children and mother and children. The Stone 2000, the leading architectural and finishing store started as a small business by the couple Naps and Malou Algenio. Their history will definitely inspire our young and budding entrepreneurs on how they started before and where they are now. Started as a “cash and carry” construction and hardware store, but now they already have business partners from the US and South Korea which added value to their business that they franchise to enterprising Filipinos. The same goes with Jollibee, which was started by the siblings of Mr. Tony Tan Caktiong whom I was privileged to interview before. It was a fruitful partnership that was not as easy as everybody thought based on the success they have been reaping now from their hardship and dedication. Then the empire of the unassuming tycoon, Ambassador Antonio Cabangon-Chua, who transcended the hardship in life as a shoeshine boy and continually working synergistically with his children and trained them on the value of his legacy and preserving his good reputation in the country and in the business community both as a hardworking and honest businessman. His children managing their respective businesses have emulated their father in terms of dedication, honesty, and vision in doing business. Then Mekeni Food a backyard business in Pampanga started by husband and wife teachers and trained their children well and made their business one of the admired companies not just in Pampanga but in the Philippines. While I haven’t met the owners yet, their inspiring story resonates with me. Last but not least, is Lydia’s Lechon. Lydias (the name of the founder and matriarch) is not just known for being the country’s oldest and most sought delicious and clean lechon (roasted pig), but also known for quality of food and service. Now, you will see them expanding and providing real and tested business opportunities through their affordable franchise scheme. From their humble beginnings, the determination of Aling Lydia to stick to the business principle of providing quality food made their business grow slowly but surely.

Now, how about success stories of friends partnering together in business? Yes we have seen successful businesses among friends. A classical case is the success of GMA Network. The Gozon, Duavit and Jimenez triumvirate have become a formidable team in the media industry. I would say the success of their business lies on the teamwork and shared values that they have. Another company is the AgriNurture which was started by two friends Tony Tiu and Dennis Sia, and is now a publicly listed company. Success is not determined by the relationship you have but by the kind of attitude you and your partners have whether they are your siblings or friends. 

What are the things you have to consider before partnering with others people?

1. Does your partners understand the business? Does he share your vision and mission? Does your partner believe in the values and principles you advocate for? Does he or she share your passion and be willing to sacrifice during times of crisis? If not, do they have a sincere interest to learn and commit to make the business grow? If you already see some indications of “hush-hush” from a would-be partner, then do not entertain the thought of partnering with him or her. A half-baked partner, even if you re-bake or re-cook will remain either a spoiler or a hobo. Don’t waste your time in exploring to forge that kind of partnership with that kind of person. You might just end up frustrated and traumatized. 

2. What will be your partner’s role, will he be there as financier and silent partner or will he also be involved in the operations? What kind of experience that he or she has? What is the level of dedication? Does the person know anything about the business and has enough experience to be of help to you? Will he be a liability or an asset to your business idea? Why do you say he will be a liability or an asset? Think carefully about this. If your concern of partnering with this person is because of money but you know that he has no added value to your business, then it would be best to look for someone who can contribute not only with money but also with added knowledge, experience and value to the business that you plan to put up or scale up.

3. Communicate your expectations and your plans. Since you will be partnering with others, whether they are siblings or friends, it would be best to communicate what are the expectations that you have from them and also your plans. Tell them how they can contribute to the growth of your business. Don’t exaggerate. Just make your communication plans and expectations clear and simple. Get everyone’s commitment to support you.

4. Define the role of your partner. It would be best to immediately define the role of your partners especially the ones who will directly get involved in the business operations. The earlier you do that, the better for everyone. Thus, you will not hurt anyone’s feelings or ego when things get tough in the process. Remember, don’t allow anyone to rain on your parade. Draw the line. Right here and right now.

5. Limit your partners. The old cliché, “The More, The Merrier” doesn’t apply in the business. The right axiom should be, “Too Many Cooks Spoil the Broth”. It would also be best to choose if you will partner with friends or siblings. They say, “blood is thicker than water”, but we also witnessed that in reality, that doesn’t exist anymore because others say, “Business is business”.  

6. As the rightful owner of the business idea that you share, take control of the majority of the shares. This will prevent from others to take control over your business and of your idea. Now in the event that they want or plan to buy you out, then you can command a price or remain there and buy them out instead. Keep something for yourself unless you really plan to pass the baton and let that trusted person share the same commitment and passion to perpetuate your legacy and grow your business. If you find that, then you find a good successor and even have him run your business and grow further so that others will enjoy the fruit of your labor.

7. Make a SMART plan for your business. SMART stands for Specific, Measurable, Attainable, Realistic and Time-bound plan for the business. Do a reality check. Where are you now? Where do you want to go at the specific time? How do you plan to go about it? Do you have enough resources to execute your plans? If you don’t have, what is your alternative step to take in order to achieve your plans? Can you source the resources from others? How will you pay the loan?

8. When you already started your business, don’t rush. Take baby steps in achieving your business goals. The simpler the business goal, the better. You don’t have to be extravagant and filthy even if business has already taken off the ground and flying high. Remember, the higher you fly, the more painful it would be for you when you fall down. So keep your feet on the ground while you are flying high. Yes, it’s a paradox!

9. Prepare a contingency plan. The best warriors are those who can adapt at any given condition. If Plan A doesn’t work, take the Plan B or Plan C when needed. Remember, in reality it is more prudent to bend than to break.

10. Last but not the least, if you can start your business idea on your own and be creative to generate the resources you need, do it. Always start small, because the lesser capital you put into a business to start, the better for you. It means you don’t have to get so many people involved in the business just to finance your business idea and at the same time, you don’t put all your eggs in one basket. 

Remember, there is always a business risk. It is up to you whether you will take the risk or not. As Peter F. Drucker said, “Whenever you see a successful business, someone once made a courageous decision”