This is why, when we work with business owners on selling their business, we often advise them to at least imagine the transaction as recruiting a new partner.
While adding a capital partner might be structured as a merger, acquisition or investment, it’s also the beginning of a close association intended to last a number of years. So, we find that it’s as important to be clear-eyed about the qualities you’re truly looking for in a partner as it is to negotiate advantageous deal terms. By the same token, it can be beneficial to simultaneously consider what a business partner might be looking for from you, especially if they’re essentially interviewing to be the successor owner of your business.
5 Tips to Recruit and Collaborate With a New Capital Partner
Here are five aspects to consider to know how to collaborate with a new business partner and even potential buyers.
1. Consider how effectively you’d work together.
Interviewing a person for a partnership-level job, a key aspect of how to collaborate with business partners, is different from interviewing a regular employee. It’s easy enough to let an employee go if they don’t turn out to be a good fit, but it’s very difficult to fire a capital partner. Before deciding to have a person join your organization at that level, it’s crucial to consider how well you would collaborate and whether your personalities would resonate or clash in a work environment. Wherever possible, try to find a person who complements your strengths and weaknesses, embodying the essence of effective collaboration with business partners.
2. Be candid, rather than cagey.
When selling a business, there’s certainly a temptation to emphasize the positive, or deemphasize any difficult aspects. That strategy may make sense if your goal is to complete a sale and walk away, but if you’re looking to start a genuine relationship, you can’t enter into it under false pretenses.
Businesses are communities who solve problems together. If you’re seeking a new capital partner to join your community, being candid about your business’s challenges is a way of seeing a person’s strengths and interests, while providing clarity about whether they’re the right person for the job.
3. Engage them about the future.
Many sellers like to tell potential buyers their origin story or brag about their track record, but as you consider potential capital partners, it makes more sense to start talking about the future instead of the past. Describe a challenging scenario and get their thoughts on how they’d approach it, as well as how they might draw upon the skills of other employees at your company.
This approach not only reveals how to collaborate with business partners effectively but also frames the conversation in a way that can be helpful for potential buyers, too, since they’re most interested in where your business is headed, but use your history to validate their assumptions.
4. Deemphasize price.
As you put emphasis on the above aspects of selecting a capital partner, what you’re also doing is deemphasizing price as the No. 1 criteria surrounding a deal. For many buyers, achieving a great future for the business and paying a little extra for it is a better outcome than paying bottom dollar at the expense of it not being the right fit. While both sides should aspire to a fair price, their shared goal should be building a productive future together.
5. Give your new team time to gel.
Once a new capital partner joins your company, prepare for a period of growing pains on your way to a successful integration. Any time a team of colleagues adds or loses a person, the resulting group should be thought of as a new team, not the original team plus or minus one. Any change upsets the dynamics of the former team as new relationships form or old ones change.
Every new team goes through three stages: forming, storming and norming.
- Forming: People spend time building habits together.
- Storming: Friction points come out.
- Norming: The new team establishes norms of how it will work together.
It can take patience on the part of a manager to allow these stages to take place naturally. Don’t be nostalgic for the past, and don’t be overly sympathetic with your team members. Your organization will ultimately be better served if you let your new capital partner and existing employees get to know one another, work out any new challenges and establish new norms.
How Oaklyn Consulting Assists Businesses in Transition
Every business goes through periods of major change, whether when taking on a capital partner or at another milestone that might involve delicate decision-making. At Oaklyn Consulting, we assist entrepreneur owner-managers, investor-backed companies and other clients as they wrestle with the moving parts that surround complex transactions, such as mergers, acquisitions, capital raises, recapitalizations and joint ventures.
Taking on a capital partner is a significant adjustment for any organization. But by taking the time to find the right individual, and enlisting Oaklyn Consulting’s help as needed, you can strengthen your business and help it continue on a positive trajectory.