Mastering Business Partnerships: From Vetting to Exit
Strategies for Building, Growing, and Ending Successful Collaborations
We’ve all heard it: partnerships can either catapult your business forward or create unnecessary complications. The difference lies in your approach—strategic alignment, clear structures, and thorough vetting make all the difference between success and failure.
This week at The Fraternity, Brad and I tackled Working with Partners—an essential topic for anyone thinking about scaling through collaboration. Below are some insights that can help you approach partnerships with clarity and confidence:
1. The Right Partner Fills a Strategic Gap
Partnerships aren’t about finding someone you like—they’re about filling a critical need in your business. Whether it’s expertise, market access, or additional resources, you should always ask: What gap is this partner filling?
Take Starbucks’ partnership with Tata Group as an example. When Starbucks wanted to break into the Indian market, they could’ve gone solo—but it would have been a long, risky road. By teaming up with Tata Group, they leveraged local expertise to expand swiftly and efficiently.
Ask yourself: What’s holding your business back, and how could a partner solve that problem?
2. Vetting: More Than Just a Background Check
Vetting isn’t just about running credit reports and checking financials (though that’s part of it). The real due diligence lies in understanding how a potential partner behaves under pressure and in different business climates. Tools like LexisNexis or Experian can help, but you’ll want to talk to people who’ve worked with them, too.
Example: The SoftBank and WeWork debacle serves as a lesson in failed vetting. SoftBank poured billions into WeWork without fully understanding its leadership’s erratic behavior and financial instability. The lesson? Dive deeper than the surface before making a commitment.
Tip: Always go beyond the numbers—talk to people in their network and evaluate their character and long-term compatibility with your business.
3. Compensation: It’s Not Always 50/50
Let’s get real—an equal split isn’t always fair or effective. The structure of compensation should reflect the value each partner brings, whether it’s capital, industry expertise, or sweat equity. You might consider vesting schedules to ensure long-term commitment or even phantom equity to align incentives without giving away ownership.
Example: Look at Tesla’s approach to executive compensation. Elon Musk’s pay is largely tied to performance targets, keeping his focus on long-term goals while maintaining control over the company. Similarly, your partnership’s compensation structure should motivate performance and align with business growth.
Key takeaway: The right compensation model aligns everyone’s incentives with the success of the business—not just in the short term but over the long haul.
4. The Critical Role of Communication
A partnership can only thrive when communication is transparent and consistent. Regular check-ins, clear decision-making authority, and predefined roles can prevent the usual pitfalls. Even better, sometimes bringing in a third-party coach can help facilitate tough conversations and maintain alignment.
Example: Buffer, a fully remote company, maintains high levels of communication through structured video calls and shared project tools, ensuring no one is left out of the loop. They also employ a transparent culture that helps keep everyone aligned on goals and expectations.
Takeaway: Set a communication cadence from day one—whether it’s weekly strategy sessions or daily check-ins—it’ll ensure nothing slips through the cracks.
5. Plan for Exits—Before They Happen
Most partnerships don’t last forever, and that’s okay. What’s not okay is failing to plan for a partner’s exit. A well-thought-out buy-sell agreement or exit strategy ensures that when the time comes, the process is smooth and business continues without disruption.
Example: Bill Gates and Paul Allen’s eventual exit from Microsoft was smooth because they had structured it early on, allowing both parties to leave on good terms without harming the business.
Key thought: Plan for the exit while things are going well. It’s much easier to put agreements in place before emotions get involved.
Conclusion: Be Strategic, Not Reactive
In the end, partnerships are about strategy. They’re not quick fixes—they’re deliberate, long-term moves that can elevate your business to new heights. Make sure you’re bringing in the right partner at the right time, with the right structure, and always stay aligned on goals.
Need Help Navigating a Partnership?
If you’re unsure about when, why, or how to form a partnership, consider joining The Fraternity to access our weekly calls and resources. Or, if you prefer a more personalized approach, schedule a 1:1 consultation and let’s work through your unique challenges together.
Keep Scaling,
