Picking the proper partner

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This article was published 19/04/2024 (530 days ago), so information in it may no longer be current.

There are plenty of ways to be in business, and serial entrepreneur Luc Bohunicky has done most of them.

“It’s not my first rodeo,” says the sole proprietor of Avid Golf Bar and Lounge in Winnipeg. “I’ve seen all different variations from a partnership perspective: I’ve been a solo founder, co-founder, first employee in a start-up and have been a partner that’s joined an existing partnership.”

Forming a partnership can be a key decision in the lifespan of any company. It can lead a company to bigger and better things, or can be a prelude to disaster.

Fans of iconic Winnipeg bread maker KUB Bread celebrated the arrival of tie-dye sportswear magnates Chip and Pepper Foster, who promised to revive the shuttered bakery and keep the rye bread flowing.

A year later, the KUB ovens remain cold.

Meanwhile, beloved Corydon Avenue bakery Pennyloaf Bakery is closed, its building for sale. Pepper Foster and accountant James Fiebelkorn purchased it in June 2022. In January, staff who claimed they were frustrated at Foster’s management of the bakery, quit en masse.

Fiebelkorn said he concluded it wasn’t feasible to reopen and he couldn’t continue making payments on a closed business.

“It just didn’t make sense to try and rebuild it when I’ve got a partner that I don’t want to be with anymore and I can’t trust,” he told the Free Press in a March 27 story.

The Free Press interviewed a number of business experts on the challenges of taking on a partner. All stressed they were not commenting specifically on the Pepper Foster experience.

Bohunicky says the first question any entrepreneur must ask when considering taking on a partner is simple: “Do I need a partner and what value does that partner bring?”

A simple influx of cash may not be enough. “It changes the dynamics of the business,” Bohunicky says. “If you take money, you don’t have the same autonomy. If I take money from investors, I now have a boss.”

That strikes at the heart of what Lisa Cefali, a shareholder and strategic adviser at Legacy Bowes consulting, says is the critical part of deciding on a partnership. Yes, there are partnership agreements to write and credit reports to pull, but she says those are “transactional details.”

“The key word is it’s a relationship. Everything is a relationship, what are you both bringing to the table,” she says. “It’s not 50-50, it’s 100-100. Both sides have to give 100 per cent. It has to be complementary.”

Cefali also stresses answering the “Why bring in a partner?” question, and recognizing the business may change when a partner comes aboard.

“You need to go in with very clear expectations: if it’s going to be your vision going forward, you need to appreciate that chances are that’s not going to happen,” she says. “The partner may carry out your vision but also may add to it, or go in a different direction.”

Bohunicky says it may make sense to partner with someone who brings a complementary skillset to the business, such as when a founder may be skilled at sales and marketing and a prospective partner has the manufacturing or logistics expertise needed to ramp up production.

Joelle Foster, president and CEO of North Forge Technology Exchange, has a long track record of bringing start-ups to fruition.

In addition to her job at North Forge, she’s also the co-founder and managing partner of the Women’s Equity Lab. Prior to her return to Winnipeg, she was the executive director of Calgary’s Hunter Hub for Entrepreneurial Thinking. Before that she was the director of Futurepreneur Canada for Manitoba, Saskatchewan, Alberta, Nunavut and the Northwest Territories. Since 2008, she’s helped 500 businesses open their doors, she says.

Foster says there are a number of key steps to take before pulling the trigger on a partnership.

“Make sure you are aligned on the same vision,” she says. “Clearly outline each of your roles and expectations and then agree on how decisions will be made, who will make them and what process to follow.”

She also says each partner should pull a credit check on the other. “Review each other’s financial health to ensure there are no undisclosed debts or liabilities.”

If this all sounds like a prelude to marriage, in some ways, it is.

“It truly starts out as an open-ended conversation,” Cefali says. “What are you trying to achieve and what are your pain points? That’s a real partnership. It’s not a win-lose or I’m going to win right away.”

Due diligence is critical, she says, no matter who the prospective partners are. Get references, check out how previous partnerships worked out. “A good partner will allow you to do that.”

Cefali, who holds the designation FEA (family enterprise adviser), says the situation becomes even more complicated in family businesses. Old grudges often interfere.

“They’re sitting at the table, trying to decide things when what happens is they’re still talking about who got the better bike when they were 12 years old,” she says.

It can be particularly tricky when the business hands off from one generation to the next: parents often retain an equity stake and then feel entitled to stick their noses in from time to time “and stir things up.” It’s important to decide who has authority and then impart that information to employees to ensure there’s no confusion, she adds.

In all cases, partners must agree on an exit strategy for each side: if someone wants out, how does that happen?

Bohunicky agrees with all Foster and Cefali say, but says in the early stages, partnership agreements can be simpler: as a start-up, neither side really has much to lose, but as the business grows and the concept is proven, there is now some value that each partner should protect.

In the end, Bohunicky is happy to be on his own, and his reasoning offers good advice.

“You have to understand, when you’re taking someone’s money, when there are strings attached, to me that creates as much of a liability as an opportunity.”

kelly.taylor@freepress.mb.ca