How to choose your partners wisely: four lessons you learn over time
If there is one decision that can shape the fate of a company more than any other, it is the choice of partners. Not the first client, nor the product, nor even the funding. The partners.
And yet, it is a decision that many make too hastily, overly convinced that initial enthusiasm is sufficient guarantee. It is not. More than twenty years advising companies and entrepreneurs allow us to say with some confidence: there are no magic formulas, but there are certainly avoidable mistakes.
The hardest thing to measure is what matters most: values
When looking for a partner, the temptation is to focus on what is visible: the capital they contribute, their network of contacts, their experience in the sector. These are reasonable criteria, but insufficient.
Experience shows, time and again, that the most painful partnership breakdowns do not arise from a lack of money or from strategic disagreements. They arise because two people who believed they shared the same approach to business discover, once the company has been established, that this is not the case. One prioritises growth at all costs, while the other values stability. One is willing to cross certain ethical lines, while the other is not.
Defining objectives when choosing partners
Another essential aspect in choosing partners is clarity regarding shared objectives.
From the outset, it is essential not to take anything for granted and to agree on key aspects such as the dividend policy, the exit horizon, the admission of new partners, potential scenarios for the sale of the company and the role of each partner in the project.
A lack of alignment on these points can give rise to significant conflicts in the future. For this reason, clear definition contributes to a more stable partnership relationship.
A shareholders’ agreement is not bureaucracy: it is the insurance no one wants but everyone needs
If one practical piece of advice had to be chosen from all of the above, it would be this: enter into a shareholders’ agreement. Always. Even if you get on brilliantly. Even if you have known each other all your lives. Even if it seems unnecessary.
The number of partnership disputes that could have been avoided with a well-drafted shareholders’ agreement is difficult to quantify, but it is enormous. And the reason why it does not exist in many cases is understandable, though not justifiable: in the early stages, when the relationship is at its best, it is hard to imagine that things could ever go wrong. That is precisely the best reason to put it in place at that moment.
Life brings unforeseen circumstances: illness, personal changes, economic crises, differences of opinion that become more pronounced over time. A well-structured shareholders’ agreement does not prevent these circumstances from arising, but it does provide a framework for managing them without destroying either the company or the relationship.
The strategic value in choosing partners beyond capital
There is one point worth reflecting on before opening up equity to a new partner for purely financial reasons: in terms of cost, equity is the most expensive form of financing there is. Bank credit, even in a higher interest rate environment, is more economical. And in between there is a whole range of options—non-bank debt, alternative financing—that are worth exploring first.
This does not mean that bringing in partners is a bad decision. It means that, when it is done, it should be justified by reasons that go beyond capital: sector knowledge, network of relationships, strategic capability, or specific expertise that the company does not have. A good partner multiplies value. One who only contributes money, by contrast, comes at a cost that is rarely properly assessed at the outset.
Choosing partners deserves at least the same level of rigour and dedication as any other significant strategic decision. At Devesa, we have spent years supporting companies and partners through this process—from legal structuring to drafting the shareholders’ agreement—precisely because we understand what is at stake.
FAQ – key issues you should consider before choosing your partners
Why is it so important to choose your partners carefully?
Because choosing partners is one of the most important decisions in a company’s life and can determine its long-term success or failure.
What factors should be taken into account when choosing partners?
The main factors are alignment of values, clarity of objectives, formalisation of agreements and the contribution of value beyond capital.
What does alignment of values between business partners mean?
It involves sharing a compatible business culture and ethical principles, which is key to avoiding future conflicts.
What is a shareholders’ agreement and what is it for?
It is an agreement that governs the relationship between the partners and helps to prevent disputes by establishing clear rules from the outset.
Is it mandatory to enter into a shareholders’ agreement?
It is not legally mandatory, but it is highly advisable in order to ensure legal certainty.
Can a poor choice of partners affect a company?
Yes. It can lead to conflicts, deadlock in decision-making and even put the viability of the project at risk.
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