Whether you are making a plan to start a business or expand one that exists, inviting partners to join you may be the best way to achieve business goals. Ideally, partners bring some combination of complementary skills, capital resources and strategic relationships that will make the business grow and prosper faster.
Before initiating a partnership, evaluate the resources you need to launch your venture. If you anticipate that start-up or expansion capital may not be available, then taking on a partner or two may be the only way to take your business from the drawing board to reality. But if skill sets beyond what you possess are the issue, you may be better off hiring a few key employees. Speak with a business attorney to devise a way to attract key employees for your management team by offering equity in the business, but not so much that you risk losing control. Remember to include the option of your being able to buy back shares if you like.
Similar business goals and priorities
Business partners must share a vision of the long-term goals and priorities for the venture. How big do you want the business to be? How much of your life are you willing to devote to building the business? Have conversations and brainstorm different scenarios that might happen during the life of the business and how each of you thinks it would make sense to respond. Partners must be able to agree on a course of action to move the company forward if success is to be realized. Serious discussions about each partner’s preferred vision of the future will give valuable insight into how to handle challenges and opportunities that might present themselves down the road. Write a business plan together and as you do, almost everything will come out in the wash.
Similar approach to customer service
Customer service is an important aspect of the business brand. Customers must know what to expect when doing business with you. It will only confuse and frustrate clients if one of you is willing to burn the midnight oil and move heaven and earth to exceed expectations every time and the other is willing to let whatever it is wait until 9:00 AM the next morning. Whatever approach you take, devise standardized, written customer service protocols that all partners can accept and agree to abide by.
Mutually agreeable exit strategy
Is this a one-off project based partnership, or is everybody in it for the long-term? Do you envision building the company rapidly and attracting a buy-out offer, or is this a business you would like to pass to your children? Guided by a business attorney, discuss the circumstances by which a partner can quit the partnership and how the transition will take place. Who can buy out a partner? What is the protocol if a partner becomes medically incapacitated and can no longer work in the business? In a divorce, can you wind up being in business with a business partner’s ex?
Your state may not require a written agreement to form a General Partnership, but you are strongly advised to do so anyway. A written agreement will clarify the parameters of the partnership. Specify the share of the business owned by each, the division of net income (or losses) and the duties and responsibilities of each partner. Commit to writing everyone’s shared understanding of the partnership business arrangement.
Forming a partnership and going into business with one or more people can be an enjoyable and profitable experience, but it doesn’t work for everyone. When partnerships go wrong, they ruin relationships and bank accounts. Choose partners wisely, be realistic and transparent and put everything in writing.
Thanks for reading,