Teaming up with a partner (or multiple partners) to start or expand your business can make taking that leap a little less daunting. However, establishing and navigating relationships with other people can be tricky, especially in a business context. Whether you’re considering a general partnership or incorporating a business with a partner, you’ll need to carefully consider whether that partnership-based structure is the right fit for your business.
Consider the Pros and Cons:
Before you sign on any dotted lines, however, be sure to carefully consider the advantages and disadvantages of business partnerships:
Brain capital: Two (or three or four) good heads are better than one.
Share the workload: You don’t have to wear all the hats in the business. You can even take a vacation and leave your partner minding the business. You have backup. You don’t have to be in two places at one time. You’ll both have better work/life balance.
Access to financing: With more people to back a business loan, you may find that you can more easily access financing for your business.
Support and connection: You have someone else to share the success with.
Decision making: If it is an equal share partnership, always coming to a consensus is difficult and time consuming. There has to be one partner who can be the “tie breaker” or who gets the ultimate say.
Stress: Whatever your previous relationship was, a partnership in a business will test your ability to work successfully together, every day.
Accountability: You do have to answer to your partner(s) – you are not simply your own boss.
Control: You won’t have total control of every aspect of your business. You will have to be able to trust your partner on every level to make good business decisions and live with them, even if sometimes you don’t agree with their way of doing things.
Find the Right Fit
Deciding whether to pursue a business partnership is only the first step – next, you need to make sure you find the right partner. Above all else, the partnership has to be the right fit for all parties in order for it to be successful. Do personal inventories of your own skills then identify gaps that a potential partner could fill. When searching for a business partner you should look for someone who will bring a complementary set of intellectual assets to the business. Choosing a business partner with the exact same background, education, skills and experience is just “you times two.”
Get on the Same Page
Once you’ve established that your partnership will be a good fit (for example, he’s great at marketing and sales, while you’re great with financial forecasting, accounting and business strategy), you then have to ensure that you have the same vision, values, goals and objectives for the company. Come up with these things together and include them in your business plan and strategy. The more aligned you are from the outset, the more successful the partnership.
Get It in Writing
When it comes to the money, you’ll want to make sure you have an open conversation with your business partner early on. There are a number of questions you’ll need to consider:
Who is bringing what into the company in the form of cash, equity, tangible assets, intellectual property etc.?
What is the profit sharing agreement?
What happens if one of the partners decides to leave the company?
What happens if your partner is sick or can’t for whatever reason continue in the business? Are you both taking an
owners draw? How much? Is it equitable for the investment you each bring?
If you are incorporating, include these considerations in your incorporation documents. If you’re setting up a general partnership (unincorporated), get everything in writing – even if your partner has been your best friend since kindergarten, or is a close relative. It doesn’t matter. Business is business. Draw up an agreement that outlines your roles and responsibilities in the company, clearly and vividly, and what you both are bringing into the business financially. Your chances of long-term business success are much better if you have all your agreements in place so there are no misunderstandings.