Marie-Therese Phido Business Partnerships Can Make or Break You
We have all heard the statistics that 80 percent of business partnerships do not work. But, due to the immense benefits people still continue to enter partnership agreements. Some of these benefits are: combined skills and knowledge, more business capital, greater borrowing capacity and in some countries, tax benefits.
Despite these, many partnerships fail. It is said that four out of five partnerships do not work. The question is how you become a part of the remaining 20%.
To be part of the 20% that work, it is advised that each party must possess some skill or knowledge that the other lacks. Benefits must be equal to both parties. However, for example, if you work with someone with substantially more experience or less experience than you, it could potentially turn into a toxic relationship. A healthy balance increases the chances that you will both benefit equally, whether it is in terms of professional development or company profits.
Indicated below are critical considerations for choosing the right business partner according to Pamela Wasley and Quicksprout:
This is first on the list for a reason. Bottom line, do you trust this individual with your personal bank account. If the answer is “no,” think twice. As partners, every dollar you spend proportionately affects your personal check book.
If the person is a good friend, make sure that their goals, values and responsibilities are aligned to yours. Do not assume just because you get along as friends that they are. Take a look at their personal life and how stable it is. Personal problems are difficult and can easily complicate their professional life. If there is any doubt, do not do it.
Select a person you have experience with at work, at a nonprofit or on a project. You should know if they are a team player and how they react in difficult situations. If you have no experience with a potential partner at all, do a trial run for a specified period of time before finalizing the partnership.
Partner, employee or consultant
Do not partner with someone just because you cannot afford to hire them. It is better to hire them as a consultant than to give away a part of your company or to find out later that he/she is not a good partner for you.
Make sure you and your partner’s strengths are in different areas. If you have two people who are good at sales and no one who is good at executing on an operational level, it will be more challenging than you think. It is much better to bring someone in who will compliment your strengths. In order to grow profitably, keep some balance.
Both parties need to agree up front what their responsibilities are in the company and stick to them. If one person keeps trying to take over and do everything or ends up doing very little, then the partnership will start to unravel and feelings of resentment will fester.
Just like in marriage, money is always one of the major problems in a business partnership. Therefore, agree in the beginning how you will use the funding you raise and how the profits will be distributed.
Decide on a formula to determine the value of the company should one partner decide to leave to avoid disagreements. Buy/Sell agreements are incredibly useful for discussing all possibilities and how they will be handled before they become a reality.
People are afraid to confront one and another. If you are too afraid to tell your business partner how you feel, you will not be able to make your partnership work.
Without communication, nothing is going to get done. Not only should you and your partner communicate on a regular basis, but you should over-communicate.
Talk with each other on a regular basis, find problems within the company and try to solve them together.
What I have learned is that excessive communication also helps keep both of you motivated. You will come up with ideas, get excited about what you are doing and have fun working together.
Roles and Structure
You and your partner should not be doing the same thing within the company, especially when you are starting out. In addition, there should be a formal structure, in terms of knowing who holds what position – CEO, COO, HR, Finance, etc.
Although personal life goals should not affect a partnership, they actually do. If your goal is to live a relaxed lifestyle on the beach while your partner wants to work seven days a week in the office, things are not going to work out.
One of you will feel that the other is not pulling his or her weight, and it will eventually create a lot of problems.
Your business partner should not be your close friend, though this has been known to work. Good friendship can sometimes get complicated with the tensions of running a business.
Emotions tend to get the best of all of us. You should not get emotional with your business partner; you need to be logical. When something is wrong, take a step back and look at it from an outsider’s perspective. Figure out what the logical response would be and take that approach.
At the end of the day you both will do what you feel is best for the company, so there is no need to get emotional. Emotions will not help you accomplish your goals; they will just cloud your judgment.
Why is all of this so important? Because a great business can be severely damaged by a bad partnership and never reach its full potential. Starting a business and/or a partnership is an emotional experience. When doing your due diligence, set your emotions aside and make sure everything lines up and has the potential at staying aligned.