Tips you should know if your are considering a business partnership
Starting a business on you own can be both challenging and sometimes even overwhelming. A way to come across this can be by share the load with a business partner. In business as in real life, it is important that the partnership you enter is working well as a conflict can end up having wide consequences for you, your economy and the people surrounding you. In this post you will find tips about the benefits and pitfalls that you often will meet when entering a partnership. This will hopefully give you and your partner a better chance of success.
Advantages of a business partnership.
Finding the right business partner can have a lot of advantages. Here are to mention but a few:
- Shared the financial risk.
- Greater flexibility in case of case of illness.
- Greater flexible in working hours.
- It is possible for you to take a vacation.
- Discuss strategy and problem solving with another person.
- Share the tedious tasks.
When all of this is said you should also consider some of the pitfalls associated with going into a business partnership.
Matching expectations with your business partner
Often business partners are in a hurry to get started with their business and forget to align their expectations with one another. Maybe you know you business partner in advance from for example sport or education and you know that your are getting along quite well. However, this is not the same as working together. The questions below can help you align each other’s expectations.
1. Do you complement each other in terms of knowledge?
That is, you have different educational or occupational backgrounds. This can be a good way to decide how to share the workload between you. For example if one of you, are an engineer he or she can take care of product development and production, while another might have a financial background and can take care of customer relations and administration.
2. Is it possible to make a clear division of responsibilities?
If no one likes to do the administrative tasks, there is a great risk that you will soon loose track of how your business is doing. Also, if nobody wants to be responsible for customer and sales activities you will soon be out of business. Therefore be sure to have a clear division of responsibilities and writhe them down. Also remember that being responsible for something does not mean that the other person can’t know about or help with a given task.
3. Do you have the same goals?
If you and your business partner have very different perceptions of what a successful business is and what constitutes a good work/life balance, then you will most likely run into a lot of trouble up the road. Therefore it is a good idea to be very clear about how long time you are expected to spend on the business, what the goal for the business is etc. Furthermore you should also consider what you will do if your current situation changes, like what if a family member gets sick, if a child gets born etc.
4. Investment vs. influence?
If either you or your business partner has invested more in the company, then there is a high risk of disagreements. Be sure to align if a larger investment in your business also means a higher influence.
5. Do you have the same financial risk?
A difference in risk tolerance, creditworthiness or personal finances between you and your business partner can result in different viewpoints on what chances to take or not to take. This could be the case if one of you sees a market opportunity and want to invest more in the company and instead the other wants to pull out because the house is now at stake.
6. What about privacy?
Some prefer to keep their private life completely outside their work life, while others are more comfortable with sharing all. It is basically a matter of taste, but it may be appropriate to agree on to what “depth” private talk should go. Some private affairs may affect the company negatively, and the negative have a tendency to reinforce itself if you put the lid on.
What if my business partner is a family member or close friend?
Partnering up with family members or close friends can have great advantages and high risks.
If you are considering making a business partnership with the above you should still go through the alignment process just as you would have done if the partner were somebody you just meet. You should also consider that you might loose a friendship or relationship to a family member if you end up on bad terms with the business.
Worst-case scenario – what do we do?
Despite good preparations and intentions, there may come disagreement that can’t be resolved and the only option is for the partners to go their separate ways. Therefore before starting a business partnership, you should also agree what should happen with the company if you need to terminate the partnership. This way you both know the consequences if a disagreements can’t be resolved. This will often be reason enough not to let a discussion get out of hand.
Teaming up with a business partner – your thoughts
Do you have experience with stating a business with a business partner and if so, what considerations did you make before jumping into business? Have you learned anything after getting started that you hoped you had thought of before? Please share in our comments.
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