7 Things To Consider Before Entering Into A Business Partnership
If you are thinking to start a business with a partner, congratulations!
Did you know, some of the best and most successful businesses were built because of great partnerships. Companies like Google, Microsoft, P&G, Infosys, and many more were built by multiple leaders with productive relationships.
Business partnerships are incredibly simple and incredibly hard to understand. Therefore, before you make the leap, consider the following list and avoid the potential pitfalls.
1. Describe your mission
Before starting a business or getting into a partnership, describe what sort of activity you plan to engage in. Be clear in your approach because vagueness can only prove to be suicidal.
2. Be clear about contributions
Assuming the person you are partnering with is honest and trustworthy doesn’t mean you should take things lightly. Make it a point to discuss about who is going to contribute what (money, information, resources) and how long and put these things in writing.
3. Be ready to compromise
Business partnership is like a marriage. It only works if each partner is ready to compromise for the betterment of their business. Ego and personal interests should best be avoided in business partnerships.
4. Fight but don’t shut shop
Just like in every relationship, differences in opinion will arise in a business partnership. But don’t let those impact your business. Best approach is to put in writing how you will handle conflicts so your business can continue its operations.
5. No obligations please
6 out of 10 partnership businesses fail because they give away what they don’t have. Here’s a typical situation – A has a business idea and B has the business skills. So they decide to become partners but soon A feels himself liable for B’s obligations and thus A and B end up working against each other, which ultimately leads to a very difficult situation.
So don’t have any obligations in business; be clear with your co-founder(s) about your terms and have everything in writing. After all, finding a perfect business partner is not easy.
6. Never have a 50-50 partnership
From my experience I can tell you the 50-50 business partnership model doesn’t work because each partner considers himself the boss and assumes operational control. No need to explain what happens next. Avoid such frustrating situations by going with a 60-40 or 70-30 split.
7. Have an exit strategy
Even if you partner with your best friend, you should understand that business precedes friendship in the business world. Therefore, have an exit strategy in place because you never know if you or your partner will be interested in the current business in future. This will save you from lot of problems down the road.
Conclusion: In my experience, partnering with someone is not always a good idea to start a business. However, if you can find a co-founder whose strengths can dominate your limitations, you should startup with a partner.
Have the partnership agreement in place and keep the above points in mind prior to partnering and you can build a successful and sustainable business along with your co-founder(s).