Having a business partner is a strong asset if you are an up-and-coming entrepreneur for a number of reasons: different perspectives on a plan, new skill sets, and of course, more money. These benefits may give you a competitive advantage in your field, as well as reduce the total amount of time-consuming tasks. But it is not always perfect.
The cost of a partnership that falls apart will hit your wallet hard, and it happens when the legal foundation of a partnership is weak. There have been too many partnerships that have ended on bad terms because of a lack in communication, no written agreements, clash of personalities, and no outlook towards the future.
Before you commit to any business venture with a partner, ask yourself if you’re making the right choice.
- Is this business opportunity the direction you want your business to go?
- Will this benefit your company?
- Is your vision for your business aided by forming this partnership?
It is easy to assume that forming a business partnership will add value to your company, therefore fixing any problems you may be experiencing. This is a misconception. A partnership is a new element to your business that may provide benefits, but it is not a fix-all. Plus there are a host of new business laws that require consideration when you move from a single owner to multiple owners of a business.
Consider how it will affect your time management, financial costs, and energy you put into your work. If you find that you will be negatively affected by adding a partner, reconsider whether it is truly worth it to follow through with a partnership.
A small detail that is important to also consider is the opportunity cost of joining this partnership. An easy way to do this is by comparing yourself to competitors of you and your potential partner: are you limited through this partnership or affected in a similar way as your competitors?
Two clashing personalities can create problems in a business partnership just like in a romantic relationship. Unrealistic expectations, impossible promises, and differing opinions are a few examples of potential catalysts for disaster. You cannot control when your partner is making decisions because of their ego, and not from an analytical viewpoint.
This goes for you as well. Entrepreneurs often believe that they can do it all, and we all know that is not true. Don’t define yourself as a do-it-all entrepreneur, but as a wise leader. Knowing when to delegate work and put trust into others is an important attribute in entrepreneurs. Allow lawyers, accountants, and other individuals you respect to help you make decisions in your plans.
This is one of the most important aspects if you are going to commit to a business partnership. Be aware of your partner’s goals in this partnership, and make sure that what you want is loud and clear. A good way to do this is to sit down with your partner and physically write out everything that you want to accomplish and how you plan to get there.
Be sure to meet with a lawyer before finalizing the partnership. The legal advice you receive will give you a realistic outline of the partnership and an ability to see where negotiation should occur. Be aware that your partner may also have a lawyer that is helping them in the same way, therefore bringing in lawyers is one of the last stages in the partnership creation.
The overall time management of this process is a factor that you should always keep in mind. Moving too quickly on the deal may lead to regret later because you did not take the time to review the details. This being said, time is money. Do not let the slow process of negotiating the agreement keep you from making actual progress.
Know yourself as well. You are an entrepreneur and following your gut is how you got this far. If you believe that this is not the right choice, or you just have a bad feeling: do not commit to it. Keep an eye out for potential issues like a personality that you would not want to work with or widely different expectations than you. In the end, you know what is best for your business and being flexible is a requirement for successful entrepreneurs.
A business partnership is a great bond that can benefit every party involved, however it can also cause harm. Take time to ensure that whoever you become partners with will help you and your business grow. Communicate early and often to stay on the same page, understand how your personalities work together, and be sure that a partnership is right for your business. These simple steps will have a large impact on the future of your company.