When you are considering joining businesses with another person, there is a lot to be considered before you sign on the dotted line. If you are married, think back to when you first met your spouse. Typically, if the connection was there, the two of you spent every possible moment together, right?
That is why most people refer to going into business together like a marriage. And, in many regards, they are correct. Both agree to a long-term commitment that requires a lot of time, trust, and devotion.
Once you add a partner to your business, everything you protected like a baby becomes theirs as well. Start by consulting an attorney who specializes in business arrangements.
The most important part of this package is trust.
The worst that can happen is the business is a bust. Even the tightest friendship can end in a nasty way if a partnership business goes down in flames.
Situations such as resentment, unmet expectations, even one taking all the money and making a run with it happens.
However, at best, you gain the following:
– Extended skill set
– Productive give and take
– Extended network
And, maybe even through all the craziness in between as you build, see success, perhaps fail, and bounce back together. That is called business!
So, with all the possibilities of failure how can you make the most of the pluses and lessen the risks of the entire project falling apart?
If you are considering entering into a business partnership with confidence and clarity, you must start with answering a few questions:
1). How Much Psychological Safety Exists Between the Two?
The “psychological safety” is a term that means all parties are confident that other members will not punish, reject or embarrass someone for merely speaking up.
If your answer to this question is not one you can say with enthusiasm, you might need to take a little more time for establishing trust; this could throw a red flag.
If for whatever reason your answer does raise a red flag, take a few steps back and re-evaluate you’re considering this partnership. Do not give any money away. To provide both parties with the chance to test the waters. According to CEO Ian McClarty Of a PhoenixNAP Data Center, “ consider doing a short-term project where you can get a birds-eye view of how the other side operates.”
Joining forces is exciting, but it also places you in a weak position. The person you choose as your partner is one of the most critical decisions you will need to make. You should take into consideration how your partner will impact your identity.
Make sure that your choice in a partner won’t have any negative impacts on your reputation you’ve built up to this point. The same reasoning applies if this is your first company and you are safeguarding prospects down the line.
As you can see, who you choose to help establish your company or add to an existing business will speak highly of you. You want to make sure you are contributing value and more weakening your image.
On the flip side of the coin, if you are confident that you and your prospective partner score high marks in this department, then explore some more in-depth questions and proceed to the next step of business.
2). What is Your Shared Purpose?
Have you and your potential business partner discussed in detail your purpose and goals for your company? Keep in mind there will never be anyone that loves your company as much as you do. You may find a partner that is as enthusiastic as you are, but, never as invested emotionally as you.
Significant values that are necessary for a successful partnership are policies, brand identity, and long-term growth strategies. It is crucial that you both treat each other and others outside the business with respect at all times.
The old saying, “opposites attract” is usually not the case in business. Being able to separate a personal bond and be able to make business decisions without having a friendship or emotions involved is tough to do.
So, before you decide to take this step and add a partner, are you really ready for a partnership?
Joanna Douglas of Clean Affinity recommends to “find out if the person really has your company’s, success at heart. It is better to make these evaluations before deciding to merge than afterward when a lot of damage can take place?
3). Are you splitting the company 50/50?
First of all, if you have been in business long enough, then you know that money changes even the tightest of relationships. Likewise, showing fairness is detrimental when deciding how to divide up ownership of the company.
Will both parties have the same amount of funding invested? Will both partners share the same amount of ownership? Keep in mind that it is vital that you have your attorney review every agreement to ensure profit amounts for each party go accordingly.
You should also make sure you are okay with any such tie-breaker clause should the two of you disagree. Perfecting this section is very important. You must know ahead of time the exact numbers you are dealing with and have it put in writing.
Discuss everything upfront, with both parties legal team present. One small loophole could cost you a lot of money in the long run. It never hurts to be over precautious. It for any reason the partnership doesn’t work, you will be more than glad you covered every base.
In Conclusion: There are many advantages of being in a business partnership.
As you can see, there are many questions that you need to address before jumping into a business partnership. When a partnership is good, the dynamics and ROI are amazing. However, when you mix the wrong two people, a toxic problem is sure to form.
The best precautions you as a business owner can take is to talk with a lawyer and a CPA to cover all the business partner questions you have. That is important for you to see how and what you need to consider and make sure every detail is thorough.
There are undoubtedly millions of successful partnerships, and yours could be just as well. Just take the right steps to reach the top.