A general partnership can be something great, or it could bring many struggles. Before you agree to have a partner in your business make you explore every option and scenario you can imagine. You don't want to go into a business partnership lightly.
What people typically fail to realize, is that a partnership in business is a lot like a marriage. I like to remind people to date someone before that jump into a partnership. Most people do not jump right into a marriage when they first meet, they typically date for a a while to see if they are compatible.
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1. What do you want in a business partner?
There are so many reasons why someone may want a business partnership. One of the first questions you should ask yourself is why you want a partner and what is the most important value you are looking for in someone.
This is super important when it comes to understanding each persons' role in the business. This helps partners understand what is expected of them and may help you realize if you actually need them at all. If two people are great at doing the same tasks and have the same skill sets, you might not need them at all. You could probably do this with only one person.
Understanding what you want in a business partnership will help you find someone with the skill sets and strengths you lack. This will also help to ensure that every aspect of the business will be covered by someone. Whether you have multiple business partners, affiliates or employees.
Take a look at some options to consider when deciding what you want in a business partner:
- Do you want someone you trust and displays integrity?
- Are you looking for someone who solves a conflict in the same way as you?
- How is their work ethic? Are they active and committed?
- What values are you looking for in a business partner?
- Do they have good communications styles?
- Do you want someone with the same visions as you?
- Does this person bring a unique value to my business?
- Is this person passionate about my business?
- Do we work well together?
- Do you have the same long-term goals?
- Do we have the same core values?
- How much do I value what this person has to offer?
- Are they in it for the right reasons?
- Can they help my business grow?
- Are you both looking for a long-term relationship?
- Do you have the same strengths and weaknesses?
2. Does your potential business partner have the same core values and expectations?
When looking for a business partner, it's essential to consider core values. You want to make sure you are on the same page with long-term and short-term goals, brand identity, policies, and finances.
Having the same core values and expectations can really make or break a company. A simple conversation about what each person's goals and expectations are could be the key to hitting success.
3. Do you compliment each other?
You may be looking for someone whose talents and skills complement yours, and this is critical to a successful business partnership.
You want to research if they are organized in their personal life and business life similarly as you.
If you are very structured and organized and they are the complete opposite, you may find yourself getting very frustrated with the way they work and do things.
Really understanding how your potential business partner works and lives can prevent careless mistakes in the future and save you a lot of money.
4. How much do you value what your potential business partner has to offer? What is it worth to you?
Each partner does not have to be paid equally in your business. Depending on how much you value someone's skills can directly factor into how much they own. If you think they offer something extraordinary and unique to your business that you cannot do could mean they get more equity.
When you are exploring the idea of a new partnership, you have to explore every scenario and find someone who really brings something unique to the table. You have to decide how much equity you want to share with them.
This could mean you share the business equally at 50/50 or you could explore a vendor partnership for (x) amount of months. Or you could create a contract that says if we meet this goal, then we can become business partners.
Honestly, whatever scenario you feel most comfortable with is what you should do.
5. What happens if one partner has a tragic accident or wants to leave the partnership?
Here again, you want to put a value on what each of you is worth, and you want to make sure you are covered if your partner experiences a tragedy that prevents them from continuing in your business.
Here's an interesting example that I like to share with people.
Let's say your business partner is married and he suddenly dies. Did you know that you would now be business partners with his wife?
This could be someone who has absolutely no knowledge of your business, and you didn't sign an agreement to be partners with this persons wife.
This is where a lead man policy with buy-sell policies come into play. This helps you keep your business afloat in the event of the death of a key colleague.
Or you could use a buy-sell agreement that is funded with life insurance, the policy owner uses the insurance proceeds to purchase the business interest of the deceased owner's interest at a predetermined amount.
The point here is to think through every single scenario that could happen. Make sure to protect yourself and your business that you have worked so hard for.
The questions above should help you understand what things to look out for in a potential business partner and prevent your business from big problems or loses in the future.
Make sure to remember to "date" someone before you agree to a business partnership. Remember to have a conversation to see if you compliment each other and have the same goals in mind. Precaution is never a bad thing when you are looking to have a successful partnership.
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