A business partnership is much like a marriage. It is a relationship that begins with a sense of exuberance and may decline over time, often due to slow changes in personality or persistent financial stress. When a partnership is successful, two people will combine their abilities and resources to run an organization that will benefit both of them. When it is unsuccessful, one or both of the business partners may suffer major setbacks.
Those hoping to enter into a business partnership, therefore, need to prepare for the challenges that could lie ahead when doing business together. The three tips below can potentially help people establish and maintain a stable and profitable business partnership.
Talk transparently about all elements of business
All too often, business partnerships, like marriages, begin with both parties wearing rose-colored glasses. They overestimate the abilities or commitment of the other party. They assume that they share key values and standards. Eventually, when the truth comes out, conflict arises. Many officiants that oversee weddings will require that fiancés attend premarital counseling where they discuss everything from how they handle their finances to how they intend to raise their children. Business partners should do something similar.
They need to talk about everything from what they intend to commit to the business in terms of their time and personal assets to what they expect to receive from the company when it proves successful. Those early discussions will help identify areas in which the partners are not aligned and clarify what each expects to provide for the business and receive from the other.
Draft a thorough partnership agreement
A partnership agreement will clarify in depth the compensation that each partner will receive and the contributions that they will make toward the business. It can also help establish clear expectations for what would occur in the event of a buyout. Therefore, a bespoke partnership agreement can go a long way toward reducing conflict between partners and ensuring a positive working relationship. Details including when they might sell the business to others or when they would agree the company has failed will be crucial to ensure they part ways amicably as well.
Make plans to check in with each other regularly
Holding a monthly or quarterly sit-down session in which partners evaluate their performance and how the company has done can be invaluable. Not only can they continue to realign with one another and recommit to the organization, but they can address issues before they poison the relationship.
Ideally, those thinking about starting a business partnership who follow through with all three of these suggestions will have less conflict during the partnership and therefore less likelihood of the business suffering as a result. Going into a business partnership with the right protections in place can make all the difference for those committing their time and money to the creation of a new business.