Getting involved in a business partnership can be a fun and strategic move for growth that can lead to many benefits; However, it is not a choice that should be made lightly. Although small business partnerships can quickly deteriorate and pose a risk if things don’t work out in the long run, they can be harmonious and beneficial to both parties.
Do your homework to avoid a negative dynamic. There are a few crucial factors to consider prior to forming a small business partnership if you are unsure how to proceed. Before entering into a business partnership and signing a contract, there are six important things to think about:
Before starting a business together, you should get to know your potential business partner by learning about who they are, how they communicate, and how they conduct business. Before signing contracts, it is essential to be transparent from the start and to ask questions to ensure that you have established and agreed upon clear expectations and objectives. You might ask your partner, for instance, how they deal with pressure or what they hope to accomplish with the business, including personal goals.
A healthy, long-term business partnership relies heavily on open and honest communication.
Make sure you thoroughly discuss your preferred communication style and preferences before starting a business. This includes discussing when and how frequently you’d like to check in with one another, how you handle conflict, and how you make decisions. You will need to make a lot of big decisions, like coming up with a clear business mission, hiring people, and getting money for your business. Therefore, prior to entering any partnership, clarifying these expectations can help you avoid conflicts and issues in the future.
Evaluate your own strengths and weaknesses before considering a new partner One of the first things you should do is to differentiate your partner’s skills from your own. By doing so, you will have a better understanding of what characteristics to look for in a partner and how to select a person whose skills are different from your own. Someone who can complement your strengths and make up for your weaknesses is the ideal business partner.
Not only does having a variety of skills and areas of expertise increase your company’s growth potential, but it can also prevent rivalry or conflict between you and your partner. After all, you won’t step on each other’s toes when working on different parts of the business.
Having values in common is necessary for forming a beneficial small business partnership.
As a result, it’s critical to ensure that your potential business partner shares your values and goals. This involves more than just wanting to make a profit; it also involves determining whether or not you share the same long-term vision and core values that define your company and guide its operations.
For instance, if you place a higher value on high quality and environmental sustainability than on quick profits and your potential business partner places a higher value on quick profits than on quality, you might find it difficult to agree on important decisions, which could hinder your accomplishments. In point of fact, a growing body of research demonstrates that values-driven organizations have strong financial performance links.
Define each partner’s roles and responsibilities in detail Once you’ve decided to hire a new partner, it’s critical that you define each partner’s roles and responsibilities within the company, including contributions of time and money. You can improve your capabilities, management abilities, and investment potential by figuring out the best ways for each of you to contribute.
In point of fact, having an understanding of the core competencies and creating a document for each partner
that is comparable to a job description could be a useful resource to refer to in the event that questions arise in the future. In addition to protecting each partner legally by putting things in writing, it can also help you establish more accountability and avoid miscommunication.
Put contracts in writing Even though a written contract and profit-sharing plan are not required, it is a good idea to have them in place to help with conflicts within the partnership and give it structure. A written contract is an important way to safeguard legal interests and deal with any issues that may arise.
The terms and conditions of the partnership are outlined in a partnership agreement, which includes:
Distribution of profits and losses, percentage ownership, and a description of each partner’s management responsibilities, as well as the partnership’s term (length) and equity strategy (how one business partner can buy out the others) in the event of a partner’s death.