Entering into a business partnership of any kind is a huge decision that not just requires, but demands careful thought and consideration. It is, after all, a relationship, albeit one that involves much greater effort in terms of time, and much more financial input from the onset.
With all the angles that need to be considered, deciding to enter into a partnership can be challenging if it is not the right one for you. Even with proper processes and systems in place, you would still need to determine whether you’re a good fit for a partnership and vice versa. You will after all have to make decisions together, and of course, there has to be a compromise.
So how would you determine if using a business partnership is for you? Let’s take a look at things that you should be aware of, and how to overcome these challenges.
Clarifying roles
There is an old proverb that says you cannot have two bulls in a court. And, in the business world, you simply cannot enter into a partnership with someone that you do not know. On the flip side, even if your future business partner is a spouse, family member, or familiar friend, roles need to be clarified and boundaries set. It goes without saying that different personalities will clash, in as much as there may be familiarity.
The core values and work ethics of each partner play a vital role in the success of the partnership. Conflict is bound to arise from time to time, and trust, great leadership, and excellent communication skills are crucial to your business and will aid conflict resolution. A chain is only as strong as its weakest link, and ultimately, the strength of your partnership will lie in that of each individual member.
Shareholding and Investing
The value of legal advice cannot be stressed enough, and when it comes to money, it is even more important to enlist the aid of an advisor that can give clear direction. The investment split in a partnership can take any form, be it 50/50 or 60/40 or any other combination. But this is something that you’d want to be extremely clear about since it affects the profit-sharing once your business starts making money.
Why do partnerships fail?
One of the major drawbacks of a partnership is unclear boundaries and crossed lines. This happens when roles are not clear, if there is no direction, and if there are too many hands in one pot. Basically, any successful business has effective and efficient people heading up various parts of the business.
Entering into partnerships with friends or family often results in an inability to separate business from personal relationships, without the realization that you need to don a different outfit for each role. Research has revealed that this is the number one reason for partnership failure.
The takeaway
Ultimately, the success of a partnership depends on two (or more) level-headed people that are able to put familiarity aside and focus on the relevant tasks at hand. Choosing a business partner is easy; an effective and productive partner – not so.
Before deciding on a partnership, you should put all your resources into researching and understanding the positives and negatives, and your planning should involve your personal vision, mission, and goals. You could even go further to brainstorm around the type of personality that you’d like to work with and use this as a guide to determine if someone would be a good fit for you.