7 Tips for Planning Business Partnerships Carefully
Launching your own business can be an exciting time. You make all the decisions, which ultimately determine the failure or success of your business. There is simply nobody that will get in the way of your approach and vision.
But understandably, most entrepreneurs want to start a business with a partner. And that is when it is crucial to consider how the business relationship should be carried on before tying the knot to help avoid later issues. You should think about what happens if the relationship goes wrong as well, then document each and everything formally.
Don’t just rush into the business relationship – gather some fundamental knowledge about your potential partner. Having a formal agreement on how to deal with potential problems is also very important. Always keep in mind that successful partnerships are founded on good partnership and bad partnership can destroy a great partnership.
1. Percentage of Ownership
Consider recording how much each of your partners is contributing to the business partnership before its opening. The contributions are typically used as the core for the ownership percentage; however, it does not have to be.
A good example is when one partner puts in a substantial amount of money with no plans to offer sweat equity in order to make the company a success and a second business partner who only plans to work full-time, but may not invest money. In such a situation, the second partner may get a larger ownership percentage or even vice versa. That is up to your agreement.
2. Take Advice From Business Lawyers
Most of your usual advisers may lack the appropriate experience. Whilst there is nothing wrong with using a document bought from the internet or prepared for others\ someone else as your starting point, you should be cautious since they will not be tailored for your specific situations. The number of partners or shareholders may be the same, but the commercial provisions that are set out in such documents may be inappropriate for your circumstance.
3. Making Decisions
Developing a clear decision-making process is very important. Without a clear agreement and understanding on how decisions are to be made, the business partners can feel as if their point of views were not considered. They can also end up doing what they feel is right because they didn’t buy-into the directions and decisions, which were made.
4. A Clear End Up Game for the Business Partnership
For instance, to be a lifestyle company or to be acquired. Doing this will definitely help partners determine the direction for the business partnership as well as the action steps to successfully achieve your goals.
5. Unanimous Vote Requirements
You should know the decisions or events that can need a unanimous vote of the partners. It is actually very important that the partners decide the involved procedure from the outset.
6. Resolving Disputes
Address potential disputes before they escalate. Talk about the worst potential scenarios and how to resolve them. If your business partner is not will to talk, for whatever reason, he\she is not the right partner for you. If heading to court is one of your ways to resolve conflicts, you have the wrong partner since you will spend a lot of money and time. It is wise to include a mediation or negotiation clause in the partnership agreement that will offer a great procedure to help resolve primary disputes.
7. Go Into Business With Someone You Trust
Before starting a partnership, a top criterion is to preferably know your potential partner for at least a year – you’ll truly know who they really are by this time. A partnership is much like a marriage. Also, become great at reading individuals and consider backing it up with some references. This is by far one of the most vital ways to protect both yourself and the business when entering a business partnership.
All the above tips will allow the creation of profitable and healthy business partnerships, which withstand all the stresses of your business. You should also know that proper documentation won’t cover each possible situation. However, it should address commonly occurring problems to protect all your interests when starting a new venture. Such a discussion should offer peace of mind and not the vice versa