When you first go into business on your own, the idea of having a partner can be very appealing. You dream of having someone to share your goals, challenges, risks, responsibilities and, of course, celebrations with. This can also be the case if you’ve been doing it on your own for a while and want to broaden your base and take your business up a level. Forming a partnership can be a fantastic way of growing a business. So why is it there are so many tales of business woe about partnerships that didn’t work out? Partnerships that failed to live up to expectations or even blew the existing and profitable business apart? All the sad stories render down to a few simple considerations and rules that should have been heeded when the partnership was formed.
Partnerships are demanding
There’s an old saying: “Marry in haste, repent at leisure.” This applies just as much to a business partnership as a personal relationship. A business partnership can be every bit as demanding as a marriage and just as harrowing to get out of if it doesn’t work. The first thing to get clear is why you require a partner and what you hope to gain from the partnership relationship. Is it financial input, skills to grow your business, an alliance that will broaden your customer base? Or does it simply come down to the fact you are tired of doing it all on your own? List all the things you would want a partner to bring to your business; their particular skills, personality traits and assets. Also consider what the partnership could cost you in the way of control and autonomy and whether you are willing for this to happen.
Will the business benefit?
Too often, because we like somebody and have a relationship with them, we overlook the fact that they will not provide what our business really needs to enhance its growth. While compatibility of personality is important in a partnership, the question you need to ask your-self is does this person bring to my business what it needs to grow?
What’s in it for you?
Claire had worked hard to establish a successful financial planning consultancy. She had met all her financial goals to date and now wanted to have a more balanced life with more time for her family while growing the consultancy to the next level. For the past year, she had shared an office floor with Michael, another financial planning consultant. They decided to work alongside one another for a while and then consider combining their businesses. Claire had been passing clients she didn’t have the capacity to handle on to Michael for some time. Michael was now pushing hard to turn their alliance into a full partnership. His case for the partnership was that they could save on expenses by sharing staff and spread Claire’s client load between them. He was willing to buy into Claire’s business. His rationale was that he would provide a capital injection to grow the business and they would then be able to share staff, expenses and the extra income.
Is a partnership the best decision?
This sounds like a great idea, however-sometimes a partnership may not be the way to go. Are you ready to share control and profits? Make sure the partner is someone who will contribute to the business on equal footing. Rather than form a partnership, the answer in Claire’s case may be to simply employ another financial planner. Be aware that if someone is keen to form a partnership with you, then you have something that is very attractive to them. Make sure that what they are offering in return is equally attractive to you and is what you and your business really needs.
Trial an alliance
Ideally, work in an alliance with a potential partner for a while to see how you get on and become familiar with their business strengths, weaknesses and behaviours. Think of this as the engagement period in the relationship, before you take the plunge into a business marriage. And when you form that partnership, make sure you have the same vision, goals and aspirations for the future of your joint organisation.
Have a written agreement
Finally, and maybe most importantly, however friendly and trusting you are with each other, have a written partnership agreement that includes an exit plan detailing who gets what should you part ways. How would assets, customers and finances be divided? Who gets to keep the company name? Partnership, like marriages, sometimes don’t work out, however carefully thought through. As with a pre-nuptial agreement, a business partnership agreement that covers all eventualities of who gets what can save heartache, bitterness and unfair financial loss down the track.
