There is no doubt that two (or many) heads are better than one when it comes to tackling a business project. Teaming up with others in a partnership or joint venture can provide the skills, enthusiasm, resources and capital to turbo charge your own individual efforts.
In the beginning, it’s easy to get carried away in the visions and dreams of success. And while it’s stimulating to discuss joint goals, you might be less enthusiastic about discussing the practicalities of working together.
If you fear potential conflict with your partner(s), it can be tempting to ignore the more mundane questions in the hope that they will be answered once your venture gets underway. But this is a dangerous path to take and may serve as a warning sign that the relationship may not be an ideal fit, no matter how good it looks.
There are a number of key issues that you should broach with your partner(s) at the start of the venture. They include:
- How will the costs (setup and ongoing) be handled?
- How will the profits be shared?
- How will the risks and losses be handled?
- Who will be liable for debt?
- How and when will payments be made to each owner?
- How many hours will each partner commit to the venture?
- How will the workload be delegated – this should take into account each partners skills, aptitude and capabilities.
- Will it be an equal division of labour? Or will one partner contribute capital instead of time?
Communication and decision making
- How are important decisions to be made?
- How will conflict be resolved?
- What happens if a conflict cannot be resolved and communication breaks down? Will you nominate a dispute resolution process to be followed?
- How will hiring and firing of staff be handled?
- How will staff be managed and duties allocated?
- What is the chain of command?
Keeping records and administration
- Who is responsible for keeping relevant records?
- Who will perform the administrative functions?
Then there are other issues such as:
- Sales and marketing;
- Death or retirement of a party;
- Termination of the venture;
Determining which issues are important depends on the nature of your venture. A short term joint venture won’t need quite as much planning as a long term partnership.
But either way, it is recommended that you have these discussions before starting the venture and that you put your arrangement in writing. Writing it down helps you to avoid faulty recollection and any “he said/ she said” arguments. It provides you with a clear record of the agreement that all partners can refer to when clarity is needed. You can look upon it as a type of business plan for how the relationship will operate. It is also important to note that certain business structures come with particular legal obligations and responsibilities. You need to be aware of these obligations and protect yourself (or your company) accordingly.
Depending on the business structure you choose to operate from, you can choose to document your discussions more formally by using a: