Over the years, we’ve supported many successful partnerships and joint ventures to reach their business goals. Combining forces with a partner who has complementary strengths and a shared vision could be the key to making your business idea a success. While partnerships often mean increased complexity, for the most part we see long-term collaborations that meet their performance expectations. Occasionally though, we do come across partnerships with disappointing results that end in a breakdown. It’s especially sad when these partners had a fantastic business idea but fell apart on a personal level. So, what are the secrets to happily working and staying together?
In the early stages of a business venture, it’s easy to get so excited about an opportunity or idea that potentially fatal questions are never discussed. Many partnership failures could be avoided by both parties going into the venture with their eyes wide open. If you already have a business partner, it is equally important to have regular discussions about your business to ensure your goals and expectations are still aligned. Here are our six tips for successful business partnerships:
1. Find a partner with a complementary skill set
Great partnerships are made up of individuals with complementary skill sets which compensate for any weaknesses either party has. Make sure you clearly define who is working on what area of the business so that you aren’t stepping on each other’s toes, and to ensure you are working efficiently. This divide and conquer technique is one of the key benefits of having a business partner but make sure you keep each other abreast of your individual activities and responsibilities.
2. Make sure your personal goals are aligned
Before you partner up, make sure you have similar personal goals, especially when it comes to work. If your goal is to maintain a healthy work-life balance while your partner wants to work seven days a week, your partnership probably isn’t going to work out. Eventually, one of you will feel that the other isn’t contributing equally. Finding someone with the same work ethic, motivations and life goals is key.
3. Have the hard talks about money
If you’re starting up a partnership, the issue of money needs to be an open conversation right off the bat. Can you both contribute the same amount of investment upfront and over time and, if not, how will you deal with this imbalance? Do all partners have the same salary and dividend expectations? Set clear agreements on the amount of salary each of you will take out, and under what circumstances this will change. You should also have a good understanding of your partner’s personal finances and the likelihood of this changing in the future.
4. Put a Partnership Agreement in place
A Partnership Agreement covers the funding, structure, management and direction of the business. It outlines the responsibilities and obligations of the business owners and is designed to deal with issues that may arise during the life of a business by determining in advance how such issues will be dealt with. A Partnership Agreement is essential for the smooth running of your business as verbal agreements won’t be adequate should a complex situation arise. Your Agreement needs to cover negative scenarios as well as positive, and detail what will happen in the event of a breakdown of the partnership.
5. Agree on your exit strategy
How you plan to exit the business can have a huge impact on day-to-day decisions and operating strategies. If business partners are focused on different long-term goals, they’re going to feel driven toward different choices, such as:
- taking cash out of the business versus delaying immediate income in favour of building capital or funding long-term growth; or
- Managing everything personally versus developing staff so that the business can one day run without such close oversight.
6. Communicate, communicate, communicate
Schedule regular meetings to discuss the business, troubleshoot problems, and ensure you are both on the same page. These sessions are vital to keeping each party accountable and are one of the key benefits of having a partner in your business. If you’re working alone the only person you can disappoint is yourself. When you bring someone else into the business, there is a heightened sense of responsibility, which makes you far less likely to let things slide. Regular meetings are also an opportunity to bounce ideas off each other, keep each other motivated and stay excited about what you’re building together.
Our team of business advisors can provide guidance on managing the risk of your partnership, as well as advice on structuring and taxation considerations for both parties.
If you’d like to discuss entering into a business partnership, feel free to contact our business advisors. You can reach us on 07 3023 4800 or at firstname.lastname@example.org
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