5 Best Practices That Can Help Business Partnerships Last
Some entrepreneurs can be quick to enter business partnerships. I mean, why not? You can get more resources, two sets of brains, four sets of hands and greater expertise.
But the reality is business partnerships can fail. Too often, entrepreneurs join forces for the wrong reasons and ignore the unspoken rules of successful business partnerships. You don't have to.
1. Be wary of relying on your partner when forming business partnerships.
While it's important to be able to depend on your business partners, relying on them is a different matter.
If you're entering into this business partnership because you're lacking connections, capital or even skills, you may want to reconsider. Using a business partnership to make up for what you don't have could result in a power imbalance or resentment down the line. It's OK to benefit from the pooled resources, but partnering with another entrepreneur solely because you need their resources could be setting yourself up for a poor relationship.
2. Align your values.
It's essential to stay on the same page as your partner from start to finish. While you both, hopefully, share the goals of making a profit and seeing your business excel, these aren't necessarily your only motivations. Your personal and professional goals and values could shape the direction you want to see your company head.
Successful partners often share their dreams with each other to ensure the foundation of their business partnerships is well suited to support them both in their missions. If your partner refuses to have this discussion, it might not be the right fit.
3. Set up and agree on your responsibilities and consequences for not following them.
Just like your employees, you as the business owner should have responsibilities and consequences for not completing them. Most likely, your business partner will have a separate set of skills or specialties that they bring to the company. Outlining both of your roles and expectations can help prevent miscommunication or ambiguity about what you both must accomplish.
Equally as important, setting consequences for failing to complete these duties, something as large as a reduced holiday bonus to end-of-the-day pushups, can help promote accountability.
One way to ensure follow-through is by writing down the metrics for determining completion. Is one partner responsible for generating an annual amount of business or reaching out to a set number of new clients? This can prevent fingers being pointed when goals aren't met.
4. Put a number on your investment.
Most businesses will require a great deal of personal investment. This includes time, money and capital. If you're pursuing your dream, then it's probably worth it. But when you add in the complexity of business partnerships, it's not difficult for one person to suddenly be contributing more than the other.
To avoid this, consider setting limits before you reach them. Talk with your partner about how much you are willing to put into the company. If you find out you're both willing to volunteer different amounts, that's okay. But be sure to maintain full transparency in this. Again, documenting and setting specific metrics for what you'll give can help prevent bitterness and peer pressure down the line.
5. Formulate your dissolution plan.
Although no one likes to consider it, business partnerships can end. There is a chance you and your business partner will break up. While it may not be pleasant, it shouldn't have to get ugly. That's where the business dissolution plan comes in.
Ideally, you will have already created a partnership agreement at the start of your relationship. This would outline how to go about ending the partnership or changing partners. You may want to have a personal conversation with each other to discuss what could potentially end your alliance or where you will draw the line.
The dissolution plan should include a timeline for the entire process of separating, payments that must be made to various attorneys and tax agencies, final documents that need filling like tax returns, a list of tasks that require completion, such as the independent valuation of your business, and notifications to stakeholders of the dissolution.
Business partnerships can be hard. Simply liking the person does not guarantee it will be a success. But when done right, a business partner can be one of the most important relationships in your life. You can share your collective knowledge, relish in company successes together and share the burden of stress that comes with entrepreneurship. These tips can help you maintain a thriving relationship for the entire lifetime of your business.
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