Create a Partnership Agreement
Over the years I have been involved in four different partnerships. While they haven’t all been beds of roses, I firmly believe in the value of partnerships for the right situations. Of the four partnerships, three worked out fine and one was a disaster. In my view, the success or failure of the partnership is directly related to the quality of the people involved. A partnership is a marriage, and as such, demands the same degree of care and attention required to nurture and grow a successful marriage. As with a marriage, you are well advised to get to know who you’re setting up shop with before signing the agreement.
If you are considering a partnership, tread softly and carry a bullet-proof partnership agreement. Treat your partner with respect, communicate openly, keep your expectations realistic, and be loyal to each other. These things will go a long way towards fostering a long-term, successful partnership.
Partnerships are not appropriate for every situation. The first rule of partnering: If you don’t need a partner, don’t have one. However, there are a number of good reasons for establishing a partnership, such as:
- To share the workload.
- To attract someone with skills or knowledge you don’t already have.
- To bring more money to the table.
- To handle a job or business that is too large for you to manage alone.
- To keep a great person on your team by sharing responsibilities and profits.
Common Causes of Partnership Failure
- Lack of communication.
- Unclear role definition.
- Differing visions or desires for the business.
- Differing values.
- Personality conflicts.
- Business can’t afford all or both partners.
- Greed or unrealistic expectations of the business or each other.
- One of the partners does all or most of the work.
- Dishonesty on the part of one or more partners.
- Lack of trust.
Common Misunderstandings About Partnerships
- You don’t have to work at keeping the relationship healthy.
- You don’t need a signed partnership agreement.
- A partnership lightens the workload. The truth is, with more mouths to feed you will have to work harder in order to bring in more sales. At a minimum, you will have to invest more time communicating.
Key Points About Partnerships
- Partner with someone who complements your skills or who has skills you don’t, and clarify your roles.
- Negotiate and sign a partnership agreement–have a lawyer draw it up.
- Assume nothing. Communicate often, honestly and openly.
- Define your vision for the business together, and make any changes to the vision together.
- Before getting into business together, get to know a potential partner well enough to know whether you have compatible values.
- Prior to signing an agreement, ensure that you and any potential partners can effectively resolve conflicts.
- Discuss all of your expectations for each other and the business; ensure the business can afford all or both partners.
- Just as you would before hiring an employee, research the work and investment history to know your potential partner’s track record. If there is a history of suing half a dozen previous employers for wrongful dismissal, you probably have a reasonably clear indication of where you will find yourself if the partnership goes sideways.
- Exit of one or more partners can cause business disruption–be sure to include an exit clause in your partnership agreement.