If you’re an entrepreneur, you might be excited to find a potential business partner who shares your vision and enthusiasm for running a small business. Successful business partnerships require a lot of work. Especially in the early stages when you’re still figuring out the best ways to work together and maximize each other’s strengths. The best small business partnerships often share some of the same characteristics.
1) A Focus on Mutual Goals
As an entrepreneur, you may be used to setting your own individual goals. That’s still fine, but once you’re in partnership, your personal goals need to come secondary to the goals you share with your partners. Write down your goals so you can hold each other accountable. In addition to this, you can decide who is responsible for what elements of the progress toward the goals. If you review goals regularly, you can progress forward without arguments about who’s doing more work or being more successful.
2) Open Lines of Communication
Communication is key, especially at the beginning of your business partnership. Yes, you’re likely to spend a lot of time talking about the business and your mutual goals. But spend some time getting to know one another personally as well. You need to forge a bond with your partner that allows for comfortable expression of opinions and disagreements. And you need to understand how your partner reacts to ups and downs. Consider working on a small project to see how it goes before you make a firm commitment to your partnership.
3) Pre-planning for Difficult Situations
What are you going to do if your partner wants to leave your business? Or decides to move to another state? What if you want your spouse or child to join your business, but your partner disagrees? What if you discover that your partner is embezzling money or acting unethically? No business partners want to face these types of tough circumstances. But they can emerge unexpectedly. Planning ahead for how to handle the most difficult situations can help keep your business afloat if things turn rough. And put everything in writing.
4) Fair Division of Responsibilities and Boundaries
Decide before you start how you’re going to divide your responsibilities. Also, make sure each partner feels comfortable with the split. You should also discuss how many hours each of you plans to put into the business per week to avoid the potential for resentment. Setting boundaries ahead of time is also helpful, especially if you’re already friends or family members. For example, is it all right to contact your partner about business over the weekend or after business hours? Work through all the details before you open your doors to minimize possible friction later.
5) A Written Agreement
Call an attorney to draw up a written business agreement with your partner. This step is non-negotiable, no matter how good your relationship is at the outset. Yes, your agreement should include your division of responsibilities that you’ve already agreed on. But that’s not all. Decide on key issues including:
- How much each of you is to be paid
- Under what circumstances each partner can leave the partnership
- Each partner’s role in the business
- Each partner’s ownership interest
- What each partner is bringing to the business (including financial and non-tangible assets)
- When and how partnership compensation might change
- Circumstances under which you might add new partners
Having a written agreement helps you deal with any awkward situations in the future. It also eases the discussions when it’s time to change your mutual arrangements.
Using up-to-date business tools such as QuickBooks makes it easy for you to share information equally with your partners. It also allows for easy communication and helps you work from the same page as you plan for future business growth.