Your start-up has overcome the initial hiccups and is now on the road to growth. But with the business picking up, comes a plethora of new needs, additional investment, technology or financial advice, growth strategy etc. You may now need to take on a business partner to take your business to the next level.
Taking on a partner will:
• Increase your business’s capital while reducing your personal financial liability. It can also increase the business’s overall borrowing power as you will have more loan opportunities.
• A partner will share the responsibilities of running the business thus allowing you to share the ups and downs of the business with him.
• It will also bring to the table different strengths, knowledge, expertise and skill sets, so necessary for your business’s growth.
• Brainstorming and positive discussions with a partner help in formulating good business strategies which in turn helps in taking calculated risks. While a good partner will be a boon for your business, let’s see what effect a wrong partner can have:
• An irresponsible partner might take some rash and impulsive decisions that can harm the business reputation and thus hamper growth.
• A lazy or sluggish partner, who isn’t committed to the goals and vision of the business, can negatively affect the overall working atmosphere. Remember, there is no sure-shot way of finding the ‘perfect’ business partner.
However, there are some things you can keep in mind while choosing a potential business partner in order to avoid the common pitfalls in business partnership.
• Motivation is the Key :- A good business partner should share your vision and enthusiasm. Pick someone who is as excited and as driven as you are to make this business idea a success.
• Think of Skill and Expertise :- Find a partner who is knowledgeable on the subjects and holds expertise in the field in which you are inexperienced. Partners,with multiple talents,bringing different skill sets to the table help in increasing opportunities for expansion and higher profits.
• Look for Compatibility :-
A business partnership is no less than a marriage. Hence, look for a partner who is compatible with you. By this, we don’t mean a spineless or a submissive person but one who can look at things the way you do and someone with whom you get along.
• Check Financial Commitment :-
Never enter into partnership with someone who doesn’t bring money, or something of equivalent financial value, onto the table. You wouldn’t want your foot-loose partner to suddenly walk out on you in the event of huge losses or terrible financial setback. Remember, a substantial financial commitment also makes a person responsible for his actions and dedicated towards his goals.
• Conduct Background Check :-
Don’t hesitate in carrying out a thorough background check of a potential partner. Insist on a list of personal and professional references that you can talk to. It helps in straightening past records, establishing the reputation and credit-worthiness of the person.
• Define the Roles :-
Establish clear roles, responsibilities and expectations for the partner and stick to them. When you choose a partner, clearly define the function and scope of his work. It’s a good practice to avoid ambiguity and misunderstandings.
• Enforce Sound Legal Contract :-
Always, we insist, enter into a written legal agreement with the partner. Take help of an attorney to draw up a sound business partnership agreement that includes clear clauses on: – Division of Work – Sharing of Profits/Losses – Raising of additional capital – Decision Making – Termination of Partnership Also, don’t forget to sign non-compete agreements. Finally, a couple of warnings before you bring in a partner:
• Business relationship with a close friend or a family membermay destroy personal relationships. In case you ‘have to’, make sure there is a written agreement and be extra clear while deciding financial terms and responsibilities.
• Don’t hurry in deciding a partner.Adishonest partner with distorted business ethics can damage a business’s reputation.You need to know a person well and trust him before you decide to take him on board.