Because entrepreneurship, which is a risk-taking venture, must encounter challenges, one of the most important things an entrepreneur can do is to upfront consider how to deal with the headwinds that are certain to come at some point. If an entrepreneurial venture is started by more than one person, it even needs more meticulous planning. See, it takes very little provocation for partners to fall out. This is because to have people pulling in the same direction, and shunning disagreement at every turn, is almost impossible.
Going it alone will certainly give you full autonomy and control of your business, but a partner may allow you to expand into a more dynamic approach. There are pros and cons of either choice.
Here are some of the things partners coming together in entrepreneurship should consider beforehand to avoid, or reduce chances of, messy divorces:
Consider only bringing on a formal partner if it’s the only option unless you really need them for special talents, or resources you lack, go it alone.
Formal partnerships should be a secondary consideration. They are not what every potential entrepreneur should rush to take.
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You might consider hiring this person instead of bringing him in as a partner. Choose to outsource. You need to ask yourself, before investing, whether the business will be stronger with more heads at the top. You’d need to decide how to divide responsibilities if at all you are partnering. When it comes to titles, will you agree on who to take which title and what their responsibilities under the title will be? Some of these are problems that are almost impossible to solve, with most of partners wanting to be bossy and to abdicate on responsibility. It is a motivation to go alone in business. But in the case where partnerships are inevitable, then:
1, Make sure you’re pulling in the same direction
Unity of purpose. Common goals.
Same inclinations. Do you have the same values? List out all the reasons you should, and the reasons you shouldn’t, partner with this person or this company. Put the pros and the cons on a scale. This will help you fully think through the fit before it is too late.
Look at what you differ in that may actually lead to the collapse of the business. See if the dream you have for the business is the same as that of the partner you are bringing in.
2. Consider the integrity of your partner.
And here is where, even when it sounds like asking for too much, one must do their due diligence. What is the conduct of the partner? What evidence do you have of your potential partner’s integrity, or of their lack of? Have you done a background check of them?
Interviewed people they’ve worked with in the past to know what they feel about this potential partner? Make sure that these are not people who will have a questionable role in the downfall of a business.
3. Make sure your contributions are actually fair
There should be a sense of equality both in responsibility and rewards in the partnership. Put an equitable value on the contributions all the partners are making to the business. You would also want to assess the external measures of value - what you would have to pay for this contribution on the open market.
Rewards and control should strictly follow contribution and risk.
If things change over time, your agreement needs to reflect how this will impact profit splits and equity ownership and by clarifying not just who is responsible to do what but also the relative value of each action, you create a cleaner trail of the objective standards to help guide these later tough conversations.
4. Ensure you have a business relationship before the actual partnership
Try a joint venture to see what it’s like working together first before you jump into a long term business partnership. This actually gives an experience of what to possibly expect in the future with the potential partner.
It can help iron out flaws, or understand what to expect once the business comes into fruition. Such a venture could also inform you on whether you “really” need the partnership, and while at it, assess the strengths and weaknesses of the potential partner against what you need for the business.
5. However close the relationship, select on merit
Successful business partnership are premised on the complementary strengths, talents, personalities and experiences of the prospective partners. A relative or friend needs to bring much more to a potential business partnership than just their personal relationship with you.
More often than not, experts have even advised against bringing family and close friends into business. Many times, it becomes different to separate their professional abilities from their close ties to the heart.
Business people should learn to keep their personal and business lives separate, and to relate with partners in a professional way. This allows for frank and open discussions with partner(s) about difficult and crucial business decisions, goals, and finances. These are discussions that a close personal relationship can make difficult.
6. Enter a solid, written agreement
It is very important to have a comprehensive partnership agreement in place so that issues such as finances and the division of work are clearly spelled out before starting the business. A lot is in line in a partnership and the risks just too much to strike a truce and formalize it in a simple handshake.
David Finkel, a business author, says that one should not forget the five Ds in a partnership.
· Death - What happens if one of the principals of the partnership dies
· Disagreement - What happens if you and your partners reach an irreconcilable difference on a fundamentally important issue?
· Debt - What happens if any of the partners becomes financially insolvent and declares a bankruptcy?
· Divorce - What happens if one of the married partners gets divorced?
· Disability - What happens if one of the partners is hurt and is no longer able to contribute time and talent to the partnership?
