- Three things to know before forming a business partnership.
Entering a business partnership can be an exhilarating endeavor. It offers loads of opportunities to work with someone who shares a similar vision, work ethic, and has unique business ideas. Together, you feel more inspired and courageous to make that business dream a reality.
Most business partnerships happen between a family member, long-time friend, someone you just met, or anyone with whom you feel confident to start a new business venture. Despite the many benefits of business partnerships, many are hesitant to enter one because of the fear of having conflicting expectations, values, and goals with their partner.
Luckily, there are plenty of resources and methods to ensure a smooth-sailing and conflict-free business partnership. One example is forming services-escrow, where you and your partner allow the use of a third party to hold funds or an asset and provide protection during business transactions.
A successful business partnership is like a harmonious marriage. You need someone you trust and enjoy being with to ensure long-term compatibility. If you plan to enter a business partnership but are afraid of the challenges involved, it’s important to consider the things in store for you.
Poor reasons to enter a partnership
People enter partnerships for a variety of reasons. But remember that not all reasons are valid enough to start a partnership. In fact, most partnerships fail initially because people jump into them for the wrong reasons. Thus, entrepreneurs need to explore what motivates them behind that alliance.
Aspiring entrepreneurs planning to start a business resort to partnerships because of fear and poor confidence, but these reasons are wrong ways of entering a partnership. We all know how lonely and difficult it is to start your own business, but this doesn’t mean you should work with someone to make it a less scary experience. Being afraid to enter a business on your own won’t get you far. Because of fear, these people end up depending on all the decision-making to their partner.
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Lack of financing is another terrible reason to form a partnership. If you lack the budget to start a business, then you’re getting yourself into big financial trouble, which leads to power struggles and resentments between your partner. Whatever happens, it’s wrong to depend on your financial shortcomings on another person.
The same rule applies to skill sets. Being bad at sales or marketing isn’t enough reason to collaborate with someone better. You can start your own business by hiring or outsourcing the right people without depending on your personal connections. Piggybacking is a risky way to start business alliances.
Common problems in a business partnership
Partnerships come with a fair share of challenges. These can range from differing expectations to varying work ethics. The purpose of forming partnerships is to explore business opportunities, so if your chosen partner doesn’t share the same passion and values about the business as you, then you’re likely set up for failure.
People have different work attitudes, and even minor differences can spark problems. For example, some feel they are most productive during the evening, while others choose to get up early.
Failure to resolve expectations and benchmarks leads to conflict. The partner may feel they are bringing more effort and resources than the other, which might cause a very awkward relationship that may ultimately lead to separation.
Secrets to successful partnerships
If a business partnership is something you’re keen to pursue, it’s important to consider some important steps before entering one.
The first and most important step when selecting a good partner is to conduct a credit check. Choosing a business partner is not as simple as picking a friend for a group project. This is a complex endeavor that involves critical financial aspects. Knowing their credit score will let you know how efficient they are when handling money.
You can also encourage your partner to take a personality test together. This will determine the personality differences with your partner and discover potential issues in future interactions.
Once you’re settled with your partner, write a partnership agreement to protect both of you from liability issues and act as a guide in implementing the entrepreneurial vision. This will also help in managing the expectations, duties, and roles of each person involved.
Entering a business partnership comes with significant advantages and challenges. This is a great time to make the most of complementary talents and shared resources. But it’s also important to ensure compatibility with your partner concerning expectations, values, and vision. Taking note of the discussion above will give you a stronger framework for a successful partnership.
