Most business partnerships start with business-minded friends blossoming into something more. But entering into a partnership can be a lot like marriage. And when you get married, you don't just marry the other person, you marry their family, their lifestyles, and their finances.
You may not notice the family, lifestyles, and finances during the honeymoon phase, nor when your great ideas are propelling you forward at a blinding pace, but they're there. And, they always will be, for better or for worse.
If you're thinking of chasing your business dream by means of a partnership agreement, here is a list of important questions you should ask yourself first:
1. What are your strengths and weaknesses?
Know thyself!
When I first started out, I suspected I would be an introvert. I had all the tell-tale markings: shy, quiet, went to college to be an engineer. Then I joined a frat! Four years of college later, I had blossomed into a risk-taking go-getter who thrived on pitching my crazy business ideas. I talked my close friend into entering into a partnership with me, and the fit couldn't have been better, even though I hadn't planned it. He was a reserved, analytical, and detail-oriented man with a mind for software coding and operations.
One of the best reasons to form a business partnership is so you can find someone with the skills you lack. This also extends to personality traits and management styles. One person can't be everything. That doesn't mean you should partner with someone who is your opposite. You need to get along, but you also need to know why you're a good fit. Answering that question starts with a look inward. What are your weaknesses, faults, and technical shortcomings? How will a business partner help you manage them? How patient will they be with you, and you with them?
2. Where does your partner stand financially?
This sounds like a standard and prudent business question, but it's not. It's a very personal question that will reveal a lot about the person you want to partner with. In fact, how it's answered may dissolve your budding partnership-which highlights just how crucial it is to know their financial standing.
As I stated above, you're not just partnering with a set of skills, or a personality you like and feel comfortable working with. You are partnering with all the personal stuff that a potential partner may bring to the table. This means that debts, loans, investments of a personal or business nature-all could impact you. If you need your partner present and focused to help you run a business, you need to know what kind of financial implications could steal that partner away.
Remember, if you're starting a new business, many startups run without any profit for the first few years. Can your potential partner handle that? What kind of window do they have financially to chase this dream? Just as an investor does due diligence for a business that is seeking funds, you must evaluate, with great scrutiny, the personal and financial components of a potential partner.
3. What are the potential partner's expectations about the time involved?
I was advised to do a little pre-marriage counseling before I got hitched. Now I advise couples and business partners to do the same. Why? Because, in both situations, the people entering into these partnerships often have preconceived expectations for how the other is supposed to behave.
Ask yourself, what do you envision your role being, and what do you envision your partner's role being? Then ask him or her the same thing. Do those visions match up? Even a term as seemingly transparent as “commitment” can mean very different things between parties.
For example, your idea of commitment may be being on call 24/7 for every possible business need. Your partner may feel that starting the business means they can have more freedom and work-life balance. Maybe you want world domination, and they want the freedom to do creative projects that may or may not add to your bottom line. Talking about this upfront can save you a lot of strife later.
4. How does your potential partner handle pressure?
This is an important question. Maybe you've had to answer this question during a job interview of your own? If you gave a rehearsed answer and didn't understand how enlightening this question is designed to be, you will understand when the person answering the question is responsible for at least half of your company.
The question is designed to bring to light how your partner handles stress. Did a pressure situation prompt them to take an easy way out? Or, did they push something crucial to the back burner? Beyond transparency and emotional control, how a person handles pressure can tell you how they prioritize business functions or assess risk.
5. Will they put their money where their mouth is?
If you were merging your company with another company, would you do it without getting anything in writing?
In many ways, a partnership agreement is like a tiny company merger. You are agreeing to take two “operations” that are used to working independently-that may even appreciate one another because of that independence-and you're merging them together, with the expressed understanding they will sacrifice that for the good of the new, singular company. If your partner is fully on board with you, there should be no issue with getting him or her to commit to writing down all the parameters of their expected work duties in a legally binding contract.
This contract should dictate what to do if there are emergencies, business complications, or if you or your partner are not performing at the level promised. The contract represents a mutual commitment to one another, and clearly outlines the consequences if that commitment is not upheld.
6. Do you REALLY need a partner?
I don't know many partnerships that have lasted over the long haul. Mostly because expectations weren't the same or priorities changed over time. It's not a bad idea to have an exit strategy built into your partnership conversation early on. If you think about it, very few people stay at the same job for their entire lives. Even as an entrepreneur who has started a successful company, I've had the need to grow and start other companies.
What is a partnership going to offer your company that you couldn't do on your own? Really take some time to think about what's causing you to start your company. Is it a restless need to be your own boss and see your own ideas come to life? If it is and you're taking on a partner simply as a safety blanket, at some point you may find you don't need that blanket anymore-but you can't just discard it. Analyzing different types of business structures before jumping into a partnership can save you a major headache down the road.
However, if you know who you are, what you want, what you expect from your partner-and are okay with the partnership ending if clear business goals aren't met-then more power to you. Entering into a partnership can be a beautiful thing when done right.
The post 5 Questions All Entrepreneurs Should Ask Themselves Before Entering Into a Partnership appeared first on AllBusiness.com
The post 5 Questions All Entrepreneurs Should Ask Themselves Before Entering Into a Partnership appeared first on AllBusiness.com.
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