It is often said that going into a business partnership is just as complex and involved as a marriage. In my experience I would strongly agree with this. I’ve seen everything from incredibly successful partnerships through to ones that have been a complete nightmare. Let’s look at some areas you might like to consider before you enter a partnership with another party. A partnership could include investing, business or property investing partnerships.
Formal partnership vs collaboration
Does the arrangement need to be in a formal way of a partnership or company? Or can you achieve the same result by a more informal collaborative arrangement? I’m finding more often that people are working in collaborative environments instead of the more formal and often more complex arrangements.
Having similar values around money is important. Just like in a marriage you often find that people have different values around money so why would it be any different in a business relationship? A good example could be one party wanting to reinvest all the profits back into the business and the other wanting to take them out. Given one of the leading causes of relationship break ups is money then this is a really key to explore.
Have you thought about your personal values and those of the person/s you want to enter into an arrangement with? We often spend quite a lot of time working out the details of how a partnership would work but do we think about how the other party really ticks. Consider things like trust, integrity, honesty, family values, work ethic, personal goals, etc.
We often gravitate to people that we understand and feel comfortable with. This can be great in many ways however it can be really valuable working with people who are very different to us as their skills can complimentary ours. The challenge is to be clear about what your strengths and weaknesses are and work in partnership with people whose skills complement and enhance those. Acknowledge their differences rather than struggle with the fact that they may not approach and do things the same way as you.
Vision for the future
Do the people you want to go into a partnership with share the same vision as you for the future? It’s worth the time to explore this fully. It’s easy to be on the same page in relation to wanting to make money for example, but how much is that, timeframes, work required to meet those objectives, etc. An example can be parents investing in property with their children. The parents focus is often to create an income for their retirement and the children often want to invest for the long term.
Dealing with problems
How does your perspective partner deal with problems and conflict, some confront head on others avoid. It is a given that there will always be problems with any relationship. Its how you deal with them that really matters. You can learn a lot about someone when you look at how they deal with problems.
Be very clear about who is doing what, and what each party is going to get paid and how. You want to ensure expectations are discussed and all parties are compensated adequately for their contributions. It could be that one party puts more time in and the other puts in more money.
Once you have thought through and discussed the above areas you want to have some sort of agreement drawn up that both parties agree to abide to and sign. The agreement will really help you get the clarity on how the partnership will work. It doesn’t need to be drawn up by a lawyer however you may get a better result as they will have the experience to make sure everything is covered off. The agreement should include: ownership, contributions, expectations, remuneration, the process if something goes wrong, mediation, termination, pretty much anything you can think of.
To ensure the success of your partnership plan for the worst but expect the best!