If you own a business and are tossing around the idea of forming a partnership with another business, there are some things you should consider before you make the idea definite. While your potential business partner may seem like the perfect kind of person to collaborate with, you never know what could happen in the future.
Think About the “Why”
Before you do it, think about why you want to form a partnership. If it’s because you can’t afford to hire help, then partnering may not be the answer. Sharing the workload with someone instead of hiring an employee may seem like a great idea, but what happens if the two of you go in different directions? Since one is technically not responsible for the other, things could get difficult and end up going south. Other reasons that may not be such great cause for a partnership are being afraid of being alone and a lack of financing.
The Importance of Paperwork
Yes, paperwork can make the entire process pretty formal, and if you’re partnering with a close friend or family member, you may feel like you don’t need to make it so official. However, it’s important that you don’t skip any legal agreements. Anything can happen in the future (even though it may not seem like it now), and you don’t want to be left in a bad situation, so hire a lawyer you both agree upon and have him/her handle the proper documentation.
First, figure out what you’re looking for in a business partner. Do you need someone who’s more creative than you? Someone who has big long-term goals? Someone who is good with sales? Once you figure out the right kind of person for the position, look past the credentials of your potential partners and consider their personalities. Does your prospect have an outgoing personality? If not, he/she may not be the best when it comes to sales. And if your prospect doesn’t strike you as interesting, he/she may not be so creative.
Like paperwork, you should formally note how much of the company you own and how much of the company your partner owns, at all times. If it ever changes, make sure you document it for any future reference. In addition, there should be firm rules in place for the type of consent needed for any major decision-making. The last thing you want is your partner signing a contract that you don’t want to sign.
Having an Exit Strategy
Like we’ve said, anything can happen in the future, so discuss the next moves after a potential scenario that ends your partnership. What if your partner decides the business isn’t worth it? What if you decide the business isn’t worth it? What if one of you dies? What if a fire wipes out all of your profits? You may not want to think about the demise of your partnership, but since it could happen, you’ll want to be prepared for it.