6 Things You Should Know Before Entering a Business Partnership
Going into a partnership is a great way to gain from someone else’s experience, resources, or both. When it’s right, a partnership allows both parties to be properly compensated for what they bring to the table, and both are usually on the same page.
But some partnerships can become nightmares, and set the business back. Or one might feel cheated, and start to become disinterested in the business, or even worse, decide to take legal action. This is why it’s important that you know what you’re getting into before entering a partnership, and be ready for the challenges that come with it. Here are a few things you should know before becoming partners with somebody.
Start with a Gut Check
At the end of the day, even if someone has all the expertise and capital in the world, this isn’t going to work if the two of you don’t gel. First, you have to know if you actually like the person, and see yourself working with them for the next coming years. Remember, this is someone that will have a say on things like marketing, branding, product development, hiring, etc., so make sure that you have personalities that complement each other and that you like them.
Do a Background Check
But you shouldn’t go off of gut feeling alone. You should also run a background check to see if they are who they say they actually are. You want to verify their credentials, business history, and also see if they have prior convictions.
One tool that you could use is PublicRecordReviews. They don’t only allow you to check felonies, arrests, and lawsuits, but it even has a mugshot lookup feature. You can look up mugshots on PublicRecordsReviews and see instantly if the person you were thinking of partnering with has any kind of criminal history. The tool also allows you to look for misdemeanors that could be relevant. This will give you a clearer view of who you’re dealing with, and see if there is anything there that could be a deal-breaker.
Think Twice about Friend, Family, and Co-Worker Partnerships
A lot of people decide to team up with a family member they know who are interested in their business, or a friend. Others decide to work with co-workers they’ve known through the years. But at the end of the day, you have to form a partnership based on business alone. Just because you get along with somebody, doesn’t mean that they add value to the business.
Choose Someone Who Makes You Better
The goal is not to find someone who’s as skilled as you. If the partnership doesn’t make your business better, then you’d be better off outsourcing to someone else and looking for financing. The goal when entering a partnership is finding someone that has the set of expertise that you don’t have that can take your business forward.
If you have a great mind for coming up with products but don’t understand the designing process, and things like cost-benefit for instance, then the goal is not to go with someone who’s as imaginative as you. You want to pair up with someone with skills in things like engineering and engineering management. You want your business to be greater than the sum of its parts.
Make Sure that Your Partnership Agreement is Clear
This is one of the biggest mistakes people can make when forming a partnership. An unclear partnership agreement could not only become an obstacle, but one partner may end up having more responsibility than they imagine.
This means that one of the parties may face personal liability issues while the other doesn’t. There are some cases where this makes sense, but still, it has to be clear to both parties before you sign. This is why you should have the agreement drafted by a lawyer to make sure that you understand what the partnership means to the both of you.
There Are Chances That You Will Argue About Money
The idea of sharing resources is one of the things that attracts a lot of people to partnerships. And at first, a 50/50 split might make sense. But, as the business and partnership grow, one party might start feeling like they’re doing more work or are more invested in the company and start resenting the other party.
This is why it is very important that responsibilities are made clear from the get-go, and that they are written down on paper. You also have to make sure that you have a clear course of action if you end up disagreeing, and find someone who will be a mediator in case of disputes.
So, now that you know a little bit more about what you can expect from a partnership, you can start looking for the right partner. Also make sure that you look at all the options, and ensure that this is the right choice for you.