If you are thinking of adding a business partner then it can be an excellent way to grow and expand your business. It is a good strategy for getting cash for the business and diversifying your asset base. Adding a partner to your business will bring along several non financial benefits as well.
Partnership though, is like marriage, and for the relationship to work, considerable thought and evaluation should be done. Do your homework and make wise and judicious decisions to ensure the viability of the business and its continued success.
Poor choices may dramatically shorten the very lifespan of your business, limit its competitive edge in the marketplace, and even reduce the overall profitability of the business and most importantly, your ability to produce an income and provide for your family. Thus, when looking for a partner, seek a partner who will bring in something additional to the business. Something you can’t bring, that will add value, different perspective to things, credibility and trust to your business.
Get a person who would be fun to work with. Someone you compatible with and who respects your judgment. Someone who you can argue with and still be friends. And most importantly, find somebody with the same values as yours.
The next major obstacle is how to divide the cake. This can be a very emotional issue even when there is no cake hence you need to handle it tactfully. If you are dividing the cake equally, then that is fine. But what if some partners fill they will be contributing more in terms of money, skills, credibility or contacts then how do you divide up the cake?
Start by sitting down and mutually agreeing on the skill sets and other factors that will be required to make this company successful in a specified period-say three years at the most. You will be listing things like professional capability, marketing & sales, raising money, contacts, administration, and the like. Make a list, and then weight its factors. Do this together, and if you disagree, talk it through until you agree. That should be pretty non-emotional.
Now take your list of weighted success factors and rate each of you on your ability to bring them to the business. Rate them on the same 0-10 scale.
When you have finished, multiply these scores times the weighted factor and you will have a mutually agreed upon measure of each person’s relative importance to the success of the business. And hopefully you will have done it without bruising any egos.
Finally all partners will then be required to sign a partnership agreement detailing their responsibilities, rights, and obligations before the ownership is actually granted. A well drafted partnership agreement will cover all eventualities like what happens if one partner wants to sell, retire, becomes disabled, or even dies. This gives the company and the partner’s protection as well as rights under the agreement
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