By Terry Corbell
The Biz Coach
Think About 9 Key Questions Before You Form a Partnership
Sure, there good reasons to partner in business. A business has more flexibility with more than one owner. Too, it can help a business to accelerate its growth to have two or more partners.
But it can also be a hindrance, especially then there isn’t unanimity on business issues. If you find someone with whom to partner, it’s best to put an agreement in writing.
There are partnership options. General partnerships are operated by the partners. In general, a corporation or a limited liability company (LLC) is run by representative management – people who are either appointed or elected.
The majority partner is someone who owns more than 50 percent of the company. In the event of a dispute or disagreement, the majority partner rules.
Sometimes, grateful owners decide to give high-performing employees or trusted family members a minority stake in the company. But I’ve seen cases where such decisions go awry when owners were too trusting and failed to see flaws in the employee or fail to take precautions to prevent embezzlements.
Not to over-simplify, before you create a partnership here are nine questions for which you need answers:
- Are you thinking clearly? Don’t make such a decision when you’re feeling lonely or under financial duress. Perhaps all you need are management strategies for a successful turnaround.
- Do you understand your motives? Know your business needs and those of the other person – really know the other person.
- Do you have the right legal help? Again, you must have a bullet-proof legal agreement.
- Will the prospective owner pay for the privilege? I’ve had hardworking and highly educated people want to become a partner in my established business. Even if I had been convinced to accept their proposals, they weren’t able or willing to pay for their equity.
- Do you need a partner to succeed? You must decide if another person will complement you well because they have skills you need for success.
- Does the person have a strong drive, integrity, skills, health and same approach about money matters? Too often, prospective partners fall short of the mark in these qualities.
- Is the person otherwise compatible with you? Opposites attract, which isn’t necessarily bad. An entrepreneurial life can be a roller coaster in emotions. You have to know if you can work with the other person in all situations.
- What would be the exit strategies? Decide what will happen if you or the other person decides to quit the business or if you decide to sell the company.
- Is the prospective partner a friend of yours? Just as it isn’t a good practice to hire friends, that’s also true about partnering with friends.
From the Coach’s Corner, here are some related resource links:
- How’s Your Strategic Planning for the Next 12 Months?
- 12 Tips for Profits to Keep Your Business Dreams Alive
- 15 Quick Tips for Profitability in the New Economy
“People that pay for things never complain. It’s the guy you give something to that you can’t please.”
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.