Being in a partnership is very similar to most relationships. Some people are better at sharing than others. Having a twin brother, I got used to sharing everything starting with a womb to a bunkbed. I think I was genetically predisposed to partnerships and have always found strength in numbers. For this reason I thought I would do a few posts on my advice on partnerships.
The best part about being in a partnership is that your partner will care about the business and be as passionate about it as you are. Their unique skills and insight will help your business to be more than it could ever be on your own. They say that partnerships are hard, and they most certainly are, but the rewards far outweigh the drawbacks.
For a successful partnership there are some great do’s and don’ts that I wanted to share from my experience.
Do / you need to have a written agreement. While things are going well is the most important time to be clear about the roles, responsibilities, and the sharing in the up (and down) side of the business.
Don’t / There is no good reason to skip the step of having a written agreement. Excuses like “they are my best friend” or “my brother and I are the exceptions to the rule” are hasty and unprofessional. Its also my opinion that spending considerable time and resources on this is a waste of productivity. For what the partners are able to agree upon, get it in writing and be ready to refine and retool this agreements in time as the business evolves.
Do / Bring your enthusiasm and ideas to the table. If you are serious about your partnership you should be bringing everything you have to it. Contribute your time and your financial resources per the partnership agreement.
Don’t / Its easy to overlook what the other person is bringing to the table. We are quick to look at what we bring to the table with out a lot of regard for what the other person is bringing. Just like in any relationship mutual respect is critical.
Do / Be a trustworthy partner. Be upfront about expenses that the company is paying for. Look out for the company and its future first. Be honest with each other.
Don’t / Take liberties with the expenses or funds. Put your own interest before that of the company. With out trust, the partnership (and relationship) will quickly dissolve.
Do / Have clearly defined roles for the partners. Its likely that the skill sets that you bring to the table are different, so focus on what the partners can do well and bring the best value to the company.
Don’t / Try to micromanage your partners role. Attempt to be the person who just takes care of everything. This will breed resentment and isn’t good for the company.
Do / Have a plan for if one partner wants out. Typically a first right of refusal is offered to the remaining partners prior to the public. Agree on how the business and its assets would be valued if a partner buys out another. Share the goals of the business, if this is a life time or sell in 5 years proposition.
Don’t / Forget to know what the business is worth or not have a protocol if a partner wants out. Be sure that you are on the same page as where you want to take the company.
NEXT POST – There are many other important topics related to a good partnership that I plan to continue in subsequent posts. Including specifics of a buy / sell agreement, life insurance, bank account and credit card oversight, non competes, options for entity, taxation, and more.