On Monday we raised the issue of the hidden dangers in partnerships. And let’s be honest, no one wants to think about this during the euphoric stage of partnership formation. But it’s important, and may just determine whether you will have a successful partnership.
Here are some thoughts for you to consider (seriously) when forming a partnership. If not addressed up front, they will likely surface and bite thereafter:
Determine the strength of your partnership
1. Set time aside (consider a full day) to discuss the business, who will do what, time commitments each of you are willing to give, and other issues relating to the relationship of working in a partnership.
a. The recommendation for a full day is based on staying with the discussion through the details and not just dismissing it too quickly.
b. A strong “Operational Agreement” should be the outcome.
2. Take a business personality assessment. Have it interpreted by a qualified person and then share it with all the partners. Identify the strengths, weaknesses (and potential derailers) and common values that will drive your business performance for greatest results.
3. Understand the financial risks each partner is taking.
4. Understand and discuss specifically what each partner is bringing to the partnership in terms of funds, time and talent.
5. Understand if there are other dynamics that may affect the partnership (a non-supportive spouse for example)
a. Who will have a “say” or influence over the affairs of the business and how conflict will be resolved and how decisions will be made. This should be reflected in your operating agreement.
6. Set key expectations such as:
a. How much money you want to make and by when
b. What expenses do you expect and agree on what be covered by the business
c. Will this is a life-style business or a growth business
7. Discuss and identify an exit plan, which should consider:
1. What your end game is for the business and for you/each partner which
considers questions such as:
a. Where do you see the company in 3 – 5 years?
b. Where do you see yourself in 3 – 5 years?
c. What do you expect from the company at the time of exit?
2. Does each partner know the exit plan and is each willing to commit to doing what it takes to achieve it? Saying it is one thing – doing it is something else
Forming a partnership is serious business, and we have seen far too many good and high potential businesses fail, or stagnate, because the partnership between its people failed! Take the time to “frontload” and thoroughly vet and plan your partnership. Trust us – you will not regret the time spent.
On Monday we raised the issue of the hidden dangers in partnerships. And let’s be honest, no one wants to think about this during the euphoric stage of partnership formation. But it’s important, and may just determine whether you will have a successful partnership.
Here are some thoughts for you to consider (seriously) when forming a partnership. If not addressed up front, they will likely surface and bite thereafter:
Determine the strength of your partnership
1. Set time aside (consider a full day) to discuss the business, who will do what, time commitments each of you are willing to give, and other issues relating to the relationship of working in a partnership.
a. The recommendation for a full day is based on staying with the discussion through the details and not just dismissing it too quickly.
b. A strong “Operational Agreement” should be the outcome.
2. Take a business personality assessment. Have it interpreted by a qualified person and then share it with all the partners. Identify the strengths, weaknesses (and potential derailers) and common values that will drive your business performance for greatest results.
3. Understand the financial risks each partner is taking.
4. Understand and discuss specifically what each partner is bringing to the partnership in terms of funds, time and talent.
5. Understand if there are other dynamics that may affect the partnership (a non-supportive spouse for example)
a. Who will have a “say” or influence over the affairs of the business and how conflict will be resolved and how decisions will be made. This should be reflected in your operating agreement.
6. Set key expectations such as:
a. How much money you want to make and by when
b. What expenses do you expect and agree on what be covered by the business
c. Will this is a life-style business or a growth business
7. Discuss and identify an exit plan, which should consider:
1. What your end game is for the business and for you/each partner which
considers questions such as:
a. Where do you see the company in 3 – 5 years?
b. Where do you see yourself in 3 – 5 years?
c. What do you expect from the company at the time of exit?
2. Does each partner know the exit plan and is each willing to commit to doing what it takes to achieve it? Saying it is one thing – doing it is something else
Forming a partnership is serious business, and we have seen far too many good and high potential businesses fail, or stagnate, because the partnership between its people failed! Take the time to “frontload” and thoroughly vet and plan your partnership. Trust us – you will not regret the time spent.
If you enjoyed this piece, please consider sharing it!
