Two inseparable friends since grade school were both natural-born entrepreneurs. Early on, they launched joint ventures like opening a lemonade stand. As time passed, they graduated to larger projects. Eventually, as adults, they decided to form a business partnership and open a family-style restaurant.
The two-person team quickly discovered that working together wasn’t always harmonious as fish and chips and a side of coleslaw. By becoming business partners, they went through rough patches until they found a suitable relationship that worked.
Maybe you’re currently thinking about forming a business partnership or already have. This post presents practical tips you can use to help your organization run smoother.
15 Tips to Run the Perfect Business Partnership
As you read over the tips presented as questions, think about how they’ll help you decide whether to start a business partnership or how to improve it. Moreover, it’s important to recognize each partner’s differences as strengths and weaknesses as opportunities for personal and business growth.
- Do you really need a partner? A business partnership means disagreements are a real possibility. You both have different management styles and each of you is responsible for the other’s actions. For example, the other person’s debt becomes yours and vice versa. Essentially, you need to ask yourself whether the advantages of having a partner outweigh the disadvantages. If you can’t, you may be better off going solo.
- Do you and your partner share similar values? Having the same work ethic and core values eliminates potential disagreements. If one partner only wants to contribute their skills part-time, the workload is unevenly matched from the get-go. A good rule of thumb is to choose someone who works as hard as you, has impeccable integrity, and wins at life.
- How complementary are your skills? If you both excel at the same thing, there’s no one available to fill in the gaps. For instance, at least one of you needs to have a head for numbers while the other one needs to excel in sales, marketing, and people skills. Using the strengths you do have ensures that both partners work productively and are happier people. Each of you can draw on each other’s strengths to help the business succeed.
- Can both of you accept criticism? As your business partnership progresses, situations will come up that could have been handled better. Brainstorming problems has an end goal of finding solutions. Inevitably, that means stepping on your partner’s toes. Because you’re both on the same team and want the best for your company, each of you must be able to listen to criticism, learn from mistakes, and feel comfortable voicing your opinions.
- Do you both agree that consulting a lawyer to set up a partnership is a good idea? A professional advisor can advise whether to set up a general partnership, limited partnership, or a limited liability partnership. Keep in mind that each type of partnership will have advantages and disadvantages, and it’s possible to organize it as an S-Corp or C-Corp. To sum up, the structuring process can be complex. It’s important to agree that drawing up legal documents is in the best interest of each of you as well as the business’s future. Make sure to include in your Partnership Agreement an exit strategy should either decide to end the partnership.
- Are you willing to support the other person? Partnerships require a mindset to give and take. When one of you is going through a tough time, it’s important that you can depend on each other to take on more responsibility. Equally important is to take time to compliment each other both verbally and in writing.
- Can you respect your partner’s time and privacy? Each partner has a separate life and different commitments. Therefore, you should avoid sending emails and texts or calling each other when you aren’t working or late at night.
- Do you know which roles are better suited for each other? Most likely, one of you is a born leader and should be the CEO (chief executive officer). Whereas, the other partner is better suited as the CFO (chief financial officer). Both of you should have defined roles to prevent conflict. It’s less confusing for everyone including employees because everyone is on the same page and knows what to expect.
- How honest can you be with each other? It’s no surprise that each of you thinks differently. Are you comfortable telling your partner that something they do drives you crazy or that you’re concerned about meddling relatives, without candy-coating the details?
- Will both of you respond to red flags in a timely manner? If your business is stagnating or you need to fire an employee, both of you shouldn’t delay deciding on a course of action. Business owners must make uncomfortable and strategic decisions to keep the business on even keel and differentiate between small and large problems.
- Can you discuss money issues? Agreeing on where to invest money, how to allocate resources, and having extra money for savings is important. Partners should always make financial decisions together and never spend money on large purchases without consulting each other.
- Are you compatible? Personalities should complement each other so you communicate effectively and productively; otherwise, personal differences will eventually surface. You must respect and trust each other to have a healthy work relationship.
- Is your vision for the business the same? Do both of you agree on where to take your business and how to get there? Of course, you’ll tweak your business plan along the way but you shouldn’t be deadlocked about short and long-term goals.
- Do you have a history of working together successfully? Running a lemonade stand is entirely different than becoming a full-fledged entrepreneur. But still, if you’ve gone through conflicts or faced challenges together successfully, there’s a better chance you’ll succeed as partners.
- Can you separate your friendship from the partnership? When your business partner is also your friend or a family member, it’s hard to control your emotions. If you’re concerned about straining the relationship, make sure you can keep personal and business matters separate. If you can achieve the other 14 tips outlined in this post, your personal relationship should remain intact.
Benefits of a Business Partnership
No doubt you’ve already seen that implementing these tips will make a difference in how well you and your business partner work together. Tackling differences and making improvements enhances your business operations. After all, there are numerous benefits to having a business partnership.
Namely, a business partnership enables both individuals to bring different ideas to the table. There’s less chance you’ll run out of ideas and limit the business’s potential. What’s also important is having access to more capital since two people invest in the same business.
Likewise, you split income so each individual takes advantage of tax savings. And, if down the road circumstances change and one partner wants out, it’s relatively easy to change your legal structure.
Even so, entering a business partnership shouldn’t be taken lightly. That’s why we put together this post, How to Start a Business Partnership so you know what’s involved and what to do.