It’s hard for a business to make it in any economy, especially when competition is fierce and plentiful. That’s why it can often be beneficial for two or more individuals/companies to enter into a partnership. Through combining skills and counteracting weaknesses, the right partners can skyrocket the growth of a business. Business partnerships can be compared to a marriage; indeed, they offer similar benefits financially, emotionally, and intellectually. But just like marriage, there is an infinite number of pitfalls that can sabotage the union. Below are several key ideas to focus on in order to create lasting, successful collaborations.
Look for those who share similar mission/values
Things can quickly become difficult if two companies possess wildly different work cultures and philosophies. Ensure that your partners are on the same page in terms of why they’re in business and how they like to work. Otherwise, you will encounter various scheduling conflicts. Poor relations and no common platform can cause all sorts of issues.
Identify and understand what each partner offers
Be clear about what each of you has to gain from the partnership. Perhaps one has a great product, while the other has great promotional/marketing skills. Maybe one partner has a great idea/prototype, while the other has the resources to help make it into a reality. By outlining early on why the relationship will be equally beneficial to both parties, you are not only able to more easily sell the partnership to the other individual, but you also avoid the regret that comes with taking on a relationship that is unequal or poorly planned.
Discuss the terms of your partnership
Be clear from the beginning how the partnership will play out. If one entity involved in the deal is under the impression that the partnership will be a long-term one and the other sees it as a one-off deal, it will cause all sorts of problems down the line. Do not put your company at risk by failing to realize the length of your business deal.
Build a relationship before committing long-term
Think of it like any committed relationship. You don’t want to jump headfirst into a marriage without getting to know the person first. Many business relationships have fallen apart when people realize they don’t work well together, or that their desire for each other’s services becomes reduced over time.
Work on smaller projects with your potential partner first, and if the relationship involves working closely together, get to know them personally as well. Personality clashes provide hints on how the other person provides direction within their company and the types of risks they are willing to take or avoid.
Be wary of partnering with friends
Business involves making a lot of difficult decisions, and when both individuals are passionate about the business, disagreements over money, direction, and daily operations are often inevitable. There are many risks that crop up when friendship is part of the equation. You may be averse to making unpopular or difficult decisions for fear of alienating your friend. Do not make compromises that you might not otherwise have conceded to. In addition, if the partnership does not work out for the same reason, the friendship may end up being irreparably damaged.
“It is absolutely necessary that both partners clearly decide on numbers in terms of who owns what per centage of the company. They should ensure that each feels what their share is justifiable.”
Decide how to handle finances
This is something that most people gloss over at the beginning and can often cause massive problems later on. One example would be Facebook’s infamous disagreement between two of its founders, Mark Zuckerberg and Eduardo Saverin. After deciding that Saverin’s services were less than vital, his stock was diluted to an almost non-existent amount, and he was more or less pushed out of the company. A nasty legal battle followed with both parties eventually settling for an undisclosed amount. It is absolutely necessary that both partners clearly decide on numbers in terms of who owns what percentage of the company and then ensure that each feels their share is justifiable. Oftentimes, two parties will split ownership 50/50 and then discover later that one person is shouldering a much larger amount of work. This difference can be even more dramatic if one individual is pouring a significantly larger amount of money into the business.
Lay important items out in print
Consult with an attorney, lay out the paperwork. Avoid stressful money battles. Regardless of how you decide to split profits and expenses, get this down on paper, so that those terms don’t suddenly and mysteriously change once the company becomes successful. It can prevent a lot of unpleasant litigations back and forth down the road.
Re-think the 50-50 split
The most important thing about ownership isn’t the profits; it’s the way power is distributed with regards to making company decisions. This can help a company maintain a clear, focused vision and operational style and prevent a lot of confusion. Two people trying to lead a company in different directions do not make progress. It’s also beneficial to partnerships where one partner is providing a specific service that, while vital, isn’t equivalent to what the other is investing into it.
Find complementary products/services when partnering across companies
A good partnership has to make sense on a marketing/ business level. While disparate businesses can often create an association to make the cross-promotion work, the increased effort involved in doing so, along with the increased risk, makes it an undesirable position to be in. By pairing complementary products, the burden of explaining the partnership to your consumers is lifted. A partnership between a job board and a service makes sense, for example, because the value of having both services in close proximity to one another is easily understood by any consumer.
Have an exit plan
Not all marriages are built to last, and sometimes, whether it’s early or late into the relationship, one or both of you may decide that the partnership is no longer desirable. Figure out a strategy early on for how one or both of you will walk away from the partnership. The right business relationship with the right focus can do wonders for the growth of any business. Know ahead of time who you are, what you need and what you have to offer, while ensuring that you expect the same from your partners. With that in mind, you should have greater success in finding that special someone to help you start or boost your business.
Lance Wang | Contributing Writer