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Do you really know your business partner? 

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Do you need a partner and the pitfalls it can create?

 

Business partners often start businesses together with little planning and few ground rules.

Sooner or later, they discover the hard way that what’s left unsaid or unplanned often leads to

unmet expectations, anger and frustration. Partners can clash over countless things, including

conflicting work ethics and financial goals, roles in the business and leadership styles. What follows

is a primer on how to avoid that and set up — and sustain — a business partnership.

 

First, ask yourself: Do I really need a business partner to build a successful company? Taking on

business partners should be reserved for when a partnership is critical to success — say, when the

prospective partner has financial resources, connections or vital skills you lack. You may be better off

hiring the other person as an employee or an independent contractor.

 

Communication is important at every stage of a partnership, and especially so at the outset.

A common mistake business partners make is jumping into business before really getting to

know each other. You must be able to connect to feel comfortable expressing your opinions,

ideas and expectations.

 

If you haven’t worked together previously, test the partnership out by tackling a small project together

that showcases each other’s skills and requires cooperation. This is also a way to learn about each

other’s personality and core values. Ideally partners’ professional skills should complement one another,

but not overlap too much. For example, you may be detail oriented and your partner may be a big-picture

thinker. Or you may be an expert in marketing and sales, while your partner prefers to stay in the backdrop

poring over financials.

 

To gauge how well you might work together, have a chat with each other’s colleagues and family members.

Key questions to answer include:

  • Do you and your partner share personal and professional values, ideas and goals?

  • Do you trust your partner’s motivations and character?

  • In what areas of everyday life and business do you agree?

 

Other points to consider:

  • What if a spouse or kid later wants to join the business?

  • How will it be handled if one partner acts unethically?

  • What if one partner wants to move out of the country?

Potential partners may want to consider taking a two- or three-day retreat together to go over their

individual expectations for the business and partnership, one by one, and compare notes. It can help the

conversation to have the partners guess each other’s expectations before revealing them to each other.

Be especially careful when partnering with close friends or family members. Like many marriages, business

partnerships can end in bitter divorce. Consider whether you’re willing to risk hurting your relationship if the

partnership falls apart.

 

Approach a partnership with close friends or family as you might with strangers: Thoughtfully plan and prepare

for every aspect of it in advance so there’s no question about how difficult situations will be handled.

A note about partnering with a spouse: Working together puts an added strain on a relationship, and couples

can quickly discover there is a little too much togetherness. Those who succeed often have learned to set

boundaries keep the business from dominating every aspect of their lives.

 

For example, they may have agreed to leave the office at 5 p.m. and put all conversation about work on

hold until after the kids are in bed.

Once the decision is made to start a business together, you should create a partnership agreement with help

from a lawyer and an accountant. Take this step no matter who your partner is. People with strong personal

connections may feel certain that their supposedly unbreakable bond will help them overcome any obstacles

along the way. Big mistake. Get a written agreement.

 

Every agreement should address three crucial areas: compensation, exit clauses, and roles and responsibilities.

Include who owns what percentage of the business, who is investing what, where the money is coming from,

and how and when partners will be paid.

 

Typically partners set up equal ownership and each contributes 50% of the initial investment. But terms can

vary greatly. For instance, one partner might contribute more money if the other partner can bring in expertise

or business contacts. As the business grows and changes, adjust compensation accordingly. For example,

partners may agree to work initially without compensation, and to get paid after a certain revenue target is

reached. In addition, if the business partnership brings on more people or if a particular partner is putting in

more or less time, building some flexibility into the contract can let you adjust payments.

The agreement should also cover how you plan to exit the business. Include clauses that spell out cases in

which one partner is obliged to buy out the other’s interest — for instance, if one wants to quit the business.

For instance, it can state that the other partner must buy him or her out for a pre-negotiated percentage of

the business’s value.

 

If neither partner wants to continue the business, partners can also liquidate and divide all assets. It’s also a

good idea to settle on in advance how to assess the total value of the business upon dissolution. The agreement

should specify who appraises the business and the methodology to use.

Outline your expectations for how you’ll operate your business. Clearly delineate the roles and responsibilities

of the partners based on their skills and desires. This will eliminate turf wars and clearly show employees to

whom they should report.

 

Establish routines for daily communication. For example, agree to talk twice a day at designated times and to

re-evaluate their goals on a regular basis. At least once a quarter, sit down and discuss how you envision the

future of the business and what steps to take in getting there.

Addressing these issues up front will help you better focus on your business later. How you work out the details

of setting up a partnership could be an indicator of how well or poorly your prospective venture will operate.

Inevitably, some potential partners will realize through the process they weren’t meant to be

.

Business Coaching – Five Key Factors in Developing Successful Partnerships

Successful business owners and managers work in partnership with others. They know that all business

objectives are achieved with and through others. Their skill for negotiation with other people is paramount

in their own thinking.

 

They establish mutually agreeable and beneficial goals with each other. They build both their own and others

capacity, capabilities and skills by having great partnership arrangements. Partnership arrangements and

how to manage them figure highly in their business policy development processes. It is a special kind of

intelligence and mindset in its own right.

 

Successful business owners create powerful partnerships and alliances that reap huge financial rewards

and enhance their business reputations.

 

How do they do it?

 

The five key factors to be crystal clear about in developing sound and successful business partnerships are:

Understand the Purpose of the Partnership

 

Successful partnerships exist in business because they focus on mutually agreeable business objectives

and goals. To ensure this result, partners must be compatible.

 

This compatibility is primarily determined by having a shared value base. The shared value based must be

explored thoroughly, honestly and openly if the partnership is going to succeed. It must be documented and

clearly understood by all the parties involved.

 

If the businesses share a common vision and values base, their partnerships will be successful. If they do

not, they will not. It is as simple as that.

 

Spell Out the Commitments of the Partnership

 

Partnership agreements form the foundation of successful alliances and affiliations. Therefore, partnership

agreements must be constructed using a shared process and must be entered into in a spirit of generosity

and customer-oriented service, if they are going to be effective.

 

Once a partnership understanding is reached at a compatibility level, a plan must then be documented that

clearly identifies roles, objectives, accountabilities and responsibilities, as well as clear time frames for

completion of tasks and initiatives.

 

Managing the partnership itself has to be the first objective. A communication and issue resolution mechanism

must be in place, and an effective decision making suite of tools is essential. Great partnerships are built

on trust. Having trusting relationships is the hallmark of good partnership governance and management.

 

Have Realistic Expectations of the Partnership

 

Successful partners, in life as well as in business, talk to each other. Not just when things are going well,

but also when there are problems.

 

They talk honestly and openly with each other, and they take on the responsibility of managing the relationship

as a priority. They spell out their expectations so that problems can be fixed when they occur. They share

knowledge and skills generously in ways that are of mutual benefit.

 

Pursuing excellence and quality in partnering relationships is a major source of mutual satisfaction.

 

Manage the Risks and Opportunities that the Partnership Presents

 

Business development and risk management are essential ingredients of successful business partnerships.

There must be a dispute resolution process in place. Business partners must master problem solving/conflict

resolution skills in effectively managing the risks that accompany working with others.

 

By identifying risks and their potential causes, successful business partners prevent them from occurring in

the first place, and they have a process for addressing them, if they do eventuate.

 

Successful business partners are always on the look out for enhancing and exploiting the opportunities that

emerge as the partnership arrangement proceeds. This can lead to exciting new product and service

opportunities that are extremely beneficial to everyone concerned.

 

Determine the Shelf Life of the Partnership

 

One of the essential qualities of good leadership and successful business partners is that they review and

evaluate their progress against objectives and projects. Effective business partners set dates for achieving results.

They know when it is time for them to withdraw from a partnership arrangement and go their separate

ways. Having a clear shelf life for partnerships and their review is critical. There is nothing worse than

being in a partnership arrangement that has outlived its usefulness.

 

 External Partnerships

 

Would you do business with someone you don't trust? Most wouldn't. Yet although trust is fundamental

to building long term relationships, it may not be the primary driver in evaluating and making business

and other decisions. Indeed many of these decisions appear to be taken without fully assessing the likely

impact on relationships with employees, customers, suppliers, investors, local communities and other

'stakeholders'--the very people who contribute to an organisation's reputation.

Choose your external relationships wisely. Do your investigation into their standing the marketplace.

Are they trustworthy?

 

Do they sell a reputable product or service?

 

  • Are they accredited?

 

  • Ask about their business history.

 

  • Arrange a meeting face to face.

 

  • Their actions or inactions can ruin your reputation and your business

Business Alliance Partners: Making Business Alliance Relationships Work

 

There are five basic alliance categories:

  1. Solution-specific alliance
  2. Sales alliance
  3. Investment alliance
  4. Geographic-specific alliance
  5. Joint venture alliance

In most cases, the partnerships between companies involve a combination of two or in some cases, more than two of the stated categories. A solution-specific alliance becomes operative after two companies make a joint agreement for developing and selling a specific marketplace solution. The sales alliance is an agreement between two companies, to sell complementary services or products jointly.

An investment alliance takes place when companies come to an agreement to combine their funds for mutual investment. The geographic specific partnership takes place when there is a joint agreement between two companies, to jointly brand the products or jointly market the services in a particular region geographically. A joint venture partnership is developed when companies decide to take on the economic activities together.

How to Make Alliances Work?

According to the available statistics, about 50% of all alliances created in the United States fail due to a number of reasons. Listed below are some of the personal qualities that a business owner and alliance partner should ideally possess:

Vision: It is a bad idea to develop the alliance just because it seems to be the right thing to do or in line with existing trends. It is essential to develop a mutually beneficial vision, along with the ability to look at the future prospects and not become dependent on your alliance partner. However, if you become too independent, you may no longer need an alliance partner. You need to develop the vision to work towards becoming interdependent.

Curiosity: You should keep looking for opportunities to raise your profits and improve your capabilities. It pays to be open to new and unexpected opportunities and to be curious about alliance possibilities.

Communication: A lack of communication can lead to the failure of an alliance. This is important and every business owner needs to focus on transparency and effective communication.

Organize: Organizing the alliance structure and procedures can have a huge impact on the longevity and ultimate implementation of the alliance. If the adopted alliance structure is complex, you should keep all the details and documents organized. This helps to develop a long-lasting and profitable alliance.

Leadership: You should develop leadership that highlights your willingness to focus on getting things done, rather than being obsessed about being right all the time. This will affect and determine the success of your alliance. This attitude should be present at the very beginning of starting the business.

Compassion: Compassion and tolerance are characteristics you should strive to maintain in an alliance. They help you to handle difficult situations and maintain your sanity.

Contracts: Written agreements are vital to the success of an alliance, no matter how loyal and trusting each alliance partner is. Your expectations of one another and the promises you make initially should be documented and available for viewing whenever required.

Alliance relationships can be extremely profitable for all the parties involved. If you are confident and aware of all the steps involved, you will be well on your way.