Aside from law firms and medical practices, the number of businesses that
have partnerships more than 10 years old is almost zero. A partnership
conflict ranks as the second leading cause of stress for small-business owners
behind cash-flow problems.
When we bring someone into our business, we are granting them ownership,
authority or rights we can’t easily revoke. Even the really good partners will
add layers of complexity, which makes it vital to examine your reasons closely
before taking on partners. So, why do we do it?
It helps us share the workload, the responsibilities and the risk. A partner
should bring complementary skills, for example he’s a pragmatist and I am a
visionary, or I’m excitable & emotional and he’s level-headed and rational.
Partners should bring new ideas and strategies and can act as a sounding
board. Some partners bring a new network of connections, others bring money
to the partnership.
But we must examine more closely the reasons we think the above scenarios.
Does it really mean I am scared and don’t believe I can do it myself. I am not
sure I can do it alone or I have a hard time making decisions. I don’t have any
money and don’t want to borrow it. And of course, he’s my buddy and we can
hang out together!
Every facet of a partner’s life affects us and our business. Changes in mood,
personal finances, family lives, health and aspirations are among many
potential sources of future conflict. Decisions being made will not only affect
your life, but the life of your partner.
Partners can be expensive. We must share profits and proceeds from the
future sale of the business and the partner you take on today, can be different
in the future. An example of this, is your partner wants to retire or dies, your
partner will now be a spouse or one of their kids.
Lastly, Partnerships are easy to get into and hard to get out of. We take on
partners for the near-term benefits and often cannot escape the long-term
But if you feel overwhelmingly to take on a partner, it can work, but not
without a a well thought out legal deal. Things that must be discussed and
written to avoid issues would be…………..
Who is responsible for what duties? Who is the Boss? What happens if a
partner leaves? What happens if the partner gets a divorce or dies? How will
profits be distributed (payroll) rate of pay etc? Is there an exit plan? What if
the company fails?
In my opinion, partnerships can bring complexity to business that we may be
better off without them. Before taking on a partner, examine your real reasons
for wanting one. If you decide you must take on a partner, don’t formalize any
arrangements until you have had the tough discussions in front of a qualified,
experienced business attorney.
Strategic partnerships are different…..
A strategic partnership is a relationship between two commercial enterprises, usually
formalized by one or more business contracts. A strategic partnership will usually fall
short of a legal partnership entity, agency, or corporate affiliate relationship. Strategic
partnerships can take on various forms from shake hand agreements, contractual
cooperation's all the way to equity alliances, either the formation of a joint venture or
cross-holdings in each other.
1. Strategic Partnerships Give Your Business a Competitive Edge
2. Strategic Partnerships Give Your Business Access to Additional Resources
3. Strategic Partnerships Grow Your Customer Base
4. Strategic Partnerships Give Your Business Access to New
5. Strategic Partnerships Help Your Business Reach a New Market
6. Strategic Partnerships Strengthen Weaker Aspects of Your Business