What You Should Know Before Starting A Business Partnership
Business partnership contributes to the success of several businesses and establishments out there. As SMEs in Africa, partnering with a business/organization your size or even bigger can lead to massive growth when done the right way.
As with every relationship out there, a partnership requires putting a system in place to vet and guide the association. As a result, here are some vital things you should know before starting a business partnership.
Carefully Select Your Partners
As amazing as a business partnership can be for SMEs in Africa, it can also be one’s worst nightmare if care is not taken. Ideally, you should know your prospective partner for at least a year before entering into a partnership with such a person. Also, you should partner with someone who has a lot to offer. Someone more experienced and knowledgeable than you in certain aspects is your ideal candidate. In the words of David Ogilvy, ‘you should hire people smarter than you.’
Your partner(s) should be someone you share similar values with. This isn’t to say you must agree on every single thing. However, your shared values should tally to a large extent. You can take things a step further by asking for references. Who are the people your potential partner has worked with, and what do they have to say about this person? References will provide you with infallible facts about your potential partner.
A Written Agreement
You should never enter into a business partnership without signing a written partnership agreement. A well-crafted agreement will help save you from any liability issue that might arise in the future. According to Jack Canfield, one of the biggest mistakes you can make when partnering is not sufficiently clarifying each other’s roles, boundaries, compensation, and exit strategies and then documenting them on paper.
While it’s important to trust each other, it’s vital to ensure you are clearly on the same page before you start. People often have different understandings and interpretations if they are not codified in writing.
Also, your agreement will make it easier for you and your partners to implement your business vision. You and your partner(s) may agree on every single thing. However, you should get a legal practitioner for legal advice and drawing up the contracts.
Clearly Spell Out Responsibilities
For SMEs in Africa, partners don’t necessarily have to perform the same tasks. However, it is essential to spell out individual obligations. In addition to this, ensure all partners agree as regards these assigned duties. This consensus will help to avoid future resentments. Responsibilities must be hinged on what works best for the business.
Asides from spelling out roles, you also want to clarify all forms of compensations, boundaries, and future exit strategies. All of these must be spelled out on paper and signed by all parties involved. Furthermore, when entering a partnership, always ensure there’s an exit plan in place. An exit plan will make it flexible for partners to exit the partnership when the need arises.
Responsibilities in this case also involve finances and time. How much will each person contribute in terms of money and time? All of these should be put into consideration.
Decide On Partnership Dissolution
There is no guarantee that a business partnership will last forever. Bearing this in mind, it is vital to figure out how things will pan out. When a partner leaves, how will his/her time and investment be compensated? These are issues that should be figured out before going into the partnership agreement. It will help you plan and think of the best ways possible to dissolve such partnerships in the future.
Dissolution can happen due to different situations. One is when you and your partner no longer share the same values regarding the future of the business.
Discuss Money
One factor that can destroy even the strongest of partnerships is money. Since the goal of any business partnership is to make money, it is essential to discuss it before starting. Here are a few things to consider in the money department:
- How will you manage business finance?
- How much will each partner contribute towards the business?
- Will you be taking loans or funding with personal money? E.t.c.
Plan For The Unexpected
The unexpected is sometimes bound to happen. Your partnership agreement should make provisions for unforeseen circumstances such as:
- The death or illness of a partner.
- In the advent of a buyout.
- Retirement of one party in the partnership, e.t.c.
These are some of the most common issues to plan for. Several others exist that should also be put into consideration.
Conclusion
The process of crafting a solid partnership agreement might not necessarily be a walk down the park. However, carefully putting things in perspective will guarantee you some peace of mind in the future. You can carry out your business partnership rest assured that you and your partners are on the same page and have things figured out in case of future occurrences. Taking your time to set things right from the start will save you the stress of potential legal battles and hassle in the future.
