If you don’t have enough capital to start a business, you can partner with someone who can cover the difference.
While many business owners opt to get loans from financial institutions, others cover their funding needs by entering into partnerships. Instead of being a solo entrepreneur, you can choose a partner willing to invest in your business, and more importantly, share in your vision.
What is a business partnership?
A partnership is a business agreement between individuals to share the management and profits of a business. Partners have equal liabilities when it comes to obligations and debts.
If you are bringing a partner on board, you should check if he/she is the right person that can help the business. There are several factors to consider when choosing a business partner.
The ideal business partner should be someone who shares the same goals and vision as you. Your partner must believe in your ideas. At the same time, you and your partner should have full trust in each other.
Both of you must be on the same page on how to handle the business. Both you and your partner should work hard and should have the same enthusiasm for the business.
Never choose a friend, co-worker, or a family member to be your partner just because you know them. Make sure that they have all the qualities of being a hardworking individual.
It is essential that you have good communication all the time. It is important that your partner is able to talk to you and share his thoughts. You also don’t want to be left in the dark when there are decisions to make.
Having a good conversation about the business is of utmost importance. The relationship that you have with each other will be reflected in the company’s success.
Lastly, your business partner should be a people person. He must have good relationships with other people. Having a huge network is very helpful in any business.
Benefits and Drawbacks of a Partnership
And just like being a solo entrepreneur, having a partnership has its benefits and drawbacks.
Among the advantages is having someone that you can depend on, particularly when the business is getting too demanding. You can focus on things that need more attention while your partner helps you with other tasks, thus lightening the load and allows you to have a better work-life balance.
Your partner can also provide a different perspective and solution to a problem. And last but not least, having a partner also eases the burden of financing your business.
A partnership, however, also has some disadvantages.
Apart from sharing profits, partners also share in losses and debts.
You may like to be in full control of a business, but having a partner limits your independence.
Conflicts may arise from having different opinions. Sometimes, it may be difficult to draw the line between business partners and real-life friends.
So once you decide to start your business as a partnership, draft an agreement that discloses the full details on how business decisions are made and how issues are resolved. Add provisions on how to handle a buyout, in case the need to sell the business arises.
Having this type of agreement may just save your friendship.
What should the partnership agreement contain?
The agreement should be able to address the purpose of the business, the extent of authority and responsibilities of each partner. Here are some important points which the agreement should have:
1. Is it possible for each partner to share equal ownership and authority? (The percentage of ownership and allocation of profits and losses.)
2. How will decisions be made? (You must clarify what type of consent a partner must obtain before they can obligate your company.)
3. If one partner dies or decides to withdraw from the partnership, how will the value be determined?
4. If one partner decides to withdraw from the partnership, when will the money be paid?
5. How are disputes resolved? (Make sure to add a mediation clause should you and your partner come to a point where you get into a huge conflict. There should be a mediating body that could help iron out your differences.)
Consult with an adviser prior to drafting your partnership agreement to ensure that every little detail is written in black and white.
Having a business partner can help you to make your business successful, only if you choose the right one.
For more information, you may contact Armando "Butz" Bartolome by email: firstname.lastname@example.org or on Twitter https://twitter.com/philfranguru His website https://www.gmbmsglobal.com
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