When you think of the name Hewlett-Packard, does corporate titan come to mind, or two entrepreneurs and a dream? What about Johnson & Johnson, or Sears, Roebuck and Company? Many a successful company had its beginnings in a partnering relationship between two or more entrepreneurs.
Still, regardless of the type of business entity, organizing a business together with a spouse, family member, friend, or stranger can be difficult at best. Merging complimentary skills and a shared vision are a good starting point, but careful planning from the beginning is the key element of success. Experts say such planning should include a strong business plan with details regarding how the business will structured, clearly defined roles, an exit strategy, and an agreement to disagree.
Many partnering relationships and their associated businesses fail because entrepreneurs are more anxious to get into business than they are to develop a business plan and work out the legal and structural details in advance.
It may seem like a no-brainer, but it’s essential in a partnering relationship for the principals to actually like each other. Sometimes people partner up in a business only to find out they have differing ideas and values. If you don’t enjoy working with your spouse, family member, friend, or investor, odds are your business will suffer. Some experts suggest that partners consider taking a personality test before they get intertwined in a business together. What’s more, when a partnering relationship involves someone with whom you aren’t well acquainted, you should ask for financial statements and a resume that includes the names and phone numbers of past business or investment partners.
Regardless of whether the business partnering is among spouses, family members, friends, or strangers, the relationship can be really good or really messy, depending upon the structure of the business, how well it is defined, and the personalities involved. In addition to writing a strong business plan, there are four important steps that can help prevent problems from the get-go:
- Have a very clear partnership agreement, which covers things like how the business will be valued, who buys whom, etc.
- Even though you’re partnering, you can only have one captain, so decide who will be the boss and live by it. Any good company has an organization chart and every person knows what their job is.
- Make sure your values match. If your goals and values are different, the business will suffer and may not survive because your partnership will differ on too many decisions.
- Set a time limit on how long the partnership will last.
At the end of the time limit, review your relationship and decide if the partnership should continue. Five years is enough time to make an educated decision about your business and the partnership.
Learn more tips for entrepreneurs at Zions Bank’s Online Business Resource Center.