BUSINESS BUDDIES
"If you are in a partnership youcan't always
expect things will be done your way" |
A well chosen business partner can provide complimentary skills and expertise,
as well as emotional and financial support. But how do you create and manage
a successful partnership?
 n
their new book The Guide to Successful Business Partnerships, authors Ian Brooks
and Noel Davies make a number of interesting observations. As they state in
the introduction, they have viewed both brilliant life enriching business partnerships,
and some disastrous partnerships that have ended in financial ruin and great
personal grief and bitterness. Avoiding the latter scenario is all about proper
preparation following a few simple steps to stack the odds in your favour.
“If you're not a risk taker, then you shouldn't go into business at all,
never mind a partnership. But if you are, then a well structured and carefully
planned partnership can be the ideal way to go into business," say Brooks and
Davies.
"A partnership will provide you with financial and emotional support, and
if you choose wisely, your partner will; bring skills and expertise you do
not have. A partner can also share the responsibility of running the business. "
But forming and maintaining a partnership is fraught with traps, and in their
book the authors draw on their own experience in business partnerships, as
well as the experience of a number of New Zealand business people, to increase
your chances of success. In Chapter 14 they offer the following advice:
If you don't have complementary skills, don't go
into a partnership.
You shouldn't form a partnership simply because you have the opportunity
you need to make sure your prospective partner can add real value to your business,
and contribute to its growth.
Make sure you have similar goals, values and expectations.
This is critical unless you and your partner are headed in the same direction,
you will constantly be pulling against each other. Unless your behaviour is
guided by the same standards and values, you will cause frustration and aggravation
for each other. Unless you have similar expectations about what each will put
into and take out of the partnership, you will continually disappoint each
other.
All of this will lead to ongoing tension and conflict that will eventually
split the partnership. Spouses too, must share similar goals, values and expectations,
because they exert a great deal of influence on you and your business partner.
Keep it simple.
Although there are a number of key issues to be considered when forming a
partnership, neither the structure you use nor the partnership agreement you
produce need to be complicated.
Make sure you have a shareholders' or partnership
agreement that protects you.
This is particularly important if you are a minority partner. When developing
the agreement be fair on details such as remuneration, leave, the use of company
vehicles, roles, performance reviews, communication, and the resolution of
disagreements. Also, make sure your share of the ownership reflects your share
of the risks. An equal partnership requires equality in the levels of financing
and security each partner contributes. However, if ownership is not divided
equally then the person owning the greater share should contribute the greater
share of the money and take a greater share of the risk.
Spend money to get sound professional advice.
This is vital for structuring your partnership, drafting an agreement, and
organising the finances. Look upon it as an investment, not as a cost.
Have an exit plan.
Make sure your partnership agreement outlines how you can each exit the business
or what will happen if one person wants to buy the other out. No partnership
lasts forever, they all run their course. "Don't be surprised if it needs to
be dissolved at some time," said one contributor. "The key is for it to happen
in a planned and mutually beneficial way!'
Make sure you can release cash.
There will come a time when you want to unlock some of the value you have
created in your business. The partnership or shareholders' agreement should
provide a method for releasing money that is tied up in the business in such
a way that neither the operation of the business nor your relationship with
your partner are threatened.
Have a strategic plan, a formal business plan,
and a budget.
Failing to do this can be one of your biggest mistakes. And although it is
essential to have a plan to follow, you also need to be ready to adapt to new
developments and conditions. "Realise that you can't foresee how the business
or the partnership is going to develop!'
Develop a culture of putting the business first.
Be careful not to strip the profits out of the business to benefit shareholders/partners
when the money would be better reinvested in the business. "You should always
act in the best interests of the business it's not all take."
Make decisions quickly. Discuss issues thoroughly so you can make sound decisions
but don't let the discussions bog you down. In this rapidly changing world
it's easy to get left behind and timing is everything. "You are better to be
90 percent correct and on time, than 100 percent correct and too late!'
Manage conflict, don't avoid it.
Some people make the mistake of being too soft on their partners letting
them get away with too much. On the other hand, when conflict arises you need
to find a solution that both parties can live with. That involves compromise,
flexibility, and sticking to the issues.
Treat your partner as an equal.
You must be committed to each other, not just the business. It's also important
to appreciate your partner's strengths and acknowledge the contribution he
or she is making to the business. Make sure you partner is involved in all
major decisions too. One seasoned business person summed it up with this golden
rule: "Treat your partner as you would like them to treat you".
Arrange key man insurance.
This is to protect you and the business against something happening to your
partner. The better your choice of partner, and the more they can contribute
to the business, the more vulnerable you are should something happen to them.
Be very careful about involving family members
in the business.
It often seems logical keep the money in the family by getting one of your
own family members to work in the business. However, this can be a minefield.
Having a family member working in your business can lead to the failure of
a long standing partnership.
Many local, national, and international New Zealand companies have been founded
on successful partnerships. But as Brooks and Davies point out, before leaping
into a partnership, you need to know the obligations associated with being
a partner, and whether you're prepared to meet them.
"If you're in a partnership you can't always expect things will be done your
way; nor can you expect your partner to compromise their values," they say. "You'll
also need to be prepared to forgive your partner because, like you, they will
make mistakes."
The Guide to Successful Business Partnerships (RRP $34.95, Nahanni Publishing
Ltd) could well be a catalyst for your decision to go it alone in business,
or take on a partner.
Certainly, if you do decide to form a partnership, establish the ground rules
and actively manage the relationship. Talk to people who've experienced a business
partnership, whether good or bad, and learn from their experiences. After all,
as Brooks and Davies conclude "life is too short to make all the mistakes yourself!'
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