In the absence of that 9 to 5 job, small business entrepreneurship is booming. Many of you reading this are probably already thinking about how to build upon an idea for a product or service. That idea has lived in your head for a while, but because you couldn’t see past that corporate job and all of its trappings, it remained just an idea. Now self-employment seems like the only employment. And I would argue it’s the best employment.
While it seems the movement is motivated by necessity, it is fueled by that undeniable entrepreneurial spirit that lives inside us all. I can’t tell you the number of people in my life who are brainstorming with friends, neighbors, family, and former colleagues. They are trying to flesh out just the right idea for a new business. In many cases that brainstorming may give way to an actual business partnership. You’re probably thinking what better way to share the cost and risks of a new business then by joining forces with someone who shares your vision. But that’s the catch. Make sure you really do share the same vision. And don’t rush into a partnership without first exploring your compatibility on all levels.
Partnerships are like marriages, and we all know the rate of divorce and how irreconcilable differences can lead to its demise. So before you get ‘married,’ know your partner – their strengths, weaknesses, and attitudes about money. We’ll talk more about money in a moment. Above all else is the shared vision. If you want to open one specialty burger joint, but your partner envisions 10 locations in 2 cities, you are doomed to fail. If you are both creative types, it could mean you collaborate and brainstorm to solve a problem and come up with a solution that incorporates the best of both plans. It could also mean you fight like cats and dogs. Sometimes the best partnerships involve a shared vision with split roles. One of you is the marketing genius, while the other handles hiring and customer care – two halves of a whole.
If a partnership is like a marriage, your contract is like a prenup. Just as a couple in the midst of a romance doesn’t want to wreck their mojo with an agreement that outlines the specifics of a divorce, business partners don’t want their creative juices and enthusiasm to be interrupted with a contract that talks about how to dissolve the partnership. There’s a case to be made for and against a prenup, but with business partners you can’t convince me you shouldn’t have one. There are some key points to cover in your agreement. Outline the amount of equity each of you contributes the business, and set the guidelines for dissolving the partnership, including how to divide the assets. And when you cross that threshold into profitability, make sure you’ve already outlined in detail how each of you will draw a salary.
And that brings us to money. Ironically enough a business is most likely to fail when it’s becoming the most successful. As the money starts to roll in disputes arise. How much is too much to pay yourself? How much goes back into the business, and for what purpose? If one of you wants to remodel, while the other wants to buy into a new product line, the conflict may be too much for the partnership to withstand.
Bottom line – don’t jump into a partnership because you’re worried you may not be able to make it alone. Yes, it might be comforting to know that someone else is sharing the risks. But remember, if the company does well you have to share the rewards as well!
Link to original post