Starting your own small business can be a leap of faith. Starting a business with others can be an even bigger leap. How can you be sure that your business partner(s) will be the right fit – with you and the needs of the business?
First, you have to ask a lot of questions – both of yourself and the other person. You need to understand what you each bring to the business, how you will work together, and how you will handle the challenges.
When our clients start a business in partnership or create a joint venture, we suggest a three-step process:
STEP ONE: Self-assessment
Before getting deep into conversations with a potential business partner about the details of the business relationship, each person should ask themselves some initial questions:
- Why do I want to do this business?
- What is my work style and my strengths and weaknesses?
- What are my goals for the business?
- What is my level of commitment to the business?
- What roles do I really want in the business?
- What are my expectations from a partner?
STEP TWO: Dialogue
After each person has a better idea of what they want and what they could bring to the partnership or joint venture, they need to sit down together to discuss mutual expectations. By talking it out, it will soon be clear if this could be a good business relationship.
- Do you share similar values and a similar approach to business ownership?
- Do you trust each other?
- How will your individual qualities and skills work together?
- In what areas do you agree or disagree?
A strong business partnership or joint venture should have:
Good chemistry
You and your business partner must actually like each other! You will be making many important decisions together. A foundation of mutual appreciation and respect is essential to get through tough times and make being in business a lot more fun.
Clear communication
You both/all need to be comfortable and willing to talk with each other regularly. You need to be able to share opinions and feelings honestly and deal with them promptly. You also need a framework for making important decisions and a process for how to deal with conflict.
Benefits for all
You each must be contributing something unique to the relationship – such as specific skills, an area of expertise, or a management style that will complement the other partner(s). Each person should bring something critical to the business, such as financial resources, marketing expertise or important connections. And both you and your partner(s) should feel you are gaining something from the partnership to make it worthwhile.
STEP THREE: An agreement in writing
After going through the self-assessment and dialogue with a potential partner, you may discover that a partnership is not the best business relationship for you or the business. Great discovery! Maybe one person would be better as an employee/contractor for the business instead of a co-owner. Or, there is someone else out there who would make a better partner.
If the process thus far makes it clear that you still want to proceed as partners, a written agreement (signed by both/all partners) is critical. It should include specifics related to roles and responsibilities, ownership percentages, compensation, decision-making and conflict resolution. The agreement should also include a process for reviewing, amending and exiting the agreement.
Take the time necessary to figure out that you and the other person(s) are the right match and you all have what it takes to start the business together. Then put it in writing! This solid foundation is essential for any business partnership.
At Paul Terry & Associates we help both new and established business partnerships and joint ventures. We focus on clarifying expectations, defining roles, addressing key issues and resolving areas of conflict. We help business partners create written agreements and action plans for how to move forward together.
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