Business partners often start businesses together with little planning and few ground rules. Sooner or later, they discover the hard way that what’s left unsaid or unplanned often leads to unmet expectations, anger and frustration. Starting your own business with your friend or your relation isn’t for the faint of heart. It’s stressful and pretty much demands your complete focus. On the plus side, it can also be a fulfilling experience professionally and personally. Here are 5 tips to build a new business with your partner :
1.Develop an idea.
Don’t just start a business because something is in vogue and you think commercializing it will make money. Develop a business concept that you’re passionate about related to something that you have experience with. From there, come up with a product or service that you believe can enhance the people’s lives.
2.Test the partnership
Test the partnership out by tackling a small project together that showcases each other’s skills and requires cooperation. This is also a way to learn about each other’s personality and core values. Ideally partners’ professional skills should complement one another, but not overlap too much. For example, you may be detail oriented and your partner may be a big-picture thinker. Or you may be an expert in marketing and sales, while your partner prefers to stay in the backdrop poring over financials.
3.Make an agreement
Once the decision is made to start a business together, you should create a partnership agreement with help from a lawyer and an accountant. Take this step no matter who your partner is. People with strong personal connections may feel certain that their supposedly unbreakable bond will help them overcome any obstacles along the way. Big mistake. Get a written agreement. Every agreement should address three crucial areas: compensation, exit clauses, and roles and responsibilities. Include who owns what percentage of the business, who is investing what, where the money is coming from, and how and when partners will be paid.
The agreement should also cover how you plan to exit the business. Include clauses that spell out cases in which one partner is obliged to buy out the other’s interest — for instance, if one wants to quit the business. For instance, it can state that the other partner must buy him or her out for a prenegotiated percentage of the business’s value.
If neither partner wants to continue the business, partners can also liquidate and divide all assets. It’s also a good idea to settle on in advance how to assess the total value of the business upon dissolution. The agreement should specify who appraises the business and the methodology to use.
4.Dealing with partner
Outline your expectations for how you’ll operate your business. Clearly delineate the roles and responsibilities of the partners based on their skills and desires. This will eliminate turf wars and clearly show employees to whom they should report.
Establish routines for daily communication. For example, agree to talk twice a day at designated times and to re-evaluate their goals on a regular basis. At least once a quarter, sit down and discuss how you envision the future of the business and what steps to take in getting there.
Addressing these issues up front will help you better focus on your business later. How you work out the details of setting up a partnership could be an indicator of how well or poorly your prospective venture will operate. Inevitably, some potential partners will realize through the process they weren’t meant to be.
6.Trust each other
Not surprisingly, trust is the foundation for any successful partnership. But what exactly does that mean?
“Trust implies that both parties participate in the relationship with both ‘gives’ and ‘gets,'” says Morrison, who on August 1, 2011, will take the helm as the first woman CEO in the 142-year history of Campbell Soup Company. “The attitude of giving a full commitment to the partnership will usually result in getting the same commitment in return,” she says.
It’s that very commitment that has kept Warren Buffett and his vice chairman of Berkshire Hathaway, Charlie Munger, working together for more than 30 years. Indeed, while they are known to be exact opposites in terms of personality, their deep trust in one another has allowed their partnership to be mutually beneficial despite their differences.
Taking on a partner is like taking on a spouse. That means you need to have honest and open communication — always, no matter how difficult the topic. This includes talking about money, mistakes, problem happen on your business and different management styles.