1. While partnering up can be a great way to leverage existing resources between parties, a poorly written and researched general partnership agreement can open you up to personal liability issues. It’s a good idea to hire an experienced lawyer to help form your company.
2. Sharing resources can be great, but it can come at a price. While a 50-50 split of profits, for example, may sound like fair compensation at the start, sometimes resentment can emerge when partners start divvying up the profit and tracking it back to individual workloads, efforts and results. Decide from the outset the roles and responsibilities each player will have, how they will resolve disagreements, and who will help serve as a mediator to settle issues and reach a win-win solution.
3. Most people team up based on a personal friendship or co-worker relationship. To thrive, a good partnership should be grounded in business and treated as a business relationship. Even if an owner is “silent” or there is a 70-30 or 80-20 split, values, goals and personalities need to be aligned toward profit.
Before beginning such an arrangement, figure out how you’ll hold one another accountable for results. What reporting or objective indicators will be used to measure and track performance? How will value — in effort and results — be monetized and measured?
4. A business venture can be structured for any amount of time (as long as the owners are still alive), but they should have a vision for how it will grow and expand over five, 10, or more years. It’s advisable to build in a flexible, win-win exit strategy for each player if needs or circumstances arise.
5. A business, like certain marriages, requires a pre-nup. The reality is that it’s not a matter of if, but when you’ll decide to go their separate ways. You need to prepare for that scenario and have a document as part of your agreement that outlines what happens when one or more people leave. How will they be compensated? How will resources be divided? How will clients be served?
6. Any successful company needs to have one person in charge. So, the decision of who is responsible for day-to-day company direction needs to be made early on, and everyone in the partnership needs to be 100 percent clear on their roles, duties, and responsibilities. This involves communication and a certain amount of planning.
The temptation is great in today’s market to share talents, equipment, expenses, or crucial business relationships. Just make sure you do the legwork and hard decision-making up front to assure that your business will pay off in the long run.