What is an entrepreneur partnership?
An entrepreneur partnership is a single business where two or more people share ownership as well as the profits and losses of the business.
And according to the National Small Business Association, only 2% of small businesses in the United States are partnerships.
It is well known that relationships are key to business success. This is particularly true in entrepreneur partnerships.
Whether you start a business with a friend, family member, or someone else there are a several tips to make an entrepreneur partnership successful.
If you do nothing else in your partnership, commit to honest and transparent communication with each other.
Like any other relationship, the best entrepreneur partnerships are based on mutual respect, understanding and trust.
To accomplish this, all parties must both talk and listen, even when you disagree.
2.Align on Business Vision and Goals.
As you begin your partnership, agreement on the long term vision for the business is important.
This includes having a shared understanding of short and long term goals as well as how you will measure success.
Without a common vision and goals, partners can easily end up working towards different things and eventually create a rift.
For example, if you are building the business with the intent to ultimately sell but your partner is hoping to grow the business and pass it down to her children, then both partners goals are clearly misaligned.
Such misalignments can have a trickle down effect on daily business operations, how you treat each other and staff, how you engage with customers, revenue and profit generation, and on and on.
Determine which partner will take the lead on which aspects of the business.
Division of responsibilities should align with each partner’s area of expertise, proven experience, or passions.
The primary reason you will want to divide responsibilities is to ensure that no one person bears all the burdens of the business and avoid duplication of efforts with the work.
By dividing and conquering, the business can achieve so much more than if all partners work collectively (or separately) on the same business items.
4.Determine How Decisions Will Be Made.
I usually refer to this as “who has the D or V” which means who has Decision making power (or V – Veto power).
As you run the business, big and small decisions will be made every day.
You and your partner(s) must determine how you will handle decision making.
Will each of you have the leeway to make decisions for aspects of the business you have primary responsibility for? Must partners make all business decisions together? Should any business decision that results in direct profit or loss over $100 require discussion? How will you resolve differences of opinions on decisions? When do partners only need to be consulted or informed versus make the decision themselves?
Entrepreneur partners should not take these imporant questions lightly. Up front discussion about decision making authority with your partners can save a lot of headache later on.
5.Agree to Routinely Assess the Health of the Partnership.
The truth is that just as the business will likely change over time, your partnership will as well.
Agreeing to regularly revisit all aspects of your partnership will help you to continually evolve your working relationship.
You will learn more about each partner’s strengths, what you like and dislike about working together, what decisions can be made individually versus what needs to be decided together, and much more as you work together.
Just like any other relationship, each new experience and major milestone has the potential to further shape your partnership.
Being aware of this, managing expectations, and creating the space to discuss and adjust as things change will allow you to sustain the partnership for the long term.
Starting a new entrepreneur partnership can be a very exciting time.
While you strategize about the market, your products and services, as well as your customers do not underestimate the importance of steps you will need to take to establish a strong partnership as well.
After you’ve thoroughly discussed and agreed on the aspects of your partnership, you should put a formal partnership agreement in place.
In addition to the items above, your partnership agreement should include (but not be limited to) business matters such as how much money each partner will invest in the business, how the profits will be divided, and what happens to the business if one partner wants to leave (i.e., does the remaining partner have first right to buy out the departing partner).
While we fully expect the partnership to succeed, we also want to make sure that all parties are protected in the event things do not work out.