When forming a business partnership - just like a marriage - there are certain key steps to take at the beginning that will help in the transition if your professional relationship should end.
As an entrepreneur, you may at some point consider getting a business partner or co-founder. Maybe you miss working with a larger team that complements your skills, or perhaps you are trying to broaden your market or expand your clientele.
Whatever your motive, you should know that business partnerships always start with excitement, but have the potential to end tumultuously.
Related: What you need to look for in business partnership agreements
1. Perform due diligence
Yes, everyone is fun over cocktails, but when the time comes to sign contracts and do business, you’d better be sober and confident you’re shaking the right hand. Asking for referrals about a potential partner goes beyond contacting common friends and asking their opinions.
Call former partners and business associates, inquire with clients, read comments on their social media pages and look them up on Google. (Keep reading way past page one of the search results.)
By the time you’re done, you should be able to name anyone who dislikes them - from their first high-school enemy to their latest unhappy client. Only then will you be able to either take a calculated risk or a major step back.
2. Make sure you lawyer up
If the legal fees in the beginning of a business relationship don’t make you wince, then you’re doing something wrong. When you partner with other people, every aspect of the business relationship should be put down in writing - including the goals for the company, duties and responsibilities of the partners and an exit strategy.
Every sentence of a contract - no matter how innocuous - should be looked at by a lawyer. Since tax laws can be tricky, have your accounts receivable/payable arrangements scrutinised by an accountant.
3. Ensure you have exit strategy
Ending your business partnership is the last thing you want to think about when you are beginning one. It is similar to thinking about divorce on your wedding day, but you should have a plan.
The business exit strategy should include several legal points including the division of the business assets and how the partner's portion of the business will be handled in case of death.
4. Protect yourself
One of the smartest moves you can make is to protect your personal assets in case of a lawsuit. Whether you choose to incorporate or become an LLC, the top benefit will be shielding your savings, home, car and even your favourite pair of Louboutins from any liabilities associated with the business.
Related: Have a look at our advice for finding the right business partner
5. Protect your brand
Joining forces with a partner takes a lot of energy, and chances are that somewhere down the line you will lose your focus. Working for a common goal within a new team is really exciting but merging forces does not necessarily mean merging identities.
Don’t lose sight of who you are. If part of the original business plan is to maintain your brand, make sure it doesn’t suffer while you’re giving all your time and energy to your new endeavour.
When you meet a potential partner, your personalities may click and your goals may be identical but to have a successful relationship, clarity is key.
The more precautions you take in the beginning, the happier and more productive you will be later on. And the day you see that the team you’ve tried to build has become nothing more that a group of people looking in different directions, then it’s time to part ways and move on.
Business partnership check list
Every business needs a good mix of talent and abilities. It's great to find a partner whose skills complement yours, but be sure to put your agreement down in writing. As in all relationships, transparency is critical.
Click here to download a business partnership agreement checklist to ensure you cover all bases.
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