The prospect of entering a partnership with another business can be very exciting. The shared responsibilities can suggest a stimulating endeavor that will generate new ideas and potential market growth.
But before you take the plunge into this unknown territory, there is much you need to know and consider — for example, the following five key issues.
1. The larger percentage
With any shared endeavor, a certain percentage goes to each owner or business. One side may have the largest amount of money to invest while the other company can devote more time to operations.
You have to decide which partner will receive the largest percentage if you don’t make it an even 50/50 split. This is completely up to the two of you. Just remember, not everyone may be as vested into the new partnership as everyone else. This has to be a very careful decision.
2. You may need a referee
When two companies get involved in making decisions, disagreements can ensue. In order to resolve conflicts, you should have a resolution strategy in place before the partnership gets started.
This avoids ugly disputes and breakdowns during the active part of the venture. Each partner will be vested in the business, which makes it harder to dissolve over time.
3. Making vital decisions
As with disputes, other decisions can become a source of adversity between the two partners. So, before you start that business engine, you would be wise to have a decision-making process established and working properly. Although the partnership requires two or more participants, there needs to be a lead decision maker.
4. Death and the partnership
In the event of the death of a partner, there should be a way to organize what happens with the business. Before startup, the partners should discuss sales or allocations of each share in the event of an untimely passing. With this in place, many potential complications can be readily addressed when the time comes.
5. Credit matters
Credit is as important in a business partnership as a marriage. If you dive into that business with a friend or acquaintance and find out his credit stinks, you could be in a world of trouble. Bad credit is like a disease: if you work with it, you can get the same disease.
The simile may sound too graphic, but it’s true. When you partner with someone whose credit is questionable, then your credit can become damaged in the process. Make sure you’re aware of all credit issues within your agreement.
For businesses located in the UK, it’s as simple as checking out an online credit report.
There are so many things to consider when starting a business partnership. These are just some of the most basic and important issues that should be addressed right away.