You’ve got a great idea for a small business, and you found the perfect business partner to help you bring it to success. You both want a successful business, and are excited to get started. Stop. Before you even invest one dime into a small business venture, you need to do a few things to ensure a successful partnership, not a tale of bad business.
It happens all the time, expectations go from “this is awesome and we can do this!” to “my partner is the biggest _ (fill in the appropriate jerk, slacker, penny pincher, wasteful spender). It can happen for a lot of reasons: differences in vision for the small business; different risk tolerances; differences in work ethic or time versus cash. Lots of things can happen to make people bang heads and trash a partnership.
The best way to do this is to manage expectations from the beginning. Channel the excitement of a new small business into setting up the w’s: who, what, when, why. Who will be responsible for what, when and even if necessary why. Communication needs to be clear. So ask yourself questions like: What is a successful business and what does it mean to each of you? How many hours a week are each of your comfortable working at the start and later when things are less “new”?
What kind of a return on your investment into the business are you expecting? What should be reinvested? How do you quantify differences in skills so time is valued equally? How much debt, personal or otherwise, are you comfortable with? What if one of the business partners wants to leave the business? What will the buyout process be to let them go or replace them? Small businesses often have cash flow issues or emergency needs for capital, so whose personal assets will and will not be available? What is the end game? Will the business be sold or stay in the family or old business partners be replaced with new ones? What will that process look like?
Successful businesses and partnerships start with a trip to an attorney and business accounting so that expectations are managed and business partnerships are nailed down into a written agreement. With a written agreement there is nothing left to chance or faulty memories. Be smart going in and have a successful business partner in your small business.
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