There are a lot of entrepreneurs who like to start a business with a partner with thoughts that it will be easier, less risky, and that you will have someone to lean on. What is a clear fact based on statistics, a partnership that is formed without a thorough due diligence and clarity of responsibilities & roles is likely to fail. Trust me...I know first hand! So what makes successful partnerships work? I am going to share my experiences and opinions.
According to the United States Small Business Administration (SBA), businesses with multiple owners are more likely to survive longer than those who go out on their own. The basic new start-up stat everyone uses regarding 66% of new businesses fail within the first year or two is a motivating factor to cover up this statistic the best you can. Some think going into a partnership arrangement helps reduce the probability of being a part of this stat...and I agree under the right circumstances. It is a fact that partnerships are the simplest and least expensive of co-owned business arrangements.
Forming a partnership can either be a good or bad thing, depending on the parties and circumstances involved.
Before entering into a partnership, it would be best to first determine whether or not you are suitable for this type of arrangement and, if so, to thoroughly investigate possible business partners.
Is your prospective business partner a good match? A business match is much like a marriage. Just as one would normally take great care in the selection of a mate, you must be careful with a prospective business partner. Here are some questions to ask yourself to find out if you’re compatible:
Avoid any potential problems by making sure duties and responsibilities of each partner are detailed in a legal agreement. This agreement should include how much capital each will contribute; who owns what; how decisions will be made, profits will be shared, disputes will be resolved; a buy-sell agreement; and who will be entitled to what if the partnership doesn’t work out. Be sure to involve a lawyer and an accountant from the outset to help form your partnership and to draw up legal agreement to avoid unexpected circumstances.
No doubt, deciding whether or not to work under a partnership arrangement is a major decisions for you, your family, and your career. A lot rides on how the partners handle everything that is involved with the business and what decisions are made.
MP, LLC credits blog post with the original author and links (if available).
Scott E McGlon is the President of McGlon Properties, LLC and the author of many blog posts on MP Blog. He has been a serial entrepreneur, entrepreneur-in-residence, investor, and president/CEO of many successful start-ups since 1998.
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