There are things to consider when you have a business partner. Rules have to be set out and responsibilities listed. Read on to find out other tips
Business plan
While this exercise is not mandatory, it is extremely helpful to ensure success of a partnership. The plan serves as a roadmap for the partnership to implement actions necessary to start and grow the company. It is also useful in making you focus on various aspects of the business such as where you plan to obtain start-up capital and whether you will be selling through the Internet.
While drawing up your business plan, you should also consider the name of the company, and when you have chosen one, make sure you register it with the appropriate authorities.
Draw up an official partnership agreement
This agreement outlines the partnership type viz: amount of ownership of each party, entitlement to profits and specific management duties. It also outlines the terms of the partnership if it has a definite end.
Choose a location
Decide the official address for the partnership. With technology enabling partners to work from remote locations, it is helpful to designate one place to receive partnership mail. If partners operate from their respective homes, the partnership can obtain an address from such companies.
Open a joint business bank account
This is where you will deposit revenues and pay bills on behalf of the company. Talk to your bank representative about restrictions on the account, such as a requirement to have the signature of all partners on large withdrawals or cheques.
Get an outsider’s perspective
Most startups don’t have a board of directors but still need an outsider’s viewpoint. It is helpful for founders to give a monthly presentation about company goals and challenges in front of two or three mentors. Presenting to a third party keeps partners from blaming each other for company decisions gone wrong. For example, partners, who disagree about how to price their product, can present their cases to their mentors instead of getting into a direct conflict with one another. Getting into this habit also helps the founders gain perspective on their decisions, since their mentors are removed from the day-to-day ups and downs.
Solve problems before they happen
Just like you would create a business plan, it’s a good idea for founders to sit down together, write out potential hot-button issues and think through solutions in advance. For example, you will want to outline each partner’s time commitment to the company and how you will handle personal problems such as illness. It’s also important to discuss how and when the partners will be paid and strategies for growing the business. For instance, one partner may want to keep the profits, while the other may prefer to re-invest them in order to scale. Taking the time to address what’s important to you upfront can help prevent future breakdowns in communications.
Clearly outline job responsibilities.
If one founder isn’t pulling her weight, it can breed resentment. One way to avoid this is by assessing and redistributing the amount of work each one does through weekly partner meetings. Knowing you will meet regularly to discuss the workload can help ease any lingering tension. Keep in mind that a balanced division of labour doesn’t necessarily mean divvying up every project. For example, instead of splitting the marketing work down the middle, one partner can focus on marketing while the other concentrates on operations. Of course, you will want to consider each other’s strengths when making those choices.
Make it official
Even though job descriptions may seem obvious, it is a good idea to officially clarify individual responsibilities among all involved, particularly in high-level areas of operation.
Consider all partners when making decisions
For many business partners, making even the smallest company decisions can turn into a drawn out, painful process, which can slow down the company’s upward trajectory. Learning how to effectively negotiate with your co-founder will help iron out potential gridlocks. When negotiating a big decision, you should focus on your overarching goals, rather than quibble over specifics. At the same time, don’t make concessions without getting something in return.
Keep communicating
It’s also essential to connect regularly — not just for accountability, but so each founder has a complete picture of how the business is evolving. In an expanding company though, individual workloads can make that harder than it sounds.
Profit and loss distribution
Each partner’s distribution percentage – reflecting their share of partnership profits and losses – must be clearly stated in the agreement. Partners share in the profits and losses to the extent of their shares in the business. If each contributes 50 per cent of the start-up money, then each is entitled to 50 per cent of the profits. Distribution of profit must be made in accordance with the partners’ percentages.
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