Entering into a new business partnership can be exciting. Both partners have come together with a great idea and are filled with optimism about what the future holds. Naturally, they want to focus on the positive aspects of doing business, and they should — to a point.
Just because it seemed like the new partners were on the same page as to how to run the business doesn’t mean they agree on every detail. The potential for conflict is present in every business, and it is important to recognize and face that conflict early to prevent partnership disputes as the business grows and evolves. Here are some things to do when pursuing a partnership business relationship.
Set Rules Early and Hire an Attorney
Don’t begin work without a signed operating agreement. Especially when that work requires a certain level of sacrifice, such as moving or quitting the old “day job”. Each partner’s role should be set in stone, along with how they will receive their compensation. Also, don’t forget to define protections for each partner. These rules should be set early, because the longer you wait, the less leverage you’ll have to negotiate
Many new partners try to save money by writing their business agreements based on a template. While this shows you’re not ignoring the need for a plan, there is too much margin for error when you attempt the DIY method. It’s okay to start with these templates, but ultimately they should be brought to an attorney to make sure that you haven’t left out important details that need to be considered. An attorney can often see potential snags and can work with you and your partner to correct these issues before they make a true impact on the business, and quite possibly your friendship.
Look on the Down Side
New partners naturally want to look on the bright side, but it is important to take the time to deal with the other side as well. How conflict is to be handled should be built into the business agreement. Ask questions regarding how the business would be divided if there were a conflict, would they be bought out by their partner, their replacement, or by management staff. How will business investments work, While it isn’t pleasant to discuss worst case scenarios, it is better to deal with the issues when they are still scenarios, and not causing scenes.
Be Ready to Accept Whatever Reality Comes Out of Negotiations
In any relationship, personal or business, there are will be certain conditions that are nice to have, those that you are mostly indifferent on, and absolute deal breaker “must haves.” Each partner should specifically evaluate what responsibilities they want to own. Sometimes, a business idea sounds great when it first emerges, but then quickly loses steam during negotiations. Remind yourself that it is okay if this business idea for this business does not work. It is better to learn this early than after you’ve invested a good deal of time and money on something you can’t quite get to work.
While there may be a few things about the business that you feel strongly about, the point of a partnership is that there is not one clear winner. Making the partnership work in a way that will allow you to move your business forward in a way that benefits the business as a whole.
Solving problems, before they become problems in business, is the most cost-effective way to deal with them, Of course, this doesn’t always happen. The most amiable partners can find themselves butting heads unexpectedly. When that happens, it is important to resolve the issue as quickly as possible with the help of an attorney, mediator, or consultant that can help you regain a better perspective.