To ensure that your business partnership remains efficient and harmonious, please follow the 9 tips below:

1. Thinking about why I need a partner?

First, think about whether you really need a business partner. Fear of doing business alone, or lack of funds, skills, or staff may be the wrong reason to establish a partnership. You may be able to hire people and outsource works to others without giving up your share of the business. Or find a mentor to bring funds, skills, or talented person to the negotiating table. Consider the Advantages and Disadvantages of partners based on your skills, industry, and financial situation. If after careful analysis, you have decided that you must have a partner:

Then choose a partner who has complementary skills.

When you and your business partner have different advantages, the power of your team will instantly double. For example, if a shy tech expert wants to start an Internet business, it is best to find a partner with sales, marketing, and interpersonal skills. In this way, both of them can focus on what they like and are good at. This will bring something different and make your business more interesting and passionate. 

2. Know more about your partners.

2.1 Professional ethics

Even if you believe someone is a good business partner, there is no harm in doing a background check. Calling a few former colleagues, leaders, competitors, customers, or professional referees who have had business dealings with your partner can let you know his professional ethics. The background check can help you avoid many accidents when working together in the future. For example, if your business partner has the habit of being late and you don’t, you can divide the responsibilities accordingly.

2.2 Business experience

It is a good idea to check if your partner has experience in running a new business. This will tell you how they performed in their previous efforts.

2.3 Financial status

Before inviting others to join your business, you need to know their financial situation. When starting a business, a certain amount of initial capital may be required. If the business partner has rich financial resources, you will not need to raise additional funds. This will reduce the company’s debt and increase owners’ equity.

2.4 Have the same values

Building business partnerships with people with the same values makes daily operations very easy. You can quickly make important business decisions and develop long-term strategies. However, sometimes even the most tacit person disagrees on important decisions. In this case, the company’s long-term values must be kept in mind.

3. Clarify the roles and responsibilities of each partner.

Make sure you clearly list the job title and duties of each partner in the company running. In your agreement, confirm what each partner will provide – not only the funds but also time, customers, equipment, technology, management operations, etc. Knowing these from the beginning can help you avoid future problems.

4. Who is in charge of daily operations.

Daily operations involve many trivial and scattered things, as well as various emergencies, which need high demand of the comprehensive ability of managers and quick response. Therefore, positions including CEO and directors need to be assigned to the appropriate persons from the beginning.

This helps to create a clear organizational structure, and can further define the roles and responsibilities of each partner. When someone is responsible for dealing with complex daily operations, others can focus more on what he is good at. And are more likely to perform better in their roles.

5. Decision-making methods.

Please note this question is extremely important! Believe me, you and your partner won’t always agree on everything. You need to define how to conduct daily management and long-term decision-making. Who can make the final decision? Determine which types of decisions require a vote by all partners, and what decisions can be made by a single partner. 

By establishing a decision-making structure that everyone understands and agrees to, you and your partners can better resolve disputes, break deadlocks, and smoothly make decisions that meet the need of most people.

6. Profit distribution.

You do business to make money, create and maintain a comfortable life, and realize your dreams, right? Your partnership agreement should specify how the partners will distribute the business profits? How much will each partner get paid, and who will get paid first?  How many profits will be used on reinvesting to improve the business?

Establish a dynamic profit allocation plan

In addition, there is a big problem in the process of starting a business. That is, in the business operations, it will be found the total contribution that partners actually make to the team is different from the initial agreement and vision, and this difference will become larger and larger as time goes on. Because the growth speed of ability is different from person to person, although you may discuss 50% to 50% points profit distribute at the beginning. But a few years later, more than 80% of the company’s business and profits are mainly derived from the more capable person in the team. Is it still reasonable to split half at this time? The one who does more and gets less will feel dissatisfied. Although the one who did a lot less, knew this was not good for the team, it was often difficult to give up the easy and generous profits, although this did not match his ability and contribution. Therefore, the team’s break-up is just around the corner. 

So, in order for your team to smooth operation for a long time, it is necessary to establish a dynamic profit allocation plan. On the basis of determining their key performance indicators, it can be agreed to hold a general meeting of all partners every year or two. Adjust the profit distribution plan, discuss and negotiate on the basis of their actual effort and contributions, then actively solve the problem of unreasonable profit allocation.

7. Exit strategies for dissolving the partnership.

Your agreement should also be involved steps be taken to legally end your partnership. If you and your partner cannot agree on the future of the company, you may choose to do so. What happens if a partner wants to exit your business? What are the options for buying another partner’s shares? You must prepare for this situation by determining how partners will be compensated, how resources will be allocated, and the ownership of the business. 

When the partnership is on the edge of breaking down, people’s conflict emotions will be very strong. Therefore, the best time to determine the exit strategies for dissolving a partnership is before you and your partner formally establish a partnership business.

Besides, in order to protect your business from the departure of partners, establish a new company, and steal your customers. You can also consider adding a competition clause. Just in case. 

You should know that this relationship will end one day. Therefore, you should develop flexible exit steps for these scenes.

8. Sign a partnership agreement.

Even if you and your business partner agree on everything, don’t just leave it on the verbal agreement. Be sure to consult a lawyer for legal advice. A lawyer can help you make an agreement that both parties can understand and agree to. It may feel complicated and troublesome at first, but taking this contract step is the best way to protect the interests of both parties and the smooth development of the company.

9. Keep communicate and be honest with each other.

Hiding your true feelings because you don’t want to hurt your business partners will bring more problems. For the partnership to proceed smoothly, both of you must share your opinions frankly and actively discuss and resolve differences. Many misunderstandings come from the lack of communication and own random thoughts. Hiding your worries will only lead to pain and resentment, which may ruin your partnership and your business.

So, please keep communicate and be honest with each other during the partnership.

Summarize:

From the beginning, determine whether you need a partner, and know more about your partners, determine respective roles and responsibilities, decision-making methods, profits distribution, exit terms, and so on. These jobs will provide you with a solid overall framework for a successful partnership and enable you to focus on your business.

It takes some time and money to make a partnership agreement with legal effect, but it is very worthwhile. Through it can confirm that you and your partner are in the same boat and have the same expectations of the business. After careful discussion and communication, and consulting with a lawyer, you will have a business contract that will allow you to avoid potential legal battles and major troubles in the future.

Now it’s your turn

Thanks for reading my article,  if you have any questions or some interesting stories during your business experiences, welcome to leave a comment below or contact me, I’m are here all the time.