So you came up with a business idea that would make you ‘blow’. But you had a problem, this idea requires someone with a good background in tech, which you didn’t have. You reached out to your college buddy who is a good software developer, and you shared your idea with him. He sees the huge financial prospects in the idea and he signs up with it. Both of you agree to work as partners with 50% equity split each.
A year down the line, you are questioning your decision to form a partnership with your college buddy. The reason is obvious, both of you hardly agree on any decision concerning the company. In fact, you are presently considering opting out of the partnership venture, but the thought of it leaves you with mixed feelings because you’ve put in a huge amount of your resources to see the business through.
Sounds familiar? But this is one among the many stories of about 70% of partnerships that eventually fail. If partnerships strengthen business growth, what could be the reason for failure in this venture?
I believe the reason behind failure in this area is largely due to the inability of partners to pay attention to what i call the “pre-checks” to forming any kind of business partnership.
If you are about starting a business with a partner or you are already in business and you intend bringing a partner on board, below are some relevant questions you should take into consideration;
- IS MY BUSINESS READY FOR A PARTNERSHIP?
What this question simply addresses is whether or not you are willing to give what it takes to sustain the interest of your intended partner. Understand that no partner comes aboard a business without expecting something in return. Unfortunately, this is where most business partnerships encounter problems. People go into partnership for the wrong reasons. They are only interested in the perks that come with partnerships. Creating a partnership entails giving up a degree of your ownership rights to the business. Be absolutely sure that you and your business are ready for that before going in.
Whatever the demands are, ensure by all means that you have the right structures in place to accommodate such.
- DOES MY INTENDED PARTNER COMPLEMENT MY EFFORTS?
Creating business partnerships is beyond the coming together of two human beings to start a venture. In making a choice for a partner, i strongly recommend you look out for people who may not necessarily possess similar temperaments as yourself, but people whose diverse traits serves as a complement.
The last thing you need in your business are people who can perform similar roles such as yourself. There is beauty in diversity! However, all prospective partners must show a strong sense of commitment to making the venture work from the onset.
In summary, intended partners should conduct extensive due diligence on each other before going into bed with each other, otherwise you might just end up in a bad business marriage in which divorce is inevitable.
- WHAT CONTRIBUTION DOES MY INTENDED PARTNER(S) BRING TO THE TABLE?
Please ensure that you and your intended partner spell out your contributions to the business before a partnership is formed. Contributions could come by way of financial capital, sweat equity or both.
In reality, you may not be able to foresee all roles especially if it’s a new business, but you can make room for such eventualities.
All form of capital contribution must be clearly spelt out and calculated. The ability of business partners to provide clear information in this regard, would help in providing clear information on what to expect as their return on investment.
- HOW DO WE RESOLVE LEGAL DISPUTES?
In any enterprise where two or more persons co-exist, disputes are bound to happen. Imagine you had a fall out with your business partner and you opt to settle your dispute by way of court litigation. I don’t need to describe the extent of damage such process would do to the business. That’s why i advice my clients especially those in business to opt for alternative methods of resolving disputes as against litigation.
Partners can determine how and where they wish to resolve future disputes as regards the business before a dispute occurs. I strongly recommend that an issue of such nature be considered and agreed on when partners are on best of terms as they stand a chance of been favorably disposed to any issue at that stage.
Alternative means of resolving disputes are cost and time effective and proceedings are confidential in nature. Interestingly, our laws recognize it. That’s why we have the Multi – Door courts in almost all 36 States in the Federation in Nigeria. Examples of alternative means of resolving disputes include; mediation, arbitration, conciliation.
I strongly recommend you seek the services of a business lawyer to guide you on which method of alternative dispute resolution is most preferable.
- HOW DO WE MEASURE OUR COMMITMENT TO OUR BUSINESS PARTNERSHIP GOALS?
By all means ensure that you and your partner(s) are committed to the success of the business in the first place. You do this by setting out goals for the business, how to achieve them, as well as timelines for achieving them.
This helps in ensuring all hands are on deck to see the business venture succeeds. Starting out with a partner requires hard work and mutual commitment by both parties, and where the details are given attention to, such business stands a greater chance at success.
- HOW DO WE ENSURE THAT ALL PARTNERS KEEP TO THEIR END OF THE BARGAIN?
Nothing compels commitment to a business partnership than a written contract reflecting the intentions of all concerned parties. Where a written partnership agreement is created by both parties, the law and the courts respects such agreements and is restrained from interfering with the decisions of both parties.
Where a partner, fails to fulfill his obligations in such agreement, the other partner can ask the court or any panel entrusted by parties with resolving disputes for an order compelling a defaulting partner to act according to the terms of an existing agreement.
In conclusion, people venture into partnerships under various circumstances. I therefore strongly recommend that before you undertake any form of collaboration or partnership, you consult with a business lawyer to know which would be most appropriate.
Need help venturing into a business partnership? Book a session with us through the link below, lets get you sorted.