fm Huff Post.com 30 Apr 15 enhanced by Peter/CXO Wiz4biz
Before you enter into a partnership, here are the most essential bottom lines to cover, when you formalize the partnership.
1. Get your Agreement in Writing. Absolutely mandatory. Yes, you’re busy, and lawyers are expensive, but if you can’t afford the time and money to properly document the partnership, should you really even be entering into it? If you don’t, it could back to bite you later.
2. Make sure you share common Values & Vision. Don’t just look at the ways you fit. Do a Pro/Con analysis and list out all the ways you do & don’t fit, + the reasons you should ¬ partner. This will help you fully think through the fit, to make the best decision.
3. Integrity is a “must” in any choice of Partners. What evidence do you have of your potential partner’s integrity? Of their lack of integrity? Have you checked out their Referances? How about Peers at there past companies?
4. Evaluate your prospective Partners past “exits” from Business or Employers. Check out there personal relationships (ie, most significant other & friends) to see what that reveals about how they will behave if your business relationship ends. While investment prospectuses have to say, “Past behavior is not a guarantee of future performance,” with human behavior it is your best clue.
5. In your Written Agreement, put the emphasis on making the partnership work out. Make it less favorable to leave or quit the partnership. This tilts the field to push you both to work things out. Make the time and effort.
6. Make sure in your “Partnership Math”, you don’t base it on Time invested, but rather on Value created. Both of you must feel fairly treated or the situation won’t work. Look at the contributions all partners are making to the business and put an equitable value on each of these contributions in the form of a percentage. Have your Board of Advisors or Directors review it, or a Business Consultant [like Mr. Wiz4biz] to be very objective. Look for external measures of value — what would you have to pay for this contribution on the open market? Rewards & control should follow contribution & risk. If things change over time, your agreement needs to reflect how this will impact profit splits & equity ownership.
7. Choose the right Legal Structure at the start of the Partnership – LLC, Partnership, Corp, etc, that best suits the structure of your organization and its long term Vision..
8. Get your Written Agreement done 1st. If you start out without one, your initial “honeymoon” stage may turn into a “divorce” stage – then how are you going to part fairly – without emotions getting in the way. Have it planned before hand – just in case.
9. Consider doing a “one off” Joint Venture – to see what it’s like working together first, before you jump into a long term business partnership. In other relationship words, date before you marry !!!
10. Incorporate your answers to how to handle the 5 D’s in your written Partnership Agreement up front. The 5 D’s are: Death, Dis-ability, Dis-solution, Disaster, Desire = 0, No passion left (partner wants to leave). All these situations should be covered in the Agreement.
Conclusion: I wish you the best of luck as you move forward in your partnerships. Remember, your roles and needs in the partnership will change over time. Make sure you keep the dialogue with your partner(s) open along the way.
Comments: Is there anything you can add to “Partnering-up?