Are two heads better than one? When it comes to a small business partnership the answer can be a resounding “yes”.
Having a partner to share responsibilities and costs sounds like a win-win for a busy small business owner. However, if you don’t set up your partnership for success, things can go downhill quickly. Here’s important information to help you establish a partnership that works for all parties.
In short, a partnership is a single business where two or more people share ownership. Each partner contributes money, property, labor and/or skills. In return, each partner shares in the profits and losses of the business.
There are three types of partnerships you can enter into. From the SBA website:
Ensure that you have everything in place legally to establish a partnership. It might cost a few bucks but speaking with a professional can help avoid problems down the line.
Even the best of friends or closest of relatives must put a written document in place to outline each partner’s responsibilities. The website AllLaw.com has a simple partnership agreement you can use as a template. Have the document reviewed by an outside party, ideally an attorney who specializes in small business issues.
What does each partner bring to the table? If you’re looking for a partner, seek out those who have strengths that might not be in your skill set.
Who will oversee accounting? Which partner is in charge of hiring? Does one partner want to spearhead vendor relations? We hear it all the time – small business owners wear a lot of hats. Make sure the hundreds of tasks that it takes to run a successful enterprise are divvied up fairly and realistically.
Now is not the time to put your head in the sand. Although discussions about problems can be uncomfortable, letting them fester won’t solve anything. Agree that you’ll face issues swiftly and look for resolutions as soon as possible.
Text and email are a great way to communicate. However, if you have an important issue, problem or opportunity, pick up the phone or meet in person. Staying engaged with your partner is vital. It’s a good idea to have a set meeting time each week to connect and discuss the business.
This is another great opportunity to put pen to paper. Discuss where you want the company to go and agree on a path. Work together to define a company culture that works for you both and fosters small business growth.
Is your partnership not working? If you’re unhappy and the business is suffering, take a step back and look at your options. Ending the partnership might be the best route to take. Now is a time you’ll be extremely happy to have official documentation in place to protect both parties.
One of the most popular posts on the SmartBiz blog is “Need To Buy Out Your Small Business Partner? The Basics and How to Fund”. If you want to buy out your small business partner, read our post for the information you need to know. If you need low-cost funds for your small business, visit SmartBiz today. You’ll know in about 5 minutes if you’re qualified for a low-cost SBA loan.