“If you’ve got an idea, start today. There’s no better time than now to get going. That doesn’t mean quit your job and jump into your idea 100 percent from day one, but there’s always small progress that can be made to start the movement.” –Kevin Systrom, Founder of Instagram
As a business coach that works with entrepreneurs, I usually ask these questions from my clients that are thinking about creating a partnership. While it might be exciting to go into a business venture with a friend or colleague as a business partner, do you really need that partnership? What is the cost-benefit of the partnership? To figure that out, here are a few questions for you to think about.
First, can you hire the other person as a consultant instead of a business partner? This might be a more favorable outcome for you because it can give you more freedom and if things get contentious, this would be a more preferable arrangement versus having to dissolve a partnership or buyout a partnership.
However, if you do need the partnership, ask yourself the following questions to make sure you are pairing with the correct partner(s).
10 Questions to Ask Yourself Before You Create that Partnership
1. How have you defined the roles and expectations of your partnership?
- If you are the creative contributor and your partner is the investor, how are time and money allocated for the business? Does your investor partner expect you to be the one running the business, or do they want to have more control over the running of the business?
2. Have you discussed your work philosophy?
- Sometimes, you have one partner who is used to being in the office at 8 am and working through dinner. Another partner may prefer to prioritize work differently, perhaps because they have other commitments or interests. What if you are a late riser and don’t prioritize the number of hours worked but you prioritize the quality of work? How is quality evaluated and who gets to decide?
3. Have you worked with this person before and do you know their temperament?
- How do they respond to stress? How are they with disappointments? Even if you are considering partnering with a friend you know well, it’s important to understand how different personalities may affect your work environment.
4. What is the immediate priority for your business according to each of the partners?
5. What is the immediate priority for your business once you get cash flow or that big investment?
6. In case of a difference of opinion between you and your partner(s), what is the process to resolve such an issue?
- Do you have a tie-breaker? Is there a dispute resolution clause in your agreement?
7. In the event of a partnership dissolution, in other words, your company is breaking up, who gets what?
- For instance, if there is a trademark or a patent involved, how are those rights split?
8. What happens to customer lists or goodwill that is generated? Do you have a buyout agreement defining how these assets will be split?
9. What if the business does not turn a profit in the first few years, how committed are all partners?
- Do you have an agreement on when you and your partner(s) will get paid?
10. Does your partner(s) have other businesses or business ideas?
- You will want to know ahead of time what happens if you or your partner decide to launch another business. If they are partners with someone else for another business, how does that affect your business?
Whether you are creating a Limited Liability Company (LLC) or a corporation, remember that a business partnership is like a marriage, you want to commit to it with the right person and with the right personality. But also remember, this is why it is good to work with an attorney to get those documents in place because they can help you customize the agreements to fit your vision and your needs. If you are interested in other startup related information, please check out my YouTube channel, “Inventive Mind.”
About the Author: Gayani R. Weerasinghe is a transactional attorney practicing intellectual property and business/corporate law, including working with entrepreneurs and start-ups on their patents, trademarks, copyrights, protection of trade secrets, and compliance training of employees. Before coming to law, she spent 13 years doing biomedical research, including co-authoring a dozen publications of original research in peer-reviewed scientific journals. She is also a business coach, assisting businesses and professionals in navigating their goals and objectives and setting new ones. For more information, please visit, www.lawgrw.com or visit her Youtube Channel “Inventive Mind.”