5 Traits of Successful Business Partnerships
Steve Jobs famously said, “Great things in business are never done by one person. They’re done by a team of people.” You can build a lifestyle business by yourself and live comfortably, but if you want to change the world you will need a team of people.
Many people start businesses with partners because they need what the other person has, most commonly money or specific skills. Other times people start by themselves, but take on partners to address specific missing key elements as the company grows. There are five key elements that factor in to the long term success of a business partnership.
1. Each Partner Has Complementary Skills
Let’s say for example two designers go in to business together. They might compete for the design work, or worse, fight over who is better. They draw straws over who has to do the business side: accounting, sales, office management, etc. It ends up being a company that is strong in one area and weak in many others.
A better partnership choice is when the partners have different, but complementary skill sets. For example, if one partner is creative, one is good at sales, one is good at operations, and one is good at finance. Together they can leverage their strengths while deferring to the other partners outside of their area of expertise. The sum is greater than the parts.
2. Division of Workload is Fair
When one partner has a larger portion of the workload or responsibility in a business without a corresponding larger ownership stake, it causes strife amongst the partners. Even worse, there have been many partnerships where one of the partners doesn’t even show up for work for extended periods of time, yet still demands to get paid both salary and profits. Many times the partner with leverage takes advantage of the other partner(s).
The way to keep the partnership fair is to divide the responsibilities as evenly as possible. If one of the partners is doing more of the work, it is fair to redistribute the load to other partners or employees. The best partnerships delegate authority to the different partners in their areas of expertise, and companywide decisions are put to a partner vote. If the workload is fair, there will be less in-fighting and more effort spent growing the business.
3. Work On the Shared Goals and Values
Many partnerships break up because partners fight for issues outside the scope of the business. To visualize the solution, imagine each partner is represented by a circle. Inside this circle are all the hopes, dreams, and realities of the business for that partner. Each partner has their own circle. Now overlap the circles where the partners share the same goals and results of the business. Each partner has some part of their circle that does not overlap with the other partners. This part that does not overlap should not be introduced into the business. Concentrating on your shared goals and results keeps the dialogue professional and on course for the scope of the business.
4. Buy-Sell Agreement in Place
Agreeing at the beginning how partners would break up sets realistic expectations and a clear path for the longevity of the company. A good Buy-Sell Agreement answers these important questions: How to value the company at any given time; how to deal with a partner that dies, is disabled, or does not perform; and a clear path for the company to buy out a partner’s share without putting the company out of business.
Buy-Sell Agreements can be added to a partnership at any time. It is best to get all partners to sign it before there is a need, so that all involved can negotiate with a level head. Buy-Sell Agreements manage each partner’s future expectations, so if their interests lie outside of the overlapping circles of the other partners, they have a clear path towards exit.
5. Partners Change Over Time
People grow personally and professionally at different rates in the same environment. One partner may have more money than they ever imagined, while another partner in the same business may have the drive to grow the business another 10 times larger. It is OK for partners to want different things. It becomes not OK when one partner threatens the existence of the company because of their demands on the other partners. Partners come and go over time in business, but the goal is that the business goes on.