In my last post, I wrote about the difficulties I encountered with my first business partner (my brother-in-law) and how that partnership ended. Partnering with family is never easy but I learned a lot from my experience — the importance of a healthy business partnership and the importance of having agreements, abiding by those agreements, and having clear communication. And most importantly, not delaying difficult conversations and continually checking in with each other to ensure you’re both on the same page.
The importance of agreements
Most partnerships begin because both people get along wonderfully, so you think, “This is great, we both get along and have the same business drive, so this should work out!” And that is completely true — getting along is a good indicator of a good partnership. However, if there is a dispute between partners or a change in partnership, a partnership agreement is the only way to assure that the business (and personal) part of the relationship can survive.
It’s important to hammer out the details early. The terms and conditions of the relationship between the partners can include the percentages of ownership and distribution of profits and losses, the description of management powers and duties of each partner, how the partnership can be terminated, and how a partner can buy their share of the partnership. By including ‘what-if’ questions in the agreement, you can avoid problems later down the road.
Partnership agreements are set in place right at the beginning to deal with anything from confusion to disagreements and change. Here are some reasons why:
- To set up each partner’s roles and responsibilities
- To avoid tax issues
- To avoid legal and liability problems
- To deal with changes due to life-changing circumstances
- To deal with conflicts of interest
- To describe how disputes will be handled
Clear and continuous communication
A lot of communication happens before you even get the ball rolling in a business partnership. But it’s important to have clear communication throughout the entire partnership. Your business partner can’t always read your mind. So it’s important to consistently and continually set expectations with each other to stay on the same page.
That can go for anything business-related or not. If there’s something that your partner does that irritates you, make sure to clear the air and nip it in the bud right away. You don’t want any lingering resentment or pent up frustration that could affect the business later on. By not allowing your concerns to snowball, you can move on and your business will be minimally impacted.
Having heart-to-heart conversations are key to a successful partnership, which means having honest, effective, and non-threatening communication. A partnership is a two-way street — you can express your perspective and be honest, but you also need to give your partner the chance to be heard as well.
The bottom line
Agreements and communication are crucial parts of navigating any business partnership, and they can make or break the success of your business. But it’s okay if both parties want to go in different directions and part ways. That’s alright. Sometimes it’s better to regroup than force something that isn’t working.