(As published in the Los Angeles Business Journal and Inland Empire Business Journal)
It has become increasingly difficult to achieve great success in today's complex business environment by forging ahead on your own. According to a recent survey of home based entrepreneurs, 60% said they were teaming up more often than they did five years ago, and 70% said they wanted to do even more. Establishing some form of collaboration, whether it is a loose alliance, formal affiliation or legal partnership, adds tremendous value to the small business owner looking to create quantum leaps in company performance.
But what about the horror stories we've all heard of partnerships gone bad? Some of us have even experienced a painful breakup. The cost, both financial and emotional, have left many entrepreneurs vowing never again!
The challenge is hooking up with the right partner first, then outline the financial, legal and working details of the partnership. Most of us, however, tend not to look beyond the surface when selecting a partner. How many times have you heard Oh, we'll be great partners. She has the sales and marketing experience and I have the financial background. We complement each other and will make a great team. While knowing your potential partner's skills and functional expertise is important, it's only the beginning of the selection process. Creating great partnerships requires doing your homework upfront and communicating with deep honesty and directness.
The following seven steps can enhance your chances for success.
Do your due diligence. It's not enough to say, We get along well. Do you share core values, vision and expectations for the company or project? Most fatal conflict will arise as a result of these unexplored areas. Unfortunately, this is the step many people either ignore or gloss over because they are uncomfortable asking these questions, take answers at face value without in-depth probing, or are just too vested in the outcome of selecting a particular person as a partner.
Establish roles and responsibilities. Fortunately, we usually team up with someone who has complementary skills. Understanding our differences as strengths and recognizing weaknesses in ourselves and potential partner is a critical early step. Defining roles and responsibilities based on a candid assessment of these areas, allow partners to avoid ego issues, stepping on each other toes, duplicating efforts and giving mixed signals to the organization. This does not mean inflexible job descriptions. Boundaries can and should remain somewhat loose so the organization be fast and flexible.
Define your decision making process. How will both the day-to-day and major decisions be made. Look at every aspect of running an organization, the myriad of decisions, their impact on the organization, and then define how those decisions will be made. Will they fall under each partner's functional area or will decision-making be shared? How will differences of opinion be handled? Partnership does not necessarily mean consensus, and disagreements are inevitable, so know how you will deal with it before it happens.
Establish leadership role. Partnerships are not completely flat organizations. They do have leaders. Leaders play multiple roles and the partnership may have multiple leaders depending on the situation or task at hand. What is the most effective leadership model for your organization?
Communicate, communicate, communicate. Know and respect yours and your partner's communication style. How do you each best receive and process information? How often should you be communicating? About what? Be aware of the quality of your communications; are you falling into the trap of group think? Successful partners know how to cultivate disagreement by challenging each other's position in an effort to reach the best solution.
Embrace and plan for change. Understand that everything you put in place in the beginning will change, with the exception of core values. As your partnership matures, the need to confer on every decision, for example, will probably disappear. Markets change, customer needs change and products and services may change. How will these changes impact the organization? How will they impact your initial agreements on roles, leadership, decision-making, etc? Planning for and agreeing upfront on how you will tackle these critical junctures is key.
Have an exit strategy. Personal circumstances (divorce, death, children entering college, etc.), may force one partner to reevaluate their commitment to the partnership. A once thriving partnership can become untenable. If you can't renegotiate the terms of the relationship know ahead of time how you will handle it if you decide to part ways. Partnership and Buy-Sell Agreements are vital to a smooth parting.
Investing enough time in the beginning will pay big dividends in ensuring a successful partnership. Above all, have an attorney draw up a Partnership Agreement outlining the ownership and business terms and your buy sell agreement.