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It is a big decision to go into business with a partner. No matter how much you might like the other person or how confident the two of you might be in your shared skills and vision for a business, you need to weigh up the risks objectively. Growing a business from the start is challenging. Likewise, the process will throw a range of obstacles and stresses at you. Ensure you are going into business with a partner who can weather both the good and bad times. This article covers three things you should think about when going into business with a possible partner. 

How Well Do You Know Your Potential Partner?

Before entering a business partnership, try to understand the character and personality of your partner in some detail. There is no guaranteed period of how long you have to have known someone to get that deeper understanding. Still, it does help understand how the other person behaves at work, in leadership, and in particular through difficult or stressful situations. This can be easier to understand if, for instance, you have worked with them previously. 

You should also try to understand what your potential partner offers relative to your own personality and skillset. Try to visualise what the combination of your leadership styles might look like. It is often preferable if a partner has a different skill set or experiences than you and may be better than you at certain roles or tasks. This differentiation can make it easier to set out your various roles and also maximise the all-round strength of your partnership. 

Are You on the Same Page in Terms of Operating the Business?

While it may seem obvious, many partners go into business with surprisingly different ideas about how the business will operate and their various roles. Forming these assumptions without properly communicating with your potential partner can lead to challenges down the road. You should not assume anything about how your partner feels about important decisions like how you will divide profits. An equal split of profits may appeal in theory. However, this may not seem fair if one partner contributes more time or resources to the business over time. You should decide on these roles and distributions in advance. Likewise, write them down so both parties can see what they have agreed to.

There are other essential elements you should both agree on.

For example:

  • What is your vision for the business, and how does it differ from your partner’s? 
  • Is your partner keen to operate the business for a few years and then sell the business, or do they want a long-term operation? 
  • What happens if someone leaves the partnership? In particular, how will you compensate them, and how will you divide resources?

The more details that you discuss and agree upon ahead of time, the better. You can also think about what success looks like in terms of results in your business. Additionally, what figures or other objective statistics and numbers you will use to set goals and track progress in your business? 

Who Will Be in Charge?

Another consideration is who will have overall responsibility for the business. While there are successful partnerships of equal partners, most successful businesses have one person in charge. It is also helpful to other employees or workers to know who is in charge of day-to-day business operations. You should plan and agree to these details in advance, so there are no surprises or disappointments. 

While it may be a difficult or awkward conversation, it is vital to have when going into business. It may be that the experience or skillset of one partner makes them a natural pick for being the overall leader. Even when that is the case, it is still important to have the conversation.

Key Takeaways

There are many things to consider when deciding who to go into business with. An essential component is understanding your partner as a person. Try to work out what makes them tick and how they will handle the difficult times that are certain to arrive at some point in your business’ journey. You should also consider whether you are both on the same page regarding how the business will run day to day, what your roles will each be, and who will ultimately be in charge. If you want to know more about making a decision around a partnership or forming a business, contact LegalVision’s business lawyers on 0800 005 570 or complete the form on this page.

Frequently Asked Questions

How long should you know someone before going into business with them?

There is no set period of how long you should know someone before going into business with them. That said, you want to make sure you have some understanding of who they are as a person – they should not be someone you just met and know little about. Getting a sense of someone can take months or even years. The more you know them, the better.

How should you decide who is in charge?

It can be a difficult decision about who takes charge of your business. You should weigh up you and your partners’ relative skill sets and experiences. For instance, has one of you led a start-up before? It is also relevant if one person is putting more time or resources into the business.

How should ownership or profits be divided between partners?

Different partnerships take different approaches to dividing ownership and profits. A common starting point is looking at how much resources and time each partner is putting in, relative to the other. However, it does not have to be strictly proportional. You should find a balance that both you and your partner are comfortable with and commit the plan to paper.

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