Running a business can be a strenuous task for many, especially for new entrepreneurs. Many business owners consider getting into a partnership with a reliable individual when they become stressed with several business responsibilities. Small business owners who are introverted sometimes have an issue driving traffic to the business and, thus, get a partner to expand their network.
If the thought of getting into a business partnership has crossed your mind, you have to realize what getting a business partner means. It means selecting an individual you can flow with and share key business ideas and goals. For instance, if you want to get funds now with a payday loan to finance the business, you have to be sure that your potential business partner would go along with your decision.
The ideal business partner has to possess some of your strengths and fill up your areas of weakness. They also need to have a skill set that complements your abilities. These are some of the factors you should look for.
Your organization can highly benefit from being converted to a partnership. You can look at it as a way to add human capital to your business for free.
Here are the crucial factors you need to consider before settling for a business partner:
Outline your expectations from the start
A business partnership without expectations would muddle up the responsibilities of other partners. This messes things up. When you establish a business partnership, the owners have to know their roles and expected daily tasks from the beginning.
You have to outline what is expected of each partner and talk about boundaries, possible contributions, and compensations. Another vital aspect of the business that needs to be discussed is partnership termination. Although some businesspersons shy away from the topic, the termination of the partnership has to be talked about to avoid issues in the future.
When you list out the expectations of your business partner, it’ll ensure that your business operations continue smoothly from the start of the partnership. This way, your organization would be in a prime position for success.
Outline the management of finances
Funds are the lifeblood of any business, and having this conversation with your partner might not be easy. However, it is one of the most vital things to discuss since you’ll have to understand the profit-sharing percentage and the management of finances.
Every business venture aims to make sales. This cannot be achieved if your business isn’t conducted correctly. You have to question how the business capital will get sourced.
While some business partners like taking funds from their savings, others like taking loans. Taking loans is classified under ‘other people’s money,’ and it sometimes involves putting out collateral. Nevertheless, bank loans are difficult, and online payday loans are way easier. You can get your requested loan in less than a day once you get approved for it.
You also have to talk about how business funds will get managed in the short and long term. Your salary structures also have to be discussed. You need to decide with your business partner whether you’d earn a salary or put profits back into the firm.
Choose the type of legal partnership
The best types of partnerships are those that are documented and legally binding. Before going into a business partnership, you have to decide on the type of business partnership you both want.
You can go for a general partnership which is the simplest type of partnership. It doesn’t need to get filed under the law. It is also the easiest to dissolve. It requires maximum accountability since the mistakes of one partner affect the other.
You can settle for a limited liability partnership if you don’t want to suffer the consequences of your partner’s actions. This partnership limits each partner’s liabilities to the capital they placed into the business.
Limited partnerships are the best option for partners who might not have equal levels of participation in the business. In this partnership type, the partner might only have a financial contribution without getting involved with the business. The liability of the partners is restricted to the amount they invested.
Detail your exit plan
Humans eventually disagree at some point. This includes business partnerships. Many things change as partnerships go on; sometimes, partners may have differing visions for the business.
Before you form a partnership, you have to converse about what will happen if a partner decides to leave the business. The compensation plan for the effort the partner put into the business has to be clearly outlined. The compensation plan for each partner if the business gets sold also has to be discussed.
At some point after starting a business, an entrepreneur may consider bringing a partner on board. This could result from several things, like a low inflow of customers or tasks.
Whatever the reason, factors like the expectations of each partner, the exit plan, and the type of partnership have to be discussed before you make anything official. This is, no doubt, the most mature thing you can do as an entrepreneur.