Picking Partners - Page 2
• Make certain you have complimentary skills. And make certain all partners are prepared and willing to sell. Nothing happens until something gets sold. I have seen lots pf partnerships fail because one of the partners felt he or she was the only one selling.
• Put the key points of your partnership in writing. Spend lots of time thinking through up front all the various issues that the partnership needs to address. For example:
- How will the equity be split?
- How much capital are the partners putting up?
- What will be the partners’ compensation?
- How will decisions be made?
- Who manages the check book?
- What happens if a partner quits, passes or is incapacitated?
- How will the partnership be terminated if necessary?
- How will new hires be decided? Can family members work in the
- If there is a board how will directors be selected?
- What will be the responsibilities of each partner?
• To me it makes sense for partners to put together a well thought out draft of their agreement before getting the lawyers involved. When a solid draft of the agreement is completed then each partner should have his or her lawyer take a look at it to make certain the partner’s interests are clearly defined and protected.
Failure to have a clear written partnership agreement is almost always a formula for disaster.
• Don’t just sign and put away the partnership agreement. At least once a year pull it back out and sit with your partner(s) to review it again. Viable businesses change constantly. Partnership agreements need to be reviewed periodically and adjusted as necessary. There is nothing wrong with evolving a partnership.
• Spend plenty of quality time with your partner(s). Successful partnerships are no different than successful marriages. The partners need to enjoy and want to be together.
Finally, before you sign the partnership agreement, shake hands and hug each other. Take a deep breath and make certain you feel totally comfortable with your “about to be” partner. If you don’t have this feeling, simply put the pen down and let the proposed partner know you are not comfortable and will not be moving ahead. I did this once and it was one of the better business decisions I ever made.
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