Meeting someone who has similar aspirations can be a very valuable encounter for a would-be entrepreneur. A potential business partner can offer the expertise, support and/or funding that they require to turn their concept into a viable business model.
Unfortunately, much as it is with other relationships, people are often over-eager at the start of a business partnership and fail to discuss important matters that could directly affect their rights and financial solvency in the future. During the early stages of a business partnership, it is crucial to negotiate specific terms for one’s protection.
What issues is it important for people to address when discussing a potential business partnership?
- Their plans for the business
Simply identifying an industry or a business model for the company isn’t enough. Entrepreneurs and their partners need to talk thoroughly about the purpose of the business, how someone intends to monetize their concept and what their specific goals for success will be. Partners need to agree on what their five and 10-year goals for the business will be, or they may soon find themselves at a crossroads regarding what they expect from the company and hope for its future.
- The end of their cooperation
One of the biggest mistakes that those starting a partnership make is to overlook the end of their relationship. Talking about the requirements to have one partner buy the other out or to have someone exit the company for retirement in the early stages of forming the business will be important.
That way, both partners will know what they can expect when they want to leave the company or if they intend to continue operating it without their partner at some point in the future. By discussing those terms ahead of time, partners avoid diminishing business resources by creating a major conflict at a point when their relationship has already started to fall apart.
- Their expectations for one another
How many hours a week should each partner work? If a major financial investment is necessary, how will they divide those future obligations to keep the company solvent? How will their individual contributions to the organization impact their share of its revenue?
Talking about what each partner should do for the business and what they expect from each other is important. Clarifying job responsibilities and compensation will also be crucial to ensure that both parties have the same expectations for one another and the company.
Starting a business partnership requires much discussion and careful consideration, but with proper support from a legal professional, it can potentially lead to a very successful enterprise.
Lastly, make sure everyone understands there is no deal and no one is bound until everyone has signed a written agreement setting forth the agreed upon terms and conditions.