If you're considering starting up a business partnership with a friend, make sure to do your due diligence in looking at both the possible pitfalls and the potential strengths of such relationships. Here are a few questions to consider when making business partnership decisions.
What will they contribute to the business? Do they have strengths that will clearly enhance the business such as abilities, knowledge, or resources that you don't possess or aren't willing to acquire by other means? Say, for example, you're a top-notch salesperson, but not too keen on crunching the numbers. If your friend is good at finance or bookkeeping, the partnership may make sense in this case. If your pal really can't offer something that would round out the business or make it more profitable, you might want to consider partnering with someone else.
Are you willing to lose the friendship? This is a tough question, but one that's critical to consider. After all, you and your friend will be working together, day in and day out, to make the business a success. The stress of running a small business can bring out the best and worst in people. If maintaining your friendship is one of your highest priorities, partnering with someone else may be a better choice.
What's expected from each partner? Developing a profitable business is hard and often unrewarding work. You and any potential business partner should honestly discuss expected work hours, contributions, and responsibilities. Resentment can creep into any business relationship when partners feel that workloads and rewards aren't fairly distributed.
Can you communicate effectively? Like a good marriage, a long-term business partnership takes honest communication to succeed. Ask yourself whether you can handle constructive criticism from your friend and business partner. Even the closest business partners don't always see eye to eye, so it's important to take an honest look at how you both handle disagreements. Will you work through difficulties for the firm's sake, or bury your head in the sand and hope for the best? Answering this question is crucial to the success of your partnership.
Friends can make amazingly successful business partners, but it's wise to proceed with caution and put a written agreement in place. When everyone understands their roles and responsibilities, things will likely go much smoother.
Make sure to review any agreements on an annual basis as business needs often change over time. If you have questions about setting up a partnership agreement, please contact our office for help.