How to Welcome New Business Partners (and Make Sure You Get Along)
Odds are good your business either started with a co-owner or will grow into new partners. Is your business ready to welcome new players?
Most businesses either start with or grow to include more than one owner. Your business may seek out new business partners to help you grow strategically or secure additional capital. Business owners seek out additional partners for a variety of reasons:
- financial—either debt or equity
- technical—to add talent or specialized skills
- strategic—to purchase competitors or align with complementary products
Regardless of your motivation, bringing in a new partner changes the culture and dynamic of your business—and you should be prepared.
To ensure your new business partners are a good fit, they should have:
- Shared company goals
- Shared vision
- Complementary skills
- Similar dedication to the company
- TRUST in each other
Make sure to do your due diligence on each partner before bringing them into the business and most importantly, trust your gut. If something doesn’t feel right, hold off.
To have the most effective partnership, it is important to address the 3 Rs:
- Relationships – each partner should be clear with the others about his/her relationships (i.e., who can make decisions, who is working as an employee, etc.).
- Roles – clearly communicate with each other about responsibilities and acknowledge each other’s contributions.
- Rewards – clearly determine each partner’s contributions at outset and determine compensation moving forward. You may need to readjust percentages and performance targets as roles change and grow.
As partnerships are formed, you should create formal governing documents to ensure the most effective relationship and in some instances amicable “breakup.” Limited Liability Companies should be governed by an operating agreement, corporations by a shareholder agreement and partnership by a partnership agreement. Each document will be different, but they all allow for each partner’s expectations to be written on paper, provide an operating guide for the business and ensure a plan in case expectations are not met.
This post was written by Sarah Mote of KCSourceLink, after a presentation from Sheila Seck with Seck & Associates, a progressive law firm focused on partnering with clients to bring the right team together to address a wide range of business issues.