If you calculate the quantity of capital, sweat, thoughts, doubts, risks, and self-confidence that takes to start and run a small business, you would not actually call it small/limited. The owner of every small business wishes to grow, adapt new features, go with the trend, and yet stay irreplaceable. We understand that your small business is not just your dream, it also is your vision. And a catalyst who shares your vision for the business can be an absolute asset. But here are some conversations that you probably should have with your business partners before you take that leap.
The first conversation you should have is with yourself. Yes! You heard it right. Sit down and brainstorm until you come up with real honest answers.
Why do you need a business partner?
It is extremely important to find out your expectations for your business. They say, you need to first fall in love with yourself, for someone to fall in love with you. Similarly, for your business to grow you need to know about your business and its needs to search for a potential partner.
Do you lack some skills that can possibly help your business expansion? Do you need funding to bring more to the table? Or you need a helping hand and maybe new ideas to pitch for? Or do you just need a person for some temporary work? Are you choosing someone because of favoritism/gratitude? Be sure to ask yourself these tough questions to set the standards for the new add-on to your business.
What responsibilities do you expect your partner to fulfill?
Ask yourself if you would want the partner to just invest the money? Or contribute to some service that they are good at (like Advertising, Accounting, Sample selection)? Or both together? What kind of work your business requires? Also, the minimum time investment your partner needs to pour in? What kind of partnership do you expect? There are different types of partnerships, learn about them too.
Basically, prepare a job description for the business partner you expect. It is extremely important to set the intentions clear right before you began. Do not lower your standards for anyone at all. Your business deserves the best of all kinds. Be patient to get all the answers straight and then move forward.
The next conversation you should have is with the potential business partners for your small business.
Does he/she share the same Business Vision?
The first and foremost conversation should be about the business vision. Be there business partner or a salesman at your business, every single person should share the same business vision and mission. Share the story of your business. Talk about the big wins and the train wrecks.
Know about the candidate’s views on the current business model. Let them give ideas to improve the model. Ask them to find out the strengths and weaknesses of themselves as well as those of your business. This conversation should basically be your stepping stone to find out if the candidate is all about money or also about growth and branding. Do not worry, you will know which one shares your vision.
Learn about the financial habits of the candidate:
Ask him/ her if they have any existing debts? How much they see themselves saving in the next five years. Learn about their risk appetite. Do they have an emergency financial stack ready? What kind of relationship do they have with money?
Financial habits reveal a lot about someone — their attitude, responsibility, and lifestyle. You definitely don’t want a partner who is lousing in paying installments. Or spends cash irresponsibly. This step is extremely important when you are choosing a partner for investing funds.
Percentage of Investment and Division of Profits
After all, a business partnership mostly is about revenue. To generate great revenue and profit, talk calculations clearly to your partner.
Find their ratio of investment — both time and money. If thinking of adding more than one partner, make sure to note down everyone’s amount of contribution. Be clear in the profits division segment as well. If possible, write it down and agree to a legal binding. Also, discuss the expenses that are accounted as a company and those which CANNOT be accounted as company expenses. Ask – When they can make investments? A lump sum amount or equated monthly investments? Understand the distinction between an investor and a partner.
Talk about the Worst-case Scenario
What happens when one partner wishes to exit and go other ways? Talk through the buy-out plans? What happens if one partner dies? Talk about the various ways ownership can be transferred. What happens when no profit is made? Think about what happens if the partnership goes sour? What if there is a family emergency?
Planning well ahead about the worst-case scenario in your good happy days gives you a heads up. It provides a safety net. In a partnership, it’s important that you not only discuss the topic but lay out a plan for these above-mentioned scenarios. To sum up, discuss — Debt, Death, Disability, Dissolution of partnership, and disagreements.
We know that your business is your baby. Your partnership is as sacred as marriage. And for all the right reasons, the partner and you need to be compatible. A partner is a catalyst in growth. But if not careful, they may be a stimulus to disaster. These can be difficult topics, especially if you’re ecstatic about your new venture and can’t wait to get started. Your new company can never get off the ground unless you take the time to lay the groundwork for a long-term business relationship.