Ever worked to put together a win-win business partnership or joint venture?
I did a Q & A call with our consulting clients yesterday and this topic came up (in the context of a JV with various health clubs as a sales partner in a long term JV.)
So today I wanted to share with you 7 tips to do it better and smarter.
Before I list these seven partnership tips, I wanted to give you a chance to get a complimentary copy of our latest bestseller, Build a Business Not a Job: How to Build Your Business to Sell, Scale, or Own Passively. The book is 176 pages of detailed, real world advice to build your business.
It’s essentially the book I wished I could have read 15 years ago when I got started in business.
7 Tips to More Intelligently Enter Into a Business Partnership
1. Clearly lay out on paper what each party is contributing to the business. This could be capital, credit, financial statement, experience, time, ability, contacts, or even symbolic capital (reputation).
2. Assign impartial relative values to each contribution. What would you have to pay a third party to get that piece?
3. If you’re adding a partner to an existing business, or one partner has a disproportionately greater investment to do the business where the other could just walk away from the business leaving the remaining partner on the hook, make sure to create a vesting period before any ownership is earned… Profits can be split immediately, but ownership should vest over a minimum of 2 years, and likely 4 years.
4. Talk through the expectations about roles, responsibilities, and process. How will you each do the business? How will you communicate as you do the business?
5. Create a checkpoint to revisit the partnership to make sure it’s a good fit (if at all possible). Agree up front what it looks like to gracefully part ways if you need to at that point. Agree on what this looks like up front. (Did I mention that it’s important to agree on this up front?)
6. Get an outside perspective on the deal. It must be equitable to BOTH parties or it will not work long term.
7. Get your attorney to formalize all your business points into a comprehensive written partnership agreement.
Sound like a lot of work? It is. But a partnership is a business marriage. It is serious stuff. So do it the SMART way.