Stop me if you’ve heard this one before. My partner and I are 50/50 owners in our business…UGH!
While most partnerships start out with the best of intentions (i.e. we want to split profits down the middle), setting up the ownership of the company can often mess with those good intentions. One of the keys for any successful business is someone has to be the one in control!
Most business partnerships will have ups and downs, just like any other relationship in your life. These fluctuations can have a detrimental impact on the business if someone isn’t able to make a decision because the other 50% partner won’t agree. A great clarifying question to ask when emotions begin to get involved is, “What’s best for the organization?”
Here are the top 3 things that can go wrong if someone is not in control:
1. No decision is made on key items because the equal partners are in a stalemate and so the progress of the business is hindered.
2. The employees are conflicted about who to listen to and follow because no one appears to have the authority, or worse, they’ll play the partners against each other much like kids do with their parents.
3. Animosity between the partners will filter throughout the rest of the organization which will have a negative impact on the culture of the organization and will lead to employee turnover and lethargy.
So how do you avoid these troubles? I’m glad you asked. Here are 4 things to keep in mind when setting up a partnership:
1. Make sure someone owns at least 51% of the business.
2. Use an operating agreement to cover topics such as how profits will be shared and how key decisions will be made.
3. Set up time to meet at least annually to review the policies of the business (if you’re a corporation you’re supposed to be doing this anyway).
4. Create a buy/sell agreement early on in the business (i.e. in the first couple of years) while the relationship is still good to set up a mechanism for a buyout to happen in case the partners have irreconcilable differences.
Like any good relationship, good communication is the key to a healthy and long-lasting partnership. As Ken Blanchard so aptly put it,“None of us is as smart as all of us,” and a good partnership will help you achieve your goals much faster and better than you can achieve them on your own.