One of the most effective ways to grow your business idea is to bring on partners. Studies show that entrepreneurs that have partners tend to reach profitability faster and are able to respond better to adverse financial and market fluctuations.
Now, that’s the good news! Here’s the bad news …
Most partnerships fail due to differing expectations! We all start with good intentions but life has a way of placing various obstacles in our path that cause us to re-evaluate our priorities.
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A recent meeting with a client, quickly revealed that she did not properly plan for potential differences in opinion and work load.
Consider the following steps before you enter into your next partnership agreement:
1. Be Clear! Focus on what you intend to create. Make your vision plain. Write a brief two-page plan with desired outcomes and timetables. This offers potential partners a chance to see how they can contribute.
2. Seek Skills. Where do you need help? Don’t make the mistake of building a team with similar skill sets. If you are a creative person then quickly find an operations person to balance out your desire to take on several projects.
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3. Build Trust. Don’t just offer someone 40% of your company after an initial meeting. Work on smaller projects to ensure that personality issues will not get in the way.
4. Never Do 50/50. Are you crazy? What happens when you disagree? Someone needs to be in charge. Another option is to create a 49/49 split and offer the remaining 2% to a trusted advisor.
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5. Intellectual property is valuable. If your partner decides to leave, can they start a similar business with your client list, website copy and marketing plan? Speak with a lawyer about confidentiality, non-compete and non-circumvent agreements.
6. Create a Compensation Plan. It may be great that you were offered 30% of the profit for this new venture but what happens if you bring in $100,000 in sales and the profit ends up being only $5,000 – that has to be shared with others. This problem could be avoided with a 20% commission plan. Equity, revenue, profit and commission are all different ways to reward team members.
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7. Draft a partnership agreement. Work with a lawyer to determine what happens if the partnership turns sour. Thoughtful consideration around these issues will save you a great deal in the long-run.
I would love to hear your experiences and questions about working with partners. Please post your comments at http://smallbusinesscamp.com/?p=1081
Are you ready to find your ideal partner? You are only an email away! Begin to share your vision with others. Utilize a few of the points in this article and go from idea to implementation in an instant!
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