Effectively managing in a partnership

Editor’s note: Michelle Stockman is an independent consultant with her company, Fort Smith-based Msaada Group. Stockman earned a bachelor’s degree from Loyola University-Chicago in communications and fine arts, and earned a master’s in entrepreneurship from Western Carolina University. Her thoughts on business success appear each week on The City Wire.

Two people + an idea = opportunity

Two people + opportunity = partnership

Two people + opportunity + profit = trouble

The statistics are discouraging, the stories are disgusting and the reality of running a business partnership is frightening. In all, business partnerships are the most difficult business structures to start and maintain. It’s no wonder 90% of the academic business case studies used in business management courses included the mishaps of business partnerships.

If you can avoid starting a partnership, do so. If not, take the time to weigh the risks of a business partnership on the front end.

The great thing about a business partner includes sharing start-up capital contributions, time and ideas to the business rather than shouldering those resources alone. However, trouble often begins when two or more people have shared leadership roles.

Entrepreneurs often have dominant personality characteristics, which has its strengths and weaknesses. The strengths are the ability to organize and lead the business through the highs and lows of running the business. On the flip side, two dominant individuals often repel each other like positive sides of two magnets. When two head-strong individuals with equal say in a business have two different ideas to drive the business to get to point B, tension, conflict and frustration are soon to follow.

Regardless of the relationship (family, friend or stranger) amongst the partners, the relationship in a business is different than any other type of relationship. When two people own a business together, the need to communicate, collaborate, respect and trust in the partner are paramount. One step to take with a potential business partner is to undergo personality assessments together so that each one can understand each other’s natural abilities, likes and dislikes.

Whereas a marriage binds two people for better or worse through their wedding vows (covenants) to each other, a business partnership is often two people with an idea and an opportunity to make money. Many business partnerships often fail to look beyond the task of opening the business. Ironically, owning a business with someone is similar to marriage, and the business is the baby. Respecting each other’s differences, communicating clearly with the other person, building trust between the partners are all successful measures.

Also, when starting a partnership business, take precautionary measures to ensure that when human emotion tries to gallop into control of the business, legal measures are in place to prevent the business from suffering from total mayhem.

There are two essential steps to take with a partnership.

First, while business planning together, also plan for the worst. Look at the “what ifs” in the partnership and talk through them. “What if either one of us gets terminally sick? What if one of us wants to take over the full business? What if one partner fails to fulfill their agreed on business responsibilities?” If you can’t talk about the unspeakable with your partner, don’t go any further with the business.

Secondly, get a partnership agreement drafted and reviewed by legal counsel. The agreement should note: who owns how much stock, what the stock is worth and how the stock can be purchased or relinquish if one partner decides to leave the business. Outline the roles and responsibilities of each partner, how to dissolve the organization as well as outline the exit strategy of each partner. A partnership agreement can be as detailed as needed to ensure the common problems with a business partnership have a strategic action plan.

Lastly, use the partnership to the business’s advantage by creating better book keeping checks and balances, utilize each other’s strengths and resources as well as cross train each other on the intricacies involved with each other’s responsibilities with the business.

The more the partnership relationship is nurtured (even while the business seems too crazy to think beyond the chaos), the more the business will benefit from the partnership.

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Stockman can be reached at [email protected]