10 Questions to Ask Before Entering a Business Partnership
Thinking about going into business with a partner? Before you dive in, make sure you're both on the same page.
Asking these questions isn't just about avoiding potential pitfalls; it's about laying a solid foundation for your partnership. By addressing these areas upfront, you can build a strong, resilient relationship that's geared for success.
Here are ten critical questions to guide your conversation and help you make the best decision.
2. How will we handle decision-making?
Knowing how decisions will be made in your partnership is key to a smooth operation. Will decisions be made jointly, or will certain areas be led by one partner? Clear roles and processes prevent misunderstandings and ensure that the business can move forward efficiently.An Example
Consider a tech startup where one partner excels in product development and the other in marketing. They agree that each will lead decisions in their area of expertise.
This clarity helps them move quickly and confidently in their respective domains, streamlining the path to success.
3. What are our financial contributions?
Money is often a sensitive topic, but it's critical to have a clear understanding of each partner's financial contribution from the start.This includes initial investment, how profits will be shared, and how future investments will be handled. Transparency here builds trust and prevents conflicts.
An Example
Two entrepreneurs decide to open a boutique. One has more financial resources and contributes 70% of the initial capital, while the other brings in 30%.
They agree that profit distribution will reflect their initial investment, ensuring fairness and avoiding resentment down the line.
4. How will we resolve conflicts?
Disagreements are inevitable in any relationship, including business partnerships. Having a predefined method for resolving conflicts ensures that when they do arise, they can be handled constructively, without harming the partnership or the business.An Example
A software development firm founded by three partners decides to use a majority vote for decision-making but agrees that any partner can call for mediation if they feel strongly about an issue.
This approach respects each partner's perspective and ensures decisions are made democratically.
5. What are our roles and responsibilities?
Defining roles and responsibilities is crucial for operational efficiency and personal satisfaction within the partnership. It ensures everyone knows what's expected of them and can focus on their strengths to contribute to the business's success.An Example
In a catering business partnership, one partner takes on the role of managing kitchen operations, while the other focuses on client relations and marketing.
This division of labor allows each to play to their strengths and ensures no aspect of the business is neglected.
6. How will we measure success?
Success can mean different things to different people. Setting clear, measurable goals for the partnership helps ensure you're both working towards the same vision of success and can keep track of progress along the way.An Example
For an online retail partnership, success metrics might include sales targets, customer satisfaction scores, and website traffic growth.
Regularly reviewing these metrics together keeps both partners aligned and focused on achieving their shared goals.
7. What is our exit strategy?
Discussing an exit strategy might seem pessimistic, but it's actually a sign of good planning. It ensures that if one partner decides to leave, there's a clear process in place that protects both the individuals and the business.An Example
Two partners in a marketing firm agree that if one wishes to exit, the remaining partner has the first option to buy out their share. This agreement prevents potential legal battles and ensures the business can continue smoothly.
8. How will we manage work-life balance?
Running a business can be all-consuming, and it's easy to let it take over your life. Discussing how you'll manage work-life balance is crucial for maintaining your health, relationships, and ultimately, the success of the business.An Example
Partners in a consulting firm decide to implement a policy where they avoid sending work-related messages outside of business hours, unless in emergencies.
This helps them maintain boundaries and ensures they have time to recharge.
9. What are our communication preferences?
Effective communication is the backbone of any successful partnership. Understanding each other's communication preferences (e.g., email, phone calls, face-to-face meetings) helps ensure that important information is shared in a timely and comfortable manner.An Example
A real estate investment duo finds that weekly in-person meetings are the most effective way for them to discuss new opportunities and make decisions, supplementing with emails for day-to-day updates. This keeps their communication clear and effective.
10. How do we define our relationship to employees and external parties?
Partners need to present a united front to employees and external parties. This includes agreeing on how you'll describe your partnership and roles to others, to ensure consistency and clarity in your business relations.This includes agreeing on how you'll describe your partnership and roles to others, to ensure consistency and clarity in your business relations.
An Example
The co-owners of a design studio decide that externally, they will both carry the title of Co-Founder and Director, but internally, they specify their unique responsibilities to their team.
This maintains their equal standing in the public eye while clarifying their roles to employees.