Dear M & M: Any thoughts on adding a partner to leverage resources to make both of us stronger?— Dan
Dear Dan: Since partnerships mean sharing ownership one must be certain the purpose or reason to bring on a new partner makes sense. You also have to also make certain is this right person to be your partner.
Always, a partner should bring to the table something you don’t have. It could be capital, customers or experience in a field you need help in. Sometimes it could be that valuable resource called “time.”
Make certain if they are just filling time, could you hire an employee to help out without giving up a part of the business with a partner?
It is highly recommended to sign legal documents called a partnership agreement. Get an attorney who specializes in this area to help. Go online, pull down some partnership agreements and take a look at what’s in them.
Important considerations include how to resolve disputes on how money flows in and out of the organization. Understanding who gets paid what and what are steps taken if more money needs to be contributed to keep the business going is important.
Understanding what everyone’s role is and what everyone is responsible for needs to be discussed and agreed to in writing. Other considerations to think about before taking on any partner is addressing exit strategies in case someone wants out.
These are just a few examples of things that need to be discussed and agreed upon by all partners. The main question to ask, is the dilution of your ownership worth what this new partner can bring to the organization? From having rules in place on how the organization will be run to methods in resolving disputes or to being clear and transparent with each other in all your dealings are important to know before the partnership forms.
First step; agree to and sign a partnership agreement. Then form the partnership, if you’re still talking to each other.
You should be clearly able to understand: If you take on a partner, will this make your business stronger and more profitable?
ASK M&M is prepared and submitted by Mark Schmitt, director of the Small Business Development Center at Cochise College; and Mignonne Hollis, executive director at the Arizona Economic Development Foundation. To ask your questions: Call the Small Business Development Center (SBDC) at Cochise College (520) 515-5478 or email email@example.com or contact the Arizona Regional’ Economic Development Foundation at (520) 458-6948 or email firstname.lastname@example.org; www.aredf.org.