Solomon Bruce Consulting Blog

Sunday, May 29, 2011

Partnerships-- Part 2

   Our last post addressed business partnerships and some of the pitfalls encountered by individuals in a partnership relationship.  Additional considerations need to be given careful thought if you believe that you want to enter into a partnership relationship with someone.
   First and foremost, you need to have a rich and clear understanding of each partner's belief, understanding and utilization of good sound business ethics.  If one of your partners either has a shady ethical background or "pushes the envelope", you have to be comfortable with that behavior.  If you have any fear or trepidation about that type of behavior, you should walk away from any partnership type relationship.  Ethics and integrity are hard matters to acquire.  They are even more difficult to retain and enrich.  Becoming a partner with someone who will tarnish your reputation is just asking for trouble.
    Technical expertise is another key factor.  If you do not have the technical expertise to run the business, you become reliant and dependent upon partners whom possess that expertise.  While that may not be a bad thing, you become beholden to the knowledge.  This is something that you need to think about very carefully BEFORE you elect to enter into such an agreement.
     Duties and responsibilities of each partner need to be clearly and  lucidly defined and documented.  This is the only way in which all partners know what each partner is responsible for doing in the business.
     I am sadly aware of one partnership that failed.  Each partner maintained a 50% ownership stake in the company.  One partner was the "sales" force, while the other partner was the "inside" partner.  Everything went well for the first 3 years.  Then, friction, misunderstanding and disagreements arose, causing undue stress and hardships by all involved.  The bottom line in this business was that it closed, filed for bankruptcy and each partner suing the other partner.  Sadly, this matter could have been easily resolved BEFORE the first day of business with the development and use of a clearly identified and delineated partnership agreement.  These partners did not have such an agreement.  Many thousands of dollars was spent on legal assistance by each partner-- with the end being a bankrupt company, employees out of work and very, very frustrated clients.
    This is one area where professional consultation help will aid your overall business effort.  This is indeed a case of READY-AIM-FIRE, not FIRE-READY-AIM!
    Be careful if you think that a partnership is a panacea for business operations.  Such is normally NOT the case.


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