A business partnership is like marriage.
You will go through plenty of ups and downs together with your business partner in your journey as entrepreneurs and business owners. There will be plenty of disagreements, late nights and challenges that you will have to face together.
Also, fallouts between business partners are one of the top reasons why businesses fail, especially in the first 5 years.
Here are 6 things people should look out for before entering into a business partnership.
#1 Importance Of Written Agreements
Businesses should be built on trust and mutual respect.
However, you would be surprised how fast things can change or go downhill whenever there is a disagreement, especially between business partners.
Thus, it is of utmost importance that all important agreements are written down and documented to prevent a catastrophic implosion from ever happening in the future.
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#2 Strengths And Weaknesses Of Each Partner
Before entering into a business partnership, it is also important to understand the strengths and weaknesses of each partner.
This helps you find out how you can complement each other and whether you have what it takes to make the business venture a success.
#3 Roles And Responsibilities Of Each Partner
Once you’ve determined the strengths and weaknesses of each partner, clearly assign the roles and responsibilities to each partner.
This is to make sure everyone does their fair share of work and brings something to the table to justify their share in the business. It is also important to make the roles and responsibility of each partner clear from the start to avoid any finger-pointing and blaming each other for not holding up their end of the deal in the future.
#4 A Clear Vision And Plan
Having a clear vision and roadmap for the business venture is also important so everyone knows exactly what they have signed up for.
Being aligned in the vision and the plan for the business venture would also prevent any disagreements on which direction the business should be heading in the course of building the business.
#5 Consequences And Duty Of Care That Comes With Being A Business Partner
To fully understand what everyone has signed up for, it is also important to be fully aware of all the risks, commitments and responsibilities that comes with being a business partner to the business venture.
This is so it does not come as a shock when money is lost or when partners are required to step-up their commitment or sacrifice to make the business venture a success.
#6 Worst Case Scenarios
Any business, by default, is risky.
Hence, you should be prepared for the worst to happen before entering into any business partnership. You would need to know exactly how much money and time you would stand to lose if the business failed.
This is a very serious question that you would have to ask yourself before you decide on whether to enter into a business partnership.
With these considerations in mind, we hope that you won’t make any big mistakes that you might come to regret later if you ever entered into a business partnership.
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DollarsAndSense Malaysia is a website that aims to help people make better financial decisions, one interesting, bite-sized article at a time. Like us on Facebook to stay in touch with our latest articles.