Throughout my career in business and as an entrepreneur I have had the experience of some really great partnerships and then some really bad partnerships. Everyone loves to talk about the bad partnerships, the horror stories of how they have lost thousands, or even possibly tens of thousands of dollars. Some have even stated that they have lost hundreds of thousands due to bad partnerships. Just recently, a few business owner friends of mine had some serious fallouts with a partnership, it did not go well and with the pending court battle, I am sure it will cost a good bit in lawyer fees and court cost.
It has been these bad experiences that have allowed me to create this process in evaluating and coming to a clear decision. Is it always going to work out? Probably not, but without at least some type of system, it will leave you questioning your sanity at times.
What is the difference between partnership and profit-sharing?
Partnerships are a legal binding document that creates a relationship with your partner that is bound by the rules and laws within your state but the more important it is something that isn’t easy to dissolve if there is a break down within the relationship.
Profit-sharing is a relationship that is created between the employee and the employer. While there are many different ways that these can be set up, there isn’t a binding relationship that happens within the partnership. Another way to consider this is that it is a type of commission for the actions they have done to increase the growth of the company.
Please refer to your state laws and guidelines from your legal counsel.
Here are four steps to allow you to make the decision on whether a partnership with your company would be a good fit? Not everyone will agree on whether or not a partnership is good or bad. Often their history creates their personal opinion and they are often right since it is their company. A partnership is only your decision, this isn’t something that someone else can make for you.
Do you enjoy their company and hanging out with them. So often we look at the partnership as a single decision. The reality is, that if you are not aligned with your partner when the going gets tough, it will be those core values and alignment that will bring you on to the same page and help you make decisions on the direction the company needs to go. The leaders must be leading in the same direction.
Do you have proper communication channels in place? Often stepping into a partnership many believe that they are great communicators and then assume that the other knows what they are thinking and vise versa.
Communication meetings must be set in place and discussion around those hard challenges must happen. Otherwise, you will get so busy putting out all the “fires” within your company that you will forget to communicate what is happening with your partners. Trust me on this one, there will be problems and challenges that must be worked out. No relationship will last if you don’t put in the work to communicate on a regularly scheduled time frame.
Never underestimate the power of trust. Once you step into a relationship you create a trust bond that allows you to take at face value the communication and actions of the other. If there is trust there is the assumption that everything they do is for good and not intended for evil. Once that trust bond is broken, the ability to assume that their actions are only for good is extremely difficult to believe. Lack of trust then leads to intense questioning, doubt, manipulation, and so many more toxic actions that can happen within a relationship. I am sure everyone has an example of someone that they lost trust with and the path that it then leads down.
Now if that trust is broken, it can be rebuilt. Steven Covey wrote an incredible book on The Speed of Trust which focuses on how quickly trust can be rebuilt and how to do this.
Talents and Expertise
With every partnership, you must understand the other’s talents, expertise, and scope of abilities. There are many books that have delve into personalities, personal strengths, and skillsets. The point you need to consider when making the decision is, will each of your own talents, skills, and areas of expertise be compatible or complement the partners.
The next part is to understand how the personalities will work together. I have seen many partnership work when both parties have the same personality but they understand how to communicate with each other and then how to fill in the areas of weakness by hiring the right personalities to strengthen the brand of the company.