One of the issues in business where I count my blessings is the integrity and loyalty that I have relied upon with my business partners, both past and present.
Business partnerships are almost as important as your marriage. In some cases more important because often it can involve a lot more debt and assets. So the question is, how well do you know your business partner?
You need to know them Very, Very well!
I recently assisted a client secure some financing only to discover that his new business partner had some legal issues in a previous business career. As a result, the business was precluded from any reasonably priced financing. This also raised issues of integrity and honesty and caused some disruption within the partnership. The bank also wanted cross guarantees from each of them!
Such issues happen more often then not. I see it more regularly when we are dealing with people who have known their business partners for less then 12 months and hence they place blind faith and friendship ahead of the need to draw up a partnership agreement.
The fact is, people change, especially when under pressure. It's important to understand your potential partner's finances, time commitments, communicative personality and long-term goals, before making the relationship official.
You spend ample time dating before you get married and you should treat your relationship with a potential business partner the same way. Entering into a business partnership is a serious commitment of time, money and reputation. Knowing as much as possible about your business partner before formally signing on the dotted line to the partnership can save you a lot of trouble down the road.
Often - how your potential business partner manages their money can tell you a lot about how they will run your business. Although it might be uncomfortable to ask about certain matters, the “knowing” is more important.
Business is tough on a friendship if it does not have strong foundations. Equal commitment to the company is paramount.
At Sothertons we spend considerable time assisting new business partners to understand the commitments ahead and identify matters to include in a partnership agreement that all will sign up to. For more information – feel free to call us on 07 4972 1300.