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Foundation of a successful partnership
Many business forms or structures exist, one of which is a business partnership – with a popular form being a “family business partnership.” We have seen many of these family partnerships formed, and some that have been very successful. So, let’s look at the characteristics of a family partnership that are critical for creating and/or growing a successful business.
Successful Partnership Characteristics:
Common goals/results exist that are agreed to by all partners
An understanding of the entrepreneurship role and what that role demands
A definition and understanding of business success
A plan for the partnership's future
Open & Ongoing Communication:
It is necessary for the family partners to communicate with each other on a regular basis, perhaps scheduling periodic meetings to discuss the current business status along with the establishment of future plans. Perhaps having another person (not immediately involved with the day-to-day operations) review the business status may help. Communication is essential in assuring that the agreed-to business goals and opportunities are known by all partners.
Share expectations between partners:
Do all partners understand what to “expect” from the partnership and why it was initially formed? Here’s where a written agreement between the partners can help. While not required, a written agreement can outline and assign responsibility for, and indicate the expectations of, the business.
Normally customer revenues will be used for these expenses; however, early in a business, all that seems to occur is one expense after another. Will the business ever become profitable?
All partners must understand the many requirements needed for conducting a business, and equally as important, what results are expected. By sharing this information and describing the expected results, the partners will better understand what is expected of them. For example, understanding that profitability may not occur immediately is better accepted when business expectations are known.
The “right” partner for what we expect the business to accomplish:
Another expectation relates to the families of the partners. Do the partners’ families realize and understand the many commitments required of each partner? What about time away from family members? A partnership, especially a startup, can have an effect on each partners’ home situation, the partners’ health, as well as the partners’ family lifestyle. Be sure that your business expectations include these family factors.
Once the business has become successful and profitable, several options exist for the future. The owners can continue the business, satisfied that they have created and own a profitable business, along with the personal satisfaction that comes with it. They can attempt to grow the business into other markets and/or take on other additional partners. They can find other customers that may utilize their products. Or, finally, they can decide, as partners, that they wish to retire from the business. If the latter is our decision, we should carefully develop a “succession” plan.
Factors of preparing a successful succession plan:
Notifying existing customers
Determining the costs related to leaving the business
Obtaining an independent business evaluation
Establishing a timetable for leaving and time to train and “install” the successor business
Business partners may also have to seek the assistance of outside advisors such as an attorney, an accountant and insurance professionals, as the business change can affect taxes or other financial factors. Yes, another plan, but a very important one.
Partnerships can be rewarding, both in a business sense and in personal satisfaction. It is important to be sure to consider everything mentioned above. There are many resources such as business coaches, SCORE advisors, NBDC and REAP that can help businesses reach optimum potential, especially with family partnerships. Hopefully, this will lead to a successful partnership agreement, and the experience will be a rewarding one.
Don is the Coordinator of the Small Business Institute (SBI) at CCC in Hastings, and is responsible for encouraging the formation of new small businesses and assisting existing small businesses. He was manager of Thermo King's Manufacturing Plant for 14 years. He is also a SCORE Advisor.
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