Given the opportunity, most entrepreneurs will like the proprietary form of business, but not always this is practical to do because businesses need multiple skill-sets that no one person will usually possess. Apart from this, there is a financial angle too to consider. As an individual, access to financial resources will be limited that partnering can solve. Partnership business is, therefore, a relationship of convenience in sharing of profits or losses, work, and skills in a pre-agreed arrangement.
For a partnership business to succeed, partners must share common goals and be committed to ensuring success in the long run. In short, the partnership is all about pooling resources, bringing in skills and committing themselves to work together closely.
Pros & Cons of Partnership Business Structure
Partnership form of business has its own advantages as well as disadvantages and you must be consciously aware of it so that you know what to expect and not to. Let’s take a look at some of these. It will help you to write a partnership deed that is comprehensive and get your potential business partner to agree upon a common programme.
- You have more like-minded people to work with. It is possible to share the work burden based on aptitudes. The downside is you have to seek a consensus and accommodate diverse approaches that are not in tune with your own thoughts.
- Your financial burden is vastly reduced when more people share the same expenditures in the form of capital or loan. This means your business is now able to afford more things. The downside is you have to share the profits and not everything is yours.
- You get better access to knowledge and skill sets. It is not just the money that matters when you select a partner; the knowledge and expertise they bring in equally a big asset. In a proprietary business form, you are often limited by just your own knowledge and you have to pay to get what you need.
- Paperwork is vastly reduced in partnership business structure, compare this with corporate companies – there is an umpteen number of returns to file, company performance must be shared with public and there more compliance to do. The downside of the partnership is that you cannot raise funds from public or accept deposits.
Importance of Picking the Right Business Partners
The success or failure of business partnerships is all about working in tandem and substituting for each others’ skills and positively compensating for shortcomings. It is not all about money that partners bring in. Here is how to pick the right partners.
- Potential partners must be trustworthy and their record of honesty can mean a lot. Money is not everything and if you know from experience that a potential partner can be trusted even with your personal account then you have a great partner on the cards.
- Good friends who share common values and responsibilities make good partners. The advantage of having a friend as your business partner is that you know his character, his personal life and how much he or she is stable. Partnering with a stranger can be dangerous and if you cannot consciously agree with him or her, it can easily escalate into a conflict.
- Look for partners who have work experience in your chosen activity. Again, money is not all that matters; more importantly, it is the kind of experience that they bring in matters to business. Experience counts like nothing else and can substitute for tons of money.
- Look out for partners who have the abilities that you don’t have. When two partners with similar skills and in a similar position come together, the possibilities of ego clash are higher. Remember that the beautiful rainbow is all about different colors; not the same.
- Take in partners who aren’t too rigid or just want to make some quick money and quit. The partnership is all about fostering long-term relationship and sharing common goals and aspirations. Talk to your potential partnership extensively about what they expect and what the business can offer. If you can agree on most of it, clinch a deal.
The most common mistake that all failed partnerships businesses did was choosing mismatched partners. The most partnership could have been saved if only they had sought professional help at the very beginning of the business lifecycle.
Our Business Ladders is a market research company who can help you choose business partners and also guide you with the legal documentation work on a scientific basis based on practical experiences. As professionals, we provide advisory services and intelligence on potential partners and even make a neutral assessment of what is best for you.
Last but not the least never jump into partnering based on initial infatuation.