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How to Choose a Business Partner

How to Choose a Business Partner

Many people think it’s a bad idea to go into business with a partner because you have to split the ownership and profits. However, having a business partner can actually increase your profits and overall business success. Many of the most successful companies were based on a partnership: Ben Cohen and Jerry Greenfield- Ben & Jerry’s ice-cream, Larry Page and Sergey Brin- Google, Jerry Yang and David Filo- Yahoo, Dr. Katie Rodan and Dr. Kathy Fields- Proactiv Solutions. Having a business partner can substantially increase the overall success of your business, because a partner can offer their own connections, expertise, and skills the business needs in becoming successful.

1. Look for a partner who shares your passion, vision and excitement: You want to choose a partner who shares your vision, believes in what you are trying to accomplish, and is as excited about the idea as you are. You have to understand this is the person you will be spending and living a lot time together with. In developing the business you and your partner are bound to face many stressful challenges as well as successes. You need a partner that is tolerant as well as positive during both the good and the bad times, and will not leave when things become challenging, but will rather stand up to the challenge and be in it for the long haul. Therefore, allowing the business to grow by achieving the short-term and long-term goals of the business.

2. Choose a partner that is complementary: It may be tempting to choose someone who is just like you, but this will not make a business successful, as you want someone who can bring different skills, experience and know how. No person is a master of all things, if you are skilled in finances you may want to choose a partner who is skilled in sales and marketing. The combining of different skills allows for greater innovation, more ideas, better planning and a greater chance that your business will be successful. As the popular saying states: “Two minds are greater than one.”

3. Find a Partner who shares your values and practices good business ethics: You only want to go into business with someone you can trust, someone who values honestly and full disclosure. Choosing an unethical and dishonest business partner will destroy the business. You need someone who will respect the businesses ideas, its assets and the laws of business, as you do not want to get into trouble. It is wise to conduct a thorough investigation of the partner you are considering, look into their previous business history, check their references and do a background check, which can include a police clearance, this will show if they have any previous criminal violations.

4. Find a partner that can offer the business resources: Financial resources is only one of the resources a partner can offer, there are many other valuable resources a partner can offer which can greatly improve the chances for business success, for example:

• Connections within the business industry such as vendors, distributors, recruiters, investors or suppliers.

• A strong client list that can lead to potential sales from business owners, specialists, or media contacts.

• Credentials and business expertise.

5. Define and allocate responsibilities: In creating a partnership it is important to assign roles and responsibilities for each partner, whether that is VP of engineering, marketing and sales or operations. It is best you do what you know best, and let the partners do what they know best, give each partner the freedom to improvise, as they will perform better when you respect them for knowing what works and what doesn’t.

6. Write a legal partnership Agreement: In choosing a partner you will need a legal agreement, stating the responsibilities, the financial obligations, how expenses and profits are distributed, what are the terms and conditions in the event the partner decides to leave the partnership, and how will the issues of breach of contract or disputes be resolved. There are many partnership agreements online that are free to view and some can be downloaded for free. However, each partnership is different, and it is recommended in forming a partnership you hire an attorney, who will customize the agreement to the specifications of the business and its partnership.

7. Look for a partner that does not come with baggage: A partner, who is consistent, will be able to devote tremendous amounts of energy and commitment to the business. You can not afford to have a partner who has a lot of personal issues or problems, as this will interfere with the ability for the business to grow. Constant excuses, for example I can’t make it because….are not acceptable when the success of a business depends on each partner giving 100%.

Choosing a Business Partner Is As Hard As Finding a Life Partner

Choosing a Business Partner Is As Hard As Finding a Life Partner

Many have failed in doing their first business especially businesses that are run through business partnership. Finding the righteous business partner is as hard as finding our soul mate or life partner. Years of friendship are not guaranteed that your friend is the righteous one for you. But, the new guy you just met yesterday, if he/she shares the same vision and mission as yours would they perhaps become your lasting partner?

Choosing the righteous partner for your business is the hardest part since you are expecting that your partner will give total commitment to it and will do anything as you do to make the business growing and lasting. However, it is the process you have to patiently through to get your business partnership runs well in the future.

The first thing you should keep in mind is that years of friendships are not always the best partner and new guy you just met recently is not always the worst partner. Friendship is different with business, in business we have to act professionally particularly on money matter. Do not make it as the reason to the ending of your years of friendships. However, knowing your partner is best recommended to know the characters.

The second thing you have to consider is your prospective partner shares the same mission and vision in business as you have. Having the same vision and mission will make your step in developing business in rhyme with your business partner.

Trust is your third consideration. You should utter anything before signing a partnership, see whether the person can be trusted or not. If you still feel uneasy or less trust on the person, leave him/her and switch to another person. Uneasiness and lack of trust are bad foundations on business development.

The last although not the least is test his/her spirit. Does she/he have stable spirit in any field he/she is in? If he/she does not have stable spirit or moody then it is not recommended. Running a business is tough work and it requires steady spirit to rock on through up and down of the business.

Well, choosing the correct partner is a rather long process. Do not rush in choosing your business partner because I am sure you do not want to waste your time, money and energy because your pal has gone away or losing will in the middle of the already running business.

What Is a Business Partner?

What Is a Business Partner?

The very term business partner or partners indicate that more than one person is engaged in a commercial enterprise. Generally, a business partner is misunderstood to mean that the partner has invested capital in the business. But this is not always the case. A commercial enterprise may offer a partnership to an inventor or manufacturer. The partner shares in the profit by giving exclusive manufacturing or selling rights to the enterprise that offers him or her partnership.

Partners can be family members, and this is the case in a number of small and medium-sized firms. Family members are made partners for several reasons. Of course, the major reason is that the business continues to remain in the family even after the death of its initial owner or one of its owners. Secondly, the tax paid by the business is reduced when there is more than a single owner.

That’s why brothers and sisters, husbands and wives, and fathers and sons are the co-owners of a number of commercial enterprises. Companies ranging from shops to factories to multinationals are generally owned by a family. Even in large public enterprises the major stockholders are members of a single family. Certain partners are ‘sleeping partners’, which means that they invest in a firm and get a fixed income for their investment or share of the profits. They have no say in the running and managing of the business.

Today the business world is witnessing a radical change from traditional business partners who were mostly family or friends. The internet is largely responsible for heralding in this change. Nowadays business partners is referred to more as commercial enterprises joining together to expand their business objectives. A classic example of this type of business partner venture can be found when Dell agreed with Intel to only install their processors in their computers.

Nowadays, small business ventures seek partners to market their products. All partner agreements are time-based and legalized. As the internet has brought more competition among businesses, a number of business owners have signed up with international partners to expand their business.

Today a business partner can be a supplier, a customer, an intermediary, or a vendor. Resellers and agents are described as business partners. Complimentary vendors are those who depend on each other to sell their products, like a hardware manufacturer and a software supplier.

The term ‘business partner’ has taken on a new dimension as businesses have changed. Small and large companies especially those who complement each other prefer to become partners. Both retain their own individuality, and at the same time, profit from each other.

If there is a business that’s doing well and wants to expand its operations, it will easily be able to find international partners. Becoming partners can be tricky when two firms that are based in different countries decide to enter a partnership, as the first hurdle is to decide which country’s laws will govern the partnership. However, a number of business partners have profited by joining forces and forming a partnership.

Business Acumen – Buying Out a Small Business Partner

Business Acumen – Buying Out a Small Business Partner

Looking for buying out a partner generally refers to businesses searching for information on how to purchase the shares of another partner. Partners may decide to leave a business if they are retiring, relocating, or otherwise can no longer take part in the business’s activities.

The first step in buying out a partner is to determine how much the partner’s shares are worth. This can be determined a number of ways. Value could be based on the market value of the company, the amount invested by the partner, or a pre-determined price detailed in a partnership agreement.

The next step when looking to buy out a partner is to find capital to finance the buyout. Though most lending institutions do not provide loans specifically for buying out a partner, they do offer loan programs that can be used towards any general business purpose. Most buyouts require large sums of money, and to apply for a large loan, lenders usually require personal and company financial documents, a business plan, and credit reports. Collateral is also required for secured loans, which can provide lower interest rates than unsecured loans.

If a business is looking to replace a partner, it may be able to obtain funding from an investor. Partner investors contribute large sums of capital in exchange for a portion of the business’s profits and a voice in the business’s decisions. In the case of buying out a partner, an investor could purchase the shares of the leaving partner and become part of the business.

Small business buying out partner usually refers to small business owners searching for information regarding buying out another business partner. Partners may wish to sell their shares of a company when they retire, relocate, or otherwise can no longer take part in the business’s activities.

The first step in buying out a partner in a small business is determining the value of the partner’s shares of the business. To resolve this problem, many businesses with two or more owners create and sign a partnership agreement that predetermines the value of every owner’s share of the business. For partnerships that do not have an agreement like this, the value can be determined by looking at how much the partner invested in the business or how much the business is currently worth on the market.

Once all partners have agreed on a selling price, the owner buying out must find financing. Most lenders don’t offer loans specifically for buyouts, but their loans can usually be used for any business purpose. Buyouts typically require large sums of money, and lenders have more extensive requirements for large loans. To get a lowered interest rate, many borrowers use personal or business assets to secure the loan.

Another source of financing for a small business buying out a partner is another investor. If a business owner can find an investor who is willing to purchase the other partner’s shares, then the owner will not have to take out another loan. The business owner simply gets a new partner to work with.

Breaking Up is Hard to Do – What You Need to Know As a Business Partner About Breaking Up

Breaking Up is Hard to Do – What You Need to Know As a Business Partner About Breaking Up

Your business partner is not pulling their weight. Unless you can lower your expectations, there will come a time when you decide to go it alone. You go to the lawyer who has been acting for the partnership to whinge about the other partner. However, he tells you that he has a conflict of interest, and he cannot act for you.

You choose another lawyer. He will be tempted to lecture you on the imprudence of entering into business without a partnership agreement. If this takes any more than half an hour, then you may not have made the right choice. Of course, you don’t have a partnership agreement! Who does the lawyer think you are, BHP?

If you do not have a partnership agreement then the law generally lays down about ten ground rules:

  • Partners must make financial contributions equally;
  • Partners are equally responsible for the debts of the partnership;
  • Partners may need to pay up the whole debt, not just half, and then seek reimbursement from the other partner;
  • There is no salary for acting in the partnership business, regardless of how much more you have worked than your partner;
  • All property bought by the partnership is partnership property;
  • Partners must be truthful and tell each other everything about the partnership business (tough, I know);
  • Partners must account for any benefit received using partnership property or concerning the partnership;
  • Persons dealing with the partnership can assume it still exits until given notice that it has been terminated;
  • Partners can do everything necessary to wind up the partnership. If they do not complete existing contracts they could be sued; and
  • Partners are entitled to have partnership property applied in payment of the debts and then applied to what is due to each of them.

The lawyer will advise you that it is in your business interests to have an amicable split. You know this too but you feel bitter and find it hard to put the relationship down to experience and walk away. You have only been together for a year or two and, although the potential is great, in reality, the partnership is not worth anything.

Here is a seven-point checklist of the predictable disputes between partners who do not have a partnership agreement:

  • The business name and domain name registrations belonging to the partnership could go to the highest bidder of the two of you. Note that these registrations do not mean that you own the name as only a trademark confers ownership. Therefore, they have limited value. You could agree not to use the registrations, but this is a waste, isn’t it?
  • Preparing final accounts. Should this not be done by an independent accountant, so it is all above board? Well yes, if you both don’t mind paying more for an accountant who is unfamiliar with the business, charging more and taking longer.
  • Competition. You could agree to split the client list and look after your own clients. But what fun is that? Outright war may be inevitable, especially if you are the stronger partner.
  • It may be satisfying to threaten to sue your ex-partner. You may see this as one of the benefits of not having a partnership agreement. Often partnership agreements provide that no court action can be commenced without an attempt at mediation. Alternatively, it can provide for arbitration which lacks the drama of threatening to slap a writ on your ex-partner.
  • Who paid for what? With GST, it is usually too easy to work out who paid for what and especially if there is not much money in the kitty this argument usually runs out of steam.
  • Another fruitful point of argument if you have not got any real money is IP rights. These can be in documents, logos and ways the partnership did things.
  • The debts owing to the partnership need to be collected. This can be an exercise in one partner chasing debts from friends of the other partner.

Many of the predictable disputes can be anticipated by a partnership agreement at the outset as it will provide for a mechanism in the event of a breakup. To fight over the carcass of the business normally involves legal costs. Therefore only fight if it benefits you (not just to wind-up your partner). Ask yourself ‘What’s in it for me?’. If the answer is ‘nothing much’, opt to shake hands and move on.