McBride for Business Blog

Get Partnerships Right in the Beginning

December 7, 2017 // R. Shawn McBride // No Comments »

Partnerships, partnerships, partnerships. They are all around, but how do we get them right in the beginning? How do we start them off on the right foot? How do we make sure they are successful? The key to a most successful partnership is to have clarity of understanding early on. There needs to be an alignment, and the partners need to have a lot of discussions.

One common problem is that partners get distracted. Some would call this “squirrels,” like a dog chasing a squirrel in the middle of a walk, or “shiny objects,” like a baby being distracted by something shiny.  Many times, partnerships start because there is an opportunity, a genuine business opportunity that initially looks great, and everybody jumps in feet first.

I counsel my clients to be careful and do this a little more selectively. That is where all the difference is going to be made. If the partners agree behind the scenes on how the partnership will work, good things can happen. If the partners do not agree and if they are struggling for understanding, then the partnership is not going to do well. One big problem that happens is that people talk on a surface level. Potential partners come together. They discuss, on a very high level, how their partnerships are going to work and how much money they are going to make, and then they jump in. Years later, they find that each of them had different concepts and ideas for the business at the beginning. Because of these different concepts and ideas, they are in different places. The partnership no longer works.

It is expensive and challenging to unwind an existing partnership. People have worked years in partnerships that have gotten into disputes, and they have lost some or all of the value they worked hard to create. To avoid that, make sure you are protected. A way to protect your value as a partner, to make sure you get paid what is fair and right for your skills and effort, is to get understandings up front. You can avoid these kinds of problems before they happen and put contingencies in place to protect you in the event your partners start to disagree in the future.

Have deep discussions early. Don’t just have a cursory agreement of what your partnership is going to look like—that may be fool’s gold. Understand all the mechanisms, how the profits will be divided, how major decisions will be made, how the partnership will pick customers, what values and culture you are going to embrace, and how you are going to build the business over time. If you are aligned on all of the areas and can make the necessary compromises, then it may be a good time to consider finalizing that partnership. If you do not have agreements on fundamental terms, I would recommend avoiding the partnership and putting your energy elsewhere. A little discretion early in the process can save you a lot of trouble later.

What has been your experience in forming or dissolving partnerships? How will you do things differently in the future? Join us in the comments below and let us know your experience.

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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique.  Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Milda K.


About the Author

R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.

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Posted In: Business, Growth, Management, Risk

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