7 Things to Know Before Entering a Business Partnership
Climbing the top of a mountain without the help of someone you trust doesn’t often add up as a great idea. If you go camping with people you just met, you aren’t going to trust them with your belongings, and even if you do, you won't do it totally. The same case couldn’t be truer in partnership businesses. A partnership is not a kind of an enterprise where you can sign a pact with guts and hope for the best. You have to be strategic and have a clear and a definitive approach for better results. For that reason, here are seven things you need to know before signing a partnership agreement.
1. Understand the Profit Sharing Ratio
A partnership is a tricky game. Unless you know how much you are expecting to gain, you aren’t ready for it. Start with the goal in mind, which is ROI. Unfortunately, ROI isn’t going to be for you alone. It is a share of all the partners, based on a given profit-sharing ratio. So, before you sign the document of partnership with someone, get a clear picture of what’s in for you.
2. Determine Whether You Have a Passion for The Business
Ignore anyone who tells you to start any business. Ignore anyone who tells you that engaging in any partnership deal is a superb idea. Nothing is as worse as signing a partnership agreement only to discover later that you do not have the passion for the business idea that was tabled before you. Unless you have a passion for it, drop it like a hot brick.
3. Know Every Partner’s Interests
More often than not, many people sign partnership agreements with people who have differing interests. Even if the goals of the enterprise are fixed, frictions are a guarantee. It is best to ignore partnership deals with people who don’t share similar interests as you do. Find people who are like-minded. You already know the truth; birds of the same feature do well when they flock together.
4. The Agreement Must be in Writing
Make no mistake; every verbal partnership your friend and your friends’ friends have had, eventually collapsed. And when they did, there was no written material to warrant a court case. Every business agreement must be in writing, and the same case applies to partnerships. If someone approached you and suggested a verbal contract, ignore everything they told you.
5. Ignore Anyone Who asks You to Sign the Agreement Without Giving You Enough Time to Think About it
It doesn’t make sense for someone to give you just a day to sign a contract. Honestly, even if you have an interest in the kind of business that someone proposes, you do need time – at least a week – to read the agreement and think things over. Ignore anyone who wants you to sign the partnership agreement very soon.
6. Understand the Roles that You Will Play
Unless you have a well-defined role in the partnership, what’s the point of giving the idea a shot? Make sure you know your role before you say YES to whatever is on the table for you.
7. Know How Long the Business Will Last
You don’t want to get into a partnership deal that will hit a rock bottom in a week. No one wants that, so why should you?