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Is It Best To Identify a Business Partner?

Written on July 9th, 2013 by in Blog

There are several common reasons new business owners consider bringing in a partner in their new business including:

  1. The partner provides funding
  2. FEAR of opening a new business on your own
  3. You identify someone with Staffing and/or Recruiting experience
  4. The person in question was responsible for the idea of this new business

There are pros and cons to business partners. There are many husband and wife teams that have done extremely well in our profession. It is important for you to determine your motivation to consider a partner. It is also important that you define roles and expectations up front in writing.

Consideration For Reason Number One

If the partner is the money person, rather than make them a partner inquire if they would become a company vs. a partnership.

Consideration For Reason Number Two

FEAR is the most common denominator for identifying a business partner. Remember FEAR stands for False Events Appearing Real. Most business partnerships can be very challenging. In a marriage, it’s common for partners to compromise because they love the other person. In business, partners don’t necessarily agree, have the same work ethic or vision. This can lead to major problems and often causes the demise of the company.

Consideration For Reason Number Three

If you’ve been approached by someone with experience, have them prove themselves first by their production. Based on their production and profits they can earn a certain percentage of equity over the years. If this person is so talented and brings so much to the table, you have to wonder why they don’t own their own Staffing and/or Recruiting Firm.

Consideration For Reason Number Four

If you identified someone as a business partner from the beginning, you may decide to enter into a partnership. It’s important to have an agreement in writing and my suggestion would be that you each own 49% of the company with two shares outstanding. If the partnership ends for any reason, the remaining partner automatically gets the two shares giving them 51% ownership. This prevents your partner from selling their shares to an individual you would never select. If this does happen you still are the majority stock holder and have the last say.

Review your motivation, conduct your due diligence and consider alternatives so you can make the decision that is in your best interest.

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