How Should I Finance My Business?

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By Frank Tagarira (Continued) Last week I discussed Personal Savings and Finance from relatives and friends as a possible source of startup finance for upcoming SMEs. This week I am going to look at finding a business partner to invest in your business, as a possible finance option for you. However, in discussing getting a business partner as an additional source of startup finance, I am going to kill two birds with one stone by discussing the problems in general of choosing and working with business partners. Many SMEs fail in the long run because of differences and arguments between/among the business partners. Choosing a business partner should be done carefully and with utmost discretion. Business partners must be chosen with one’s head not with one’s heart. Assess Your Need for Partners. Bringing in partners is both addition and subtraction. You will be adding (hopefully) financial resources, additional expertise and more bodies, but you will have to give up some control and a share of the profits. Ask yourself these two questions before you decide to bring on partners: 1. Will this business survive financially without partners? 2. Will my ego (pride) prevent me from relinquishing control and a share of the profits? If you answered yes to these two questions, then you may want to reconsider bringing on a partner. One needs to think over every aspect before going for a business partnership. It’s more than friendship and more than being on the same profession – “it’s business”. There are some guidelines one must consider before having a partner. Here are some of them given by some successful business partners: Ethics: The work of each partner should be clearly framed and laid out. Partners should not interfere in each other’s work, as the framework should set out the operational scope and responsibilities of each partner. This way each partner will know what is expected of them and their performance should be reviewed against this framework. Care must thus be taken in drafting this framework. There should be complete understanding of each other’s work and the ability to accept the other’s decisions. Vision: Each should have the same view of the firm. To form a successful business partnership, one should have a close view of the way the other person conducts himself in personal, financial and professional situations. You should have a clear view of what your firm is for you and your partner/s. Is the firm just a source of income, or is it a dream venture in the making? Your partner must share your vision. Style: Considering this aspect is important. It is not necessary that the two of you work in the same way. One may be instinct-driven, while the other be the one who plans to the last detail. But it is the mutual understanding, acceptance and recognition of the other that gets it going. Communication: Being able to sit and talk through matters with a business partner is very important. There might be matters that both are not able to agree on. But it is the talking that can help situations like this. Both should be able to sit across the table and decide on the matter and come up with a solution talking about all aspects of the situation and then go further for the mutually decided course. Trust: The reason for so many failures in the past is the greed for quick money and the resultant short-sightedness. Trust is the most vital ingredient of a partnership. Each partner should be able to go on with their decision and the other trust his. There should be trust. If done correctly and for the right reasons, bringing on business partners can truly benefit your business. But care must be taken in choosing business partners because what may seem like a good idea now can quickly become a disaster if the process is not logically thought out. Bringing on business partners can be beneficial for your business, both financially and from a management standpoint (Be bold, be brave, be excited, very very excited…) * Frank Tagarira is a Small Business Development Consultant. He studied with ACCA (Association of Chartered Certified Accountants – Glasgow UK).