When starting a business, choosing the correct partner will play a key role in determining the future success of your enterprise.
A partnership is a single business where two or more people share ownership. In general, each partner contributes to all aspects of the business including money, property, and labour or skill.
In return, each partner shares in the profits and losses of the business. For the reason that partnerships entail more than one person in the decision-making process, it is important to discuss a wide variety of issues up front and develop a legal partnership agreement.
This agreement should document how future business decisions will be made, including how the partners will divide profits, resolve disputes, change ownership such as bringing in new partners or buying out current partners, and how to dissolve the partnership in the event of one or more of the partners wanting to leave the business.
Going into business with another person has many benefits which include combined skills and knowledge, more capital and greater borrowing capacity. A partnership should, however, be carefully scrutinised before taking the plunge.
Trust lies at the heart of any partnership. Without trust, your partnership will not be sustainable. You must be frank about your common goals, expectations and outcomes.
Compatibility on your approach to finances, planning and strategy is essential or it could later create issues that affect your ability to succeed. One question to examine is: Can this partner be trusted to put the interests of the company above their own?
Finding a partner that can see the bigger picture, recognise industry trends, and formulate strategies to stay ahead of the competition is vital. Do they need to be told what the priorities are or can they see the bigger picture?
A key ingredient is to properly contemplate each aspect of your prospective partner’s personality, values, beliefs and nature. This may sound like you are about to get married, but if you closely inspect the characteristics of getting hitched and going into a partnership, they both have a lot in common.
Character and other personal attributes aside, you should consider whether your prospective business partner will complement your current skillset.
Will they be able to contribute in a meaningful way to the growth and prospects of the business? Business partnerships typically are most helpful if you each possess some skill or knowledge the other lacks. An example could be where you may be a genius at accounting but lack proper sales skills.
For the same reason that you are not likely to get married overnight, you should also not rush into a business partnership.
*Mbo Luvindao is the Manager at Bank Windhoek’s Emerging Small-to-Medium Enterprises Finance Branch