4 Things You Have To Know About Business Partnerships

What You Need to Know to Not Get Screwed

Ah, business partners. I always ask people in roughly equal partnerships, “Who's the shitty partner?” If they don’t know, it’s them.

My philosophy on this has changed over the years. I started my core business with a 50/50 partnership. 

I ended up buying him out after 9 or so years when I felt like the relative value of what each of us brought to the company had become unequal. 

It was a long and taxing process and ultimately costly so I don’t recommend it. Here are 4 tips for staying out of trouble:

One partner needs to have a majority

There are no truly equal partnerships. 

Have the conversation about this up front because as uncomfortable as it is, it will be a lot worse and cost you a lot more later on.

Exit timelines/strategies help.

Partnerships work best when there is a defined near term exit strategy. 

If you have investors who are going to force you to exit in 3-5 years most people can come to an accommodation to keep working together until they get to the finish line.

Open ended partnerships don’t age well. Partnerships are like a marriage. After about 7 years, someone gets the itch to move on. Circumstances change, people change, and it’s unrealistic to expect both parties to stay locked in forever.

Marriages are worth working on a lot more than partnerships

Of course you could spend years in therapy making your partnership work but I don’t think anyone should be that committed to a business relationship. 

A marriage yes, a business partnership, no.

Make sure you have a Buy/Sell agreement. 

These define the terms under which a partner can exit. 

It’s a hard conversation to have up front but that’s a lot better than doing in court later.

Go through your exit clauses carefully and try to imagine them happening. How would it play out?

Once you are in a fight it is very helpful to point back to the terms of the agreement. 

Here are some of the popular ones.

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