The entrepreneurship journey is like a soap opera, especially when multiple partners are involved in building a business. Beneath the success stories, there are always those tense moments when partners lock horns; it’s that moment when Richard Branson gets an ultimatum from his cousin and partner Simon Draper when Branson poses the idea of using earnings from the record label to invest in the airline industry. Or Facebook founder Mark Zuckerberg settling court cases with his former partners. Partnerships can enable you to achieve more but they also come with challenges.
Right from the beginning of the partnership, create a formal agreement drafted by a lawyer, and ensure it lays out all the terms of engagement, each one’s share in the business, their financial contribution, provisions for future financial contributions etc. Needless to say that everyone needs to sign it to bind all parties to what they agree to, if someone refuses, you are better off not getting into the partnership. Why is this important?
Well, in some cases partners would fall out at an advanced stage of the business, years later when there is a lot more at stake. However, without a written agreement, accusations will be levelled on a ‘he said, she said basis’ which can amount to anything. A formal agreement (where everyone gets a copy) can always be referred back to down the line; it will also protect you from liability in case a partner enters into agreements without your knowledge. Simply put, it acts exactly how a prenuptial agreement would do in a marriage; prevent a partner from taking more than they deserve in case of a breakup.
Create a Dispute Resolution Strategy
The secret to successful partnerships is to anticipate what is bound to happen, and disagreements are as sure as death. Lawrence Levy in his autobiography To Pixar and Beyond: My Unlikely Journey with Steve Jobs to Make Entertainment History, narrates how he would take long walks with Steve Jobs where they would discuss sensitive issues including negotiating stock options for Pixar’s early-stage employees. In a situation that required decreasing Steve’s shares to award the employees their stock and knowing Steve as a tough negotiator, Lawrence had to use his extensive experience to navigate the negotiation extremely carefully and succeeded. Nevertheless, not all people have the skill and self-control needed to always settle disputes amicably, so create dispute resolution strategies early.
Furthermore, these strategies don’t have to be complex, something as simple as appointing a neutral mediator to come in to help resolve disagreements or a third partner who would have the third and deciding vote in case of a decision-based dispute. Apple’s founders Steve Wozniak and Steve Jobs had engineer Ron Wayne as an early partner for precisely this reason, try it.
Find a Way to Track Contributions in Monetary Terms
One of the biggest challenges in partnerships comes when one partner is working full time on a business while the other is inactive or contributes capital. Alternatively, both partners may be dedicated to the business but one may be putting in more work than the other. In both cases, resentment can quickly build; especially if one starts feeling that their partner is slacking off and leaving them to do all the hard work. One way to deal with this is to value the time given to a company in monetary terms, as sweat equity, however, this has to be agreed upon by both partners. In a sweat equity arrangement, every partner is given a target and when they achieve that, they are either awarded shares in the company or money. This not only ensures that the most dedicated partners are rewarded but also makes it hard for lazy ones to relax once they know they own part of the business.
Clearly Define Roles
A business is like the human body, every part has a function and when that part fails to perform the whole body suffers. A good example of a business that clearly defined the roles of partners and early employees is Nike, during the initial days. Phil Knight the founder of Nike in his book, Shoe Dog: A Memoir by the Creator of Nike, recounts how he would give his partners the freedom to run the branches they had in their control with little interference. This made it easier for him to give them additional responsibility when he needed to expand, start a new factory or open new shops.
Clearly define each partner’s role when you are recruiting and stick to them. Nothing annoys more than a partner who keeps on overstepping their role and when egos are thrown in, the result is a toxic relationship. On the other hand, this does not mean that there shouldn’t be accountability, declare the roles formally in the partnership agreement, and then hold regular performance reviews to ensure that everyone is performing their roles as needed. Additionally, come up with remedies in case anyone is not performing their roles.
Gabriel is an entrepreneurship enthusiast, with a fondness for questioning the workings of everyday things. He is an entrepreneur, a lover of stories and a member of Rotaract.
He is a freelance writer ( engage me at www.writegarage.com), skilled in crafting engaging content; from fintech to marketing techniques, startup culture, business development, analysis...the list goes on ..the only thing that keeps him up is the fact that anyone can change the world.