It is very possible that you have faced the situation of making the decision of whether or not you should have a business partner. Or perhaps if you accept the proposal of a family member or friend to join a society.
Is it positive or negative to have business partners? Is it true that the wrong choice of partners is one of the “three deadly sins of the entrepreneur? What criteria should the entrepreneur use to choose a good business partner? What if the partners are the couple, parents, siblings or close relatives?
These and other questions are frequent when the decision is made to undertake and the option of having a business partner in our company arises.
I am preparing a seminar with the name "Tres Puentes to choose a good business partner"; But two friends must make the decision . How to define the percentage of participation and the conditions that will govern the future business?
Case # 1: Isabel is opening her fifth store and a friend with his wife offers to be partners in this new business. Antonio and María want to invest money and participate in the operation of the business, that is, work in the company. How is the percentage of shares that correspond to Antonio calculated if he is investing money and will "contribute" work? But the knowledge and the brand belongs to Isabel, who has been dedicated to that company for ten years.
Case # 2: René and Julio have just compared a small sandal factory. Each investing half the value and now they must define some delicate details. René is busy with other things, he can only contribute money for now and visit the factory once in a while. Julio is willing to dedicate himself full time to the new business. How is Julio's salary established? How is the percentage of shares of each calculated? When is more money required to buy new machinery and equipment, how is it provided?
Of course I change the names and the type of business, to respect the identity of the characters. They are real cases. I know you will identify with one of them.
In the short space of this article I want to introduce 4 topics that the entrepreneur must take into account and both Isabel and René must talk and clearly define today that they are taking the first steps.
Expectations
Each one must express the expectations that they have regarding being part of that society. These expectations have to do with expected earnings, the possibility of a paid job, staying active or acquiring business knowledge.Some partner may simply be interested in making a greater profit for their money, while another wants to secure a job. The entrepreneur has to be very skilled in detecting that he is not saying himself. Read between the lines and delve into this topic starting with a simple question: What do you expect in the short and medium term of this business in which you want to participate with me? Do you want to be a capitalist partner or do you want to be an operating partner? Are you interested in simply making a greater profit for your money or having a paid job within this business.
The contributions
Capital contributions can be made in cash or in kind. A partner could claim a percentage of shares; but she has no capital to contribute now and will pay in the future with work or money in installments. It is not convenient for you to transfer shares if there are no contributions in the present. You must speak it. The contribution in kind can be the personal work of the future partner or assets such as machinery and equipment. These two topics must be clear and very precise. If the partner pays with work, what is the salary base. It has turned out that the partner is a biotechnology engineer; but he will work as a "cook". How is time valued? You will have to use the salary of a "cook", not an engineer. Of course. This topic is awkward. The partner offers to work x amount of hours; but then stop doing it or place a relative.At first he offered a contribution with work, but now he needs a salary. In the case of Isabel who contributes her knowledge, that has a value and perhaps greater than the value of machinery and equipment. If a partner works in the company, she will receive a "market salary" for the position she is going to hold. The partners must be clear that when capital is required in the future, all should contribute according to their participation.
Share percentage
Delicate subject too. Forget that every society is fifty fifty. It is the most "solomonic" way of solving; but in business it doesn't work. Isabel is provided "knowledge", her time to choose the point, choose the machinery, train the personnel, etc. Antonio will contribute money and will start learning when he enters. The contributions of each one will hardly be fifty percent. It is necessary to make a list of the contributions, establish a price and speak it clearly. Calculate the percentage of what each one contributes and that will be the distribution. If the other partner is left with 20%; but you want more, you must pay the difference in cash or with another type of contribution. In the case of René and Julio, it will not be so easy to say "we are going to fifty percent, you work full time and I support you at night and on weekends."That is not clear. You should not mix the chocolate with the coffee. They are two different things. Work is time invested that has a value according to the position that is performed. Time contributions can be established with hours committed by both.
Commitment
Memory is selective. We listen to what we want, we listen and remember what is convenient for us. What agreement must be put in writing. Meet as many times as necessary. Talk hot topics, even if they're awkward. Talk about it today when it suits. Those "loads don't fit on the road." In the field they say "it is better to turn red once green all life." This document is a simple "PARTIES AGREEMENT". It is a draft before legally creating the society. They simply write down something like:
PARTIES AGREEMENT or PARTNERS AGREEMENT or SOCIAL AGREEMENT
“Between us Isabel and Antonio we agreed to form a society to open a store on the same site and these are the clauses that will govern our society.
Point 1: x xxxx, Point 2: x xxxx, We sign in such a city, on such a day.
This is a private agreement. At first you do not have to be authenticated by a lawyer. This is written before the company is legally incorporated. When they decide if they will be partners, then they go to the lawyer. They add some clauses of these to the articles of incorporation and the rest of the document can be printed, signed and the lawyer authenticates the signatures to formalize it.
Thus they will have two documents:
1) The corporate agreement that legally constitutes the company before the commercial registry
2) The “parties agreement” or “partners agreement” where they add all the details that could not be included in the articles of incorporation.
Four critical issues to consider before choosing a business partner. My experience observing entrepreneurs in my workshops doing this dynamic assures me that it is a great first step. Many will not resolve to be partners; but it is better that they decide today and not in two or three years.
I am sure that if you follow these four easy steps, you will avoid many problems and headaches. You will also avoid divorces, loss of beautiful family relationships, loss of good friends and earn more money.
If you choose a bad partner, you will have problems. I assure.
If you choose a good business partner, you will have a lever that will lift you very high. Together they will turn a small business into a large company.
Leave your comments, because the article is complemented by your specific queries. I know you have been through this you have many doubts.
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