Cracking the Code of Successful Business Partnerships

Cracking the Successful Business Partnership Code

Many business owners "freak out" at the thought of entering a partnership, often believing that "partnerships don't work". However, my highly successful partnership some years ago showed me that partnerships can be incredibly effective, and lead to significant growth which is extremely useful when preparing a business for sale. My experience in that partnership gave me invaluable insights into the crucial elements that underpin a thriving business partnership. Don't just take my word for it, listen to my podcast with my former business partner where we discuss why our partnership was so successful LISTEN AND FOLLOW HERE.

1. Start with a Common Goal and an Exit Strategy

One of the most critical factors for our partnership's success was having a common goal from the outset. For us it was to "exit with equity in three years". This shared objective motivated and helped us increase our business's value by approximately 10 times our individual business’ values. We did this by working together towards our end game goal.

I consider it a "golden rule" of successful business partnerships to begin with the end in mind and have an exit or transition plan. Starting with the end game in mind when the partnership is new and "everything in the garden is rosy" makes it significantly easier to execute later, especially if circumstances change or things don't go as planned. Our end game plan was built directly into our initial business plan.

2. Embrace Differences and Build on Complementary Skills

Someone once said, “Opposites attract”! Opposites in a partnership are vital to building a business.  Partners should ideally possess diverse skills that are complementary.

My partner Peter, for example, recognised that he didn't have all the skills or desire to do the logistics and day to day operations of the business successfully. My strengths were in those areas and delivery of the workshops. Conversely, Peter's strength lay in developing the business and driving the sales. This synergy allowed us to work to our strengths and build a very successful business.

Appreciating differences in skill sets and motivations is key. Partnerships often struggle when people partner with those who are exactly like themselves.

3. Shared Values

Underpinning everything, however, is having very similar and compatible values. This is critical in a partnership. Relationships are built on trust and mutual respect, and these are in turn underpinned by good values.

I recall an exercise which we were involved in where 60 or 70 people worked on defining and getting clarity on their values. The end of the exercise involved finding other people in the room with similar values to yourself. Out of the 60 or 70 people Peter and I found each other due to our uncanny similarity in values.

4. Cultivate Equality, Trust, and Respect through Defined Roles and Communication

Another "golden rule" for successful partnerships is doing everything 50/50 where possible. When one partner has 51% and the other 49%, it immediately creates a hierarchy, whereas partnerships are meant to be equal, fostering harmony. Even if it cannot be a monetary 50/50, the most crucial aspect is the trust and respect partners give each other, moving forward together.

Partners should also establish distinct roles and responsibilities early in the relationship. This process is akin to recruiting for a job, where one assesses a person's background, successes, and failures to understand their strengths. The aim is to ensure that one partner's strengths align with the other's weaknesses, creating a robust partnership.

The concept of "eligibility and suitability" from recruitment applies equally to partnerships.

• Eligibility refers to having the necessary skills and experience, and complimentary skills.

• Suitability focuses on how partners will get on together, if they share similar values, and if they can build trust and respect.

5. Effective communication and understanding each other's working styles

One example of how this worked for us is when Peter, knowing I am a "muller" who needs time to process information, strategically presented a challenging situation (selling a workshop we didn’t do “yet” to a client) by softening me up with breakfast. Peter then stated he didn't want an immediate answer, offering me 24 hours to think it through. My first ‘reaction’ was to say “No, we don’t do that!” but after mulling it over for 24 hours, I came up with a solution. Peter had been confident I would but by knowing me, he had presented the idea to me in a way that suited my personality and style.

We also had an upfront agreement to alternate who made the final decision when we didn't agree on something and that worked very well. Despite occasional upsets, we would always talk things through, laugh it off, and resolve issues.

6. Address Legalities and Potential Challenges Upfront

It is highly recommended for partners to seek legal advice and have a partnership agreement drawn up. While we didn’t have a formal legal written agreement, we did agree the “rules of the game” upfront.

Due to my experience with clients' partnerships more recently I always advise getting a legal agreement drawn up.  This agreement is not just for if things go wrong, but also to address situations such as a partner falling ill or passing away and protecting the remaining partner. Crucially, a good lawyer should legalise the partnership's own plan, rather than dictating what to do.

If you need a referral to a good lawyer, then please contact me. Also, I have created a partnership checklist of all the things you need to discuss and agree BEFORE seeing a lawyer. If you don't have it already, you can access the DOWNLOADABLE PARTNERSHIP CHECKLIST HERE.

For family businesses, the same rules apply as for any other partnership, but there's an "obvious danger" of running too high on emotion. While heart and mind should work together, business decisions must be based on "cold hard facts" and numbers, ensuring that emotions and relationships support the business rather than hinder it. It's also important to separate business and family life to avoid burnout.

7. Summary - Set Up A Successful Business Partnership For Profit Growth And Sale

• Focus on a clear purpose and common goal for the business

• Have a robust business plan including an exit strategy

• Build mutual trust and respect

• Leverage diverse skills and personality differences

• Define roles clearly

• Do everything 50:50 and ensure an equal partnership

As I said earlier, taking a partner into a business can be a great strategy for setting the business up for a successful sale. Your partner(s) may even end up buying you out and taking over the business. It creates lots of options. Don't just take my word for it, listen to my podcast with my former business partner where we discuss why our partnership was so successful LISTEN AND FOLLOW HERE

If you are interested in developing this strategy and would like some help, please use the EMAIL ME button below to make contact.

Having an external facilitator work with partners can have enormous benefits.