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Partnerships are commonplace in business, however many people do not have a complete understanding of what a partnership truly is, how it should function, and what to expect once they have entered into one. In the most frequent instance, a partnership is formed between one or more businesses or partners (owners) that will work together to achieve success, to share profits or losses. Partnerships have widely varying results and can present partners with special challenges. Levels of give-and-take, areas of responsibility, lines of authority, and overarching goals of the partnership must all be negotiated.
Partnerships can be very beneficial to startups and existing companies alike. In general, a partnership is formed between two or more people (or companies) that have differing skill sets. For example, someone who is very technically inclined will partner with someone who has strengths in management. This provides the opportunity for each partner to focus on the area of the business that they are most knowledgeable, which will let the business grow faster and more efficiently. That being said, there is a lot that can be gained from a business partnership, however it is extremely important to understand how the partnership will work prior to committing to the partnership.
One of the most overlooked facets of entering into a partnership is the exit strategy. Most people are so excited to start their venture that they forget to plan for the future, or what will happen when individual goals and visions change over time. Most partnerships will not last forever, and this should be taken into consideration ahead of time. This is particularly true in a lifestyle business. Each partner has his/her own ideas about what they ultimately want to get out of the business. This can refer to anything from the amount of hours each person is willing to put into the business in the future, or what the target returns should be, regardless of how much time and resources are poured into the business. In time, people change, and with this change comes shifts in ideals and lifestyles. What will you do if your partner wants to raise new capital and grow the business but you are happy where it currently is and do not want to invest anymore capital into the venture? These are all things to think about before entering into a partnership, as you will be prepared to go different directions, or make a compromise to continue the partnership.
Partnerships have always been, and will continue to be beneficial to many companies. It is very important to know that in all likelihood, the partnership will not last forever. As long as the partnership is well thought out and planned out thoroughly from the very beginning, then nobody will be caught off guard when it is time to go in different directions.