• Trust and respect where two the principal reasons why Henry and David partnered originally to start iTopIt, and to launch Levante Business Group.
• Both Henry and David feel they work better in a partnership.
• The reasons you may partner may include: financing (i.e. one partner has the money for start-up), expertise (i.e. one partner has the expertise in the industry or business you are starting), friendships & family (although we always caution that you be careful when partnering with your friends and family as it may end badly).
• You may also have a “Silent Partner” who provides a cash investment, but is not actively involved in the business. As with all partnerships, it’s important that the role of the Silent Partner be clearly defined up-front so that you minimize issues later.
• Joining with a partner is often a great way to fill a gap in expertise, although always remember that you can hire expertise in many cases instead of giving away equity.
• It’s critical that you define and be honest up-front with each other as to who will do what and how much time each partner will invest in the business.
• David and Henry enjoy what they call “active partnerships“. These are partnerships where all partners are contributing fairly equally. It allow us to minimize or spread the risk, it allows us to bounce ideas off of each other.
• There has to be synergy between the partners of a small business. It means putting in equal amount of effort and thinking, and you end up having a quick and common vocabulary that allows you to help each other and move the business forward.
• We tend to avoid partnering with people who are negative.
• Compromise is another key component to a good partnership.
• Good partners have each other’s interests in mind; you have each other’s backs. We try to look at what’s best for the other person, and what’s best for the business overall.
• The efforts of the partners must be shared and recognized. And when original intentions, motivations and plans change, how will you handle that between each other and how will you change the parameters of the partnership?
• Legal Partnership Agreements are a must for any partnership. This typically includes an Operating Agreement and a Buy-Sell Agreement (these two may be combined into one agreement).
• The Partnership Agreement defines all of the parameters of the business agreement, including who is the Managing Member, what capital is contributed by each member, and what happens when a member of the partnership wants to exit or can no longer perform their duties.
• We recommend that you start with a (Business Partnership Checklist) Memo of Understanding where you define most of the terms of the partnership. Then you consult with an attorney to finalize the details and create the legal Operating Agreement.
• If you are the Majority Owner, you need to make sure you can buy-out your partners.
• Partnerships may not be a fit for people who do not like to seek advice from others, who do not prefer to share success or blame, and if they don’t see value in the opinions of others. It’s probably not a good idea to partner just for financial reasons.

 Resources

• Business Partnership Checklist (Partnership Memo of Understanding)
• 3 Pillars of Successful Business Partnerships

Related Episodes:

Here is a more recent episode on the topic of Small Business Partnerships:

Episode 259: Business Partnerships

You can find other related episodes of The How of Business podcast on our Archives page.

Related Content:

Entrepreneur Article: Everything You Need to Know About Business Partnerships