Entering into Partnerships without Clearly Defined Roles
This small business mistake is part of a collection excerpted from Gary Schine's book 101 Small Business Mistakes
Entering into Partnerships without Clearly Defined Roles
Partnerships are often difficult and sometimes just plain unworkable. Some businesses fail because the partnership doesn't work. In the worst case situations, I've seen partnerships end up in both failed businesses and court battles.
The only partnerships that work are those where the partners each have clearly defined and agreed upon roles. Those that fail, do so because the partners do not have clearly defined territories which leaves open the opportunity for disagreements over policies and procedures. Typically in these situations, the partners did not settle on each other's roles from the outset.
In considering a partnership, roles and expectations for the partners should be agreed upon before proceeding into business. Many times partners just assume that they are in agreement about roles although it is never discussed until it is too late.
Be very clear about who will do what, when and how many hours each is expected to work, how each will be compensated, and about any other potential areas of conflict. In fact, it is best to put the partnership agreement into writing so you can be crystal clear about the responsibilities of each partner.
A written partnership agreement should also cover conflict resolution between the partners, what happens if one of the partners wants out of the partnership, and what happens if some of the partners want to remove another from the partnership. A lawyer should be consulted in drafting the agreement.
A final note:
It often makes sense for partners to set up a corporation instead of a formal partnership. The corporate structure has built-in procedures for transfer of ownership and for other eventualities that may become issues. A corporation may be cheaper to set up than a good partnership agreement. Discuss this with your lawyer.
Other Business Mistakes and Misconcetions
- Failure to Prepare a Business Plan
- Myth-- A New Business Must be Based upon Uniqueness
- Overspending
- Momentum
- Starting a Business for Reasons other than Market Demand
- Entering into Partnerships without Clearly Defined Roles
- Not Putting Partnership Agreements into Writing
- Organizing A Small Company as a Large Company
- Misconception-- A Product Can Be So Good, It will Sell Itself
- Not Understanding Your Product's Benefits
- Believing That Experts Have Magic Answers
- Not Pricing Based on Benefits to Buyer
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