Business partnerships can be incredibly beneficial for both parties involved. However, if not done properly, they can also lead to major disputes and disagreements.
That's why it's important to have a partnership agreement in place detailing the expectations and responsibilities of each partner.
When a client owns his own business and calls to tell me he's thinking about taking on a partner and that he also wants to set up his business to sell within the next five to 10 years, the first conversation we have is on how to set up the agreement between him and the partner.
Here are three reasons why every business should have a partnership agreement.
1. Avoids Confusion
It's really important at the beginning stage to get it on paper because it will add clarity to which partner is responsible for what.
Having it on paper means each partner knows what they are focusing on and they can put all their energy and attention into growing the business to the point of the sale.
2. Avoids Conflicts
Up until this point, the owner has been running the business by himself, and now the owner has to relinquish some of that control - having an agreement in place will help avoid conflicts surrounding that control.
3. Avoids Disruptions
When someone new joins the team and takes over a large part of the business without a plan in place, there can be disruptions to the workflow, and it can even cause frustration with other employees.
Planning it out ahead of time will put everyone at ease.
We talk about this concept in more detail in this short video.
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