Are you looking for potential partners that can help you grow your start-up? Here, you’ll find out the exact steps you need to take to build partnerships in business.
No business can successfully thrive without the input of one or more persons.
One way or the other, you’ll need the assistance of others to actualize your business goals.
This is one of the reasons why business partnerships are important.
However, finding business partners and building strong relationships isn’t something to handle with levity.
This is because a business partner can make or mar your business.
So, read on to discover how you can build strategic partnerships in business that will fit your business model and help you actualize your goals.
First things first, let’s discuss the concept of business partnership.
Business Partnership Defined
A business partnership is the coming together of two or more business enterprises or organizations for mutually beneficial purposes.
For the partnership to work, both parties have to enter into a formal agreement to share ownership, risks, profits, and liabilities in the business.
The sharing ratio may differ depending on the type of partnership entered into or the nature of the business.
However, it is usually predetermined before entering into the partnership.
Furthermore, both parties involved have to combine their resources to achieve the business goals.
Again, the responsibility of each partner will depend on the partnership agreement.
Overall, both parties need to have similar interests for the partnership to work.
Types Of Partnership Agreements
In your quest for how to build partnerships in business, you need to know the different types of partnership agreements that exist.
Generally, there are four types of business partnerships.
Each is unique and has specific benefits over the other.
This is the simplest type of partnership to form, and it doesn’t require you to fulfill any state laws before entering into this partnership.
In a general partnership, two or more individuals sign a partnership agreement to manage a business together and share responsibilities, liabilities, and profits evenly.
To be clear, two people with a business idea can come together to form a partnership and open a business.
By this simple act, they’ve entered into a general partnership.
Furthermore, the decision-making power is shared equally amongst the partners.
In other words, each partner has the authority to make binding decisions on the business.
The benefits of a general partnership include;
- It involves less paperwork to get started.
- Also, it’s easy to dissolve.
- Responsibilities are shared equally, with each partner playing an active role in the business.
- Likewise, profits are shared evenly between partners.
- General partners enjoy simplified taxes.
- The death of a partner could be the end of the partnership and, in most cases, the business.
- Debts and liabilities are shared equally, even if they’re incurred by just one partner.
Limited Partnership (LP)
This is another type of partnership you can explore when building business partnerships.
As the name implies, one of the partners has limited control, entitlements, and liabilities.
In this type of partnership, there are two types of partners involved; the general partner and the limited partner.
The general partner plays a more active role while the limited partner plays a passive role.
An example of this type of partnership is an aspiring entrepreneur with a business idea but lacks the capital to finance the business idea.
Should this entrepreneur have investors willing to invest in the business, these investors will be the limited partners.
In most cases, limited partners only go into partnerships for profits.
Benefits of Limited Partnerships include;
- The business owner still has full control of his/her business.
- Also, the business owner has access to higher profits/returns in the business.
- The state recognizes this type of partnership.
- The business owner bears all the risks, debts, and liabilities alone.
Limited Liability Partnership (LLP)
This is similar to LP, but there’s a difference between both types of partnership.
In LP, there has to be one general partner who bears unlimited liability for other partners in the business.
Also, only the general partner is responsible for managing the business.
However, in LLP, all parties are actively involved in managing the business and have limited liability.
To put it simply, LLP combines the principles of a general partnership and a limited partnership.
- Each member has limited liability for debts incurred by the business.
- It’s a legalized structure that can employ staff and enter into contracts.
- Every member has control over the business.
- It’s not suitable for all business structures.
- Partners are individually liable for their errors/negligence.
Limited Liability Limited Partnership (LLLP)
This type of partnership also offers limited liability for all members, including the general partner.
However, only the general partner manages and controls the business.
- No personal liability for all members.
- It’s not applicable in all states.
Now, it should be easy to decide what type of partnership agreement you want for your business.
However, before we consider how to build business partnerships, let’s discuss why it is important.
Benefits Of Business Partnerships- Why It Is Important
Business partnerships allow you to combine human and capital resources to achieve similar goals.
Firstly, as a business owner with limited capital to run your business, your business partners can provide you with financial support.
Aside from financial resources, business partnerships also grant you access to the human resources you need to run your business.
For one, you get to share ideas and perspectives with your partner to make business decisions.
Furthermore, in a general partnership where each partner has roles and responsibilities to play, each partner can bring a team on board.
This will give you access to the different skill sets you need to keep up with business operations.
It Exposes You To A Wider Network
This is another reason why building business partnerships is important.
Partnering with other business owners/investors will also give you access to their network.
Particularly, it will allow you to connect with other people and build more meaningful relationships for your business.
Help You Grow Your Customer Base
Building business partnerships can also help you grow your customer base.
A good business partnership can give you the right exposure to attract new customers to your business.
For instance, imagine a business partner introducing your business to his/her audience either through affiliate marketing or influential marketing.
This could potentially bring in more customers to your business.
Instead of being a lone wolf entrepreneur and having to do everything all by yourself, you could enter into a business partnership.
It would make things a lot easier for you and lighten your burdens.
Overall, depending on the type of partnership, you and your partners will share the responsibilities, risks, debts, and profits.
Finally, you can save a lot on taxes in partnerships because the business profit isn’t taxed.
So, you only get to pay tax from your individual income.
As good as all these sounds, you also need to be aware of certain downsides to business partnerships.
Drawbacks Of Having Partners In Business
Risk Of Disagreement, Conflict Of Interest, And Dispute
Different individuals with varying traits and perspectives come together to form a partnership.
As such, there’s bound to be disagreement on opinions which may sometimes escalate into a dispute between partners.
The good thing about partnerships is that partners share the workload and responsibilities.
However, this is also a downside because when one party incurs liabilities due to negligence, everyone shares the liabilities as well.
So, there’s the risk of losing your personal assets to settle debts incurred by another partner.
Lack Of Autonomy
As a solopreneur, you have complete control and autonomy over your business.
You make all the decisions and keep the profits to yourself.
However, in partnerships, you’ll need to share control with other active partners in the business.
Business Can Be Negatively Affected By The Withdrawal, Death, Or Incapacitation Of One Partner
Another sad thing about the partnership is that the incapacitation or withdrawal of one party could end the business relationship.
This is true, especially in a two-person partnership.
In some circumstances, it could lead to the business winding up.
Now, you’re fully aware of what business partnership entails and the different types.
Let’s consider how to build one for your business.
6 Practical Steps To Building Partnerships In Business
1. Identify What Type Of Partnership Will Suit Your Business Based On The Type Of Products/Services Your Offer
Earlier, we discussed the different types of partnership agreements you can enter into and their benefits.
Aside from that, you also need to think of what type of business partnership will suit your business the most.
So, you need to think of your business model– the products and services you offer.
For instance, an affiliate partnership program may work fine for you as a product/service-based business.
Also, you could run a referral partnership program where partners refer your business to others.
You could also consider a joint speaking engagement partnership where your partner allows you to promote your products/services to his/her audience.
Overall, there are different types of partnerships you could explore.
Identify one or more that will work best for your business before you start building business partnerships.
2. Create An Ideal Partner Avatar To Help You Find Your Ideal Partner(s)
A business partnership is more like a romantic relationship or marriage.
Both parties need to be in sync for it to work.
This is why you need to have an idea of who your ideal partner will be before you start looking for business partners.
One thing that could help is to create a business partner profile or avatar.
You need to create a profile that captures the personality traits, mindset, character, and skills your ideal business partner should have.
This may seem a little bit overboard, but it is necessary to help you get someone whose interests align with yours.
It will also help streamline your research process.
3. Research To Find Potential Partners For Your Business
With the profile you’ve created, it’s time to find a business partner and build business partnerships.
The profile you’ve created should guide you on who to look out for.
First, you may want to start your search within your network of friends and associates.
Also, you may want to do a broader search online to find your ideal partner.
You can start looking at online forums, professional platforms, and social media.
Overall, look at your potential partner’s profile to gain insight into their personality.
4. Connect And Reach Out To Potential Partners
Now you’ve found your ideal partner(s).
It’s time to take active steps to start building the business partnership.
Firstly, you would want to connect with your potential business partner if the person isn’t already in your network.
This could be on their various social media platforms.
Connecting with them will also allow you to observe them while you prepare your pitch.
Your pitch has to be emotionally compelling and intellectually appealing.
It has to specifically highlight the benefits of partnering with you.
Here are some tips to help you create a winning pitch.
- First, study your potential partner to know what makes them tick.
You can do this by researching their background, personality, company culture, vision, and more.
- Clearly state the problem your business solves.
- State the specific solutions you’re offering.
- Also, specify the benefits ( for you, your customers, and the partners).
- Share your vision and values.
- More importantly, share your unique selling point/competitive edge.
- Lastly, talk about your unique mechanism ( how you intend to deliver the value you’re promising both to the customers and the partners).
5. Create A Partnership Agreement/Contract
Assuming your partner likes your pitch and agrees to work with you, you’ll need to create a partnership contract.
You could decide to go for a general partnership, LP, or other types of partnership.
It would be best to get a legal professional to draft the terms of the partnership agreement to avoid issues in the future.
6. Agree And Get To Work
When everything is settled, the parties involved need to sign the agreement.
Afterward, you can start working together to achieve your business goals.
So, that’s how you find partners and build business partnerships.
However, that’s only part of the process.
Chances are, you’ll be working with your new partners for a fairly long time.
Just like in every relationship, there may be disagreements.
Even more, business partnerships are prone to disputes and conflicts.
However, there are certain things you can do to minimize conflict and ensure a healthy business relationship.
Strategies For Long-Lasting Business Partnership- How To Make It Work
Set Clear Expectations From The Get-Go
Allowing each partner to do as they please is a recipe for disaster in a business partnership.
More so, it would also lead to disorganization and inefficiency.
Hence, when forming a business partnership, clearly set your expectations.
Each partner should be informed of their roles and responsibilities in the business from the onset.
This will prevent disagreements and abuse of control.
Let Honesty And Transparency Lead
For a partnership to work, these two elements ought to be present.
First, both parties need to be transparent with each other in their dealings.
There should be no double-dealings or double standards in the partnership.
This will foster trust, which is the foundation for all long-lasting relationships.
Furthermore, partners need to be respectfully honest about their feelings, opinions, and dissatisfaction with each other or certain business decisions.
This will prevent built-up anger and resentment that could threaten the partnership.
Think of the partnership as a union of business owners coming together to achieve a common goal instead of a business transaction with the aim of sharing the profits in the end.
Having this mindset will promote efficiency and productivity in the partnership.
Specifically, each partner will consider themselves a part of the greater goal the business is aiming to achieve and work actively to fulfill their assigned role efficiently.
Prioritize Constant And Effective Communication
Communication is also key to a successful relationship and business partnership.
The business partners should be willing to discuss as often as possible and arrive at a mutually agreed decision for the business.
More so, information should be passed across as clearly as possible to avoid misunderstandings that could terminate the partnership.
Likewise, each partner should be willing to share honest feedback on business practices and decisions.
Be Willing To Compromise Occasionally
Different individuals with varying opinions come together to form a partnership.
Sometimes these opinions will be aligned; other times, they won’t.
Rather than going back and forth, one party should be willing to compromise and settle on a common ground.
Of course, you shouldn’t compromise on something that could affect the business negatively or go against your values/standards.
Put In The Effort To Make It Work
For a successful business partnership, you may also need to go the extra mile to make it work.
You may need to do little things like organizing a business launch or dinner to create a more personal connection with your business partner.
Also, you’ll need to treat each other with respect, respect boundaries, and support each other.
Conclusion On How To Build Business Relationships
Overall, building a successful business is no easy feat.
However, having a good partner with whom you can share the risks, responsibilities, and challenges can make the journey a lot easier.
Using the tips outlined above, you can find your ideal partner and build a long-lasting business partnership.
However, regardless of how you carefully pick a business partner, you may realize that your partner isn’t right for you when you start working together.
Don’t be afraid to get rid of the bad business partner when that happens because finding another business partner is much easier than building a business from scratch again.
All the best!.