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Partnerships

5 Things to Do Before Saying ‘I Do’ to a Business Partner

When forming a business partnership – just like a marriage – there are certain key steps to take at the beginning that will help in the transition if your professional relationship should end.

Deborah Mitchell

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As an entrepreneur, you may at some point consider getting a business partner or co-founder. Maybe you miss working with a larger team that complements your skills, or perhaps you are trying to broaden your market or expand your clientele.

Whatever your motive, you should know that business partnerships always start with excitement, but have the potential to end tumultuously.

1. Perform due diligence

Yes, everyone is fun over cocktails, but when the time comes to sign contracts and do business, you’d better be sober and confident you’re shaking the right hand. Asking for referrals about a potential partner goes beyond contacting common friends and asking their opinions.

Call former partners and business associates, inquire with clients, read comments on their social media pages and look them up on Google. (Keep reading way past page one of the search results.)

By the time you’re done, you should be able to name anyone who dislikes them – from their first high-school enemy to their latest unhappy client. Only then will you be able to either take a calculated risk or a major step back.

Related: Are partnership agreements for spouses a requirement?

2. Make sure you lawyer up

If the legal fees in the beginning of a business relationship don’t make you wince, then you’re doing something wrong. When you partner with other people, every aspect of the business relationship should be put down in writing –  including the goals for the company, duties and responsibilities of the partners and an exit strategy.

Every sentence of a contract – no matter how innocuous – should be looked at by a lawyer. Since tax laws can be tricky, have your accounts receivable/payable arrangements scrutinised by an accountant.

3. Ensure you have exit strategy

Ending your business partnership is the last thing you want to think about when you are beginning one. It is similar to thinking about divorce on your wedding day, but you should have a plan.

The business exit strategy should include several legal points including the division of the business assets and how the partner’s portion of the business will be handled in case of death.

Related: 5 Tips to Treat Your Strategic Alliance Like a Great Marriage

4. Protect yourself

One of the smartest moves you can make is to protect your personal assets in case of a lawsuit. Whether you choose to incorporate or become an LLC, the top benefit will be shielding your savings, home, car and even your favourite pair of Louboutins from any liabilities associated with the business.

5. Protect your brand

Joining forces with a partner takes a lot of energy, and chances are that somewhere down the line you will lose your focus. Working for a common goal within a new team is really exciting but merging forces does not necessarily mean merging identities.

Don’t lose sight of who you are. If part of the original business plan is to maintain your brand, make sure it doesn’t suffer while you’re giving all your time and energy to your new endeavour.

When you meet a potential partner, your personalities may click and your goals may be identical but to have a successful relationship, clarity is key. The more precautions you take in the beginning, the happier and more productive you will be later on. And the day you see that the team you’ve tried to build has become nothing more that a group of people looking in different directions, then it’s time to part ways and move on.

Related: What should I consider when entering into a partnership?

This article was originally posted here on Entrepreneur.com.

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Partnerships

What To Do When Partnerships Go Bad… Very Bad

What do you when the honeymoon is over and you discover that you’ve gone into business with a snake?

Alan Knott-Craig

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Q: My business partner is trying to screw me out of my business. I approached him a month ago to say I wanted to chase a different path, and sell my minority stake. It’s worth R1 million, but the shareholder agreement says that if I resign he has a call option to buy the shares for nil. His response to my request to exit was that he would exercise his option and pay me nil. What should I do? Should I stay? Should I walk away from the shares with no money? Should I fight for what he owes me? I’m not happy in the company, but I can’t bring myself to write-off the value of my shareholding. — Anonymous

Know who you’re partnering with

I have bad news for you. You’ve lost your money. Kaput. Gone. Minority shareholdings in unlisted companies are worthless, unless you’re in bed with honourable people.

If your majority shareholder is a crook, you’re screwed. You can’t sell to someone else, and a crook won’t do a fair deal to buy you out. If you stay, you’re delaying the inevitable.

You will be screwed. Rather leave now than later. Rather be happy than hang onto the promise of a pot of gold that never materialises.

Focus on creating new wealth

You’re an entrepreneur, so you have the instinct to fight. To never give up. To persevere. This is one of those times where your instinct is wrong. If you fight, you’ll end up in the mud with a pig. Pigs love the mud. He’ll enjoy it, you won’t. Worst of all, you’ll invest energy in trying to regain what you had rather than creating new wealth.

It’s a bit like trying to win back the girlfriend who cheated on you, rather than going out and finding a new girl. Rather find a new girl.

Don’t seek revenge or short term satisfaction

Once you’ve accepted that staying is not an option, and nor is fighting, the next reaction is revenge. “Damn it, I’m going to punch him in the head!” Short-term satisfaction. Long-term, it makes you look bad. And maybe you go to jail.

The best outcome you can hope for is that your story gets traction in your industry/circle of friends/town before his story. Believe me, he has already told everyone he knows that you’re unethical and screwed him. That’s what crooks do.

Related: 7 Ways To Quickly Spot The Wrong Partner (And 3 Tips To Get It Right)

Good luck fighting the war of whispers. Rather don’t. It’s bad energy. Who cares what people think. The people who care don’t matter, the people who matter don’t care.

Let your reputation define your achievements

In the end your reputation will be defined by your life’s achievements, not by the words of a crook. If you are a nothing, no one will care about his words. If you make it big, no one will care about his words.

If you want revenge, be successful. Success is the ultimate revenge. The rule for partners is this: Make it easy for them to screw you early. That way you don’t waste a whole lot of time with the wrong partners.

Whatever happens, remember this: Life is an adventure. It’s your choice how you describe your story. Is it a sad drama (‘Oh woe is me’), or is it a funny story with some speed-bumps and a happy ending? Frame your story as the latter. You hit a speed-bump, not fun. But not the end. The truth is that business is rough and tumble. So toughen up.

Don’t lose faith in your abilities

This is where it’s useful to have a loving spouse. With him or her at your back you can withstand anything. Whatever happens, don’t lose your self-belief. You have the magic.

You’ve had a bad experience in business. So what? You trusted someone. That’s not such a bad thing. You just got a bit unlucky that he was a crook. Next time lucky. But there is no next time if you lose your self-belief.

Winston Churchill lost all his savings to financial con-men in 1929. He said he was faced with two choices: Fight to get back what he lost, or make more money. He decided to make more money. Keep moving forward. Don’t look backwards.

PS: The best way to deal with a crook is to play dead. Cut him loose. Don’t engage at all. Just play dead.

Related: 5 Things to Do Before Saying ‘I Do’ to a Business Partner

Listen to this

Alan’s audible book Be a Hero: Make Life an Adventure is now available on amazon.com and Audible.com

Read by Alan himself, Be a Hero is a collection of stories on how to make your life an adventure but also changing your mind-set and tackling adversity.

Ask Alan
Do you have a burning start-up question? Email: alan@herotel.com


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Make Absa Your First Business Partner

Thinking of starting your own business? We’ll help you think further with a start-up plan, funding, payroll guidance and Enterprise and Supplier Development solutions for your business.

Absa

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Thinking of starting your own business? We’ll help you think further with a start-up plan, funding, payroll guidance and Enterprise and Supplier Development solutions for your business.

Firstly, consider opening an Absa Business Banking Account by choosing from our range of tailored transactional account options online. You’ll be able to make and receive payments through multiple channels that make your banking as hassle-free as possible with our cash handling solutions and merchant services.

Plus, if you are a new business owner you can open any of the business accounts we offer online, register your new company with the Companies and Intellectual Property Commission (CIPC) and get a South African Revenue Service (SARS) tax number in one go.

Related: Business Partners Limited Explain What It Takes To Have The X (Fundable) Factor

A business plan is also essential for every entrepreneur, as it forms the roadmap of how your business will achieve its goals and should include its operational, financial and marketing strategies. Our team of experts will always be available to give you all the assistance you need with your business plan.

Once you’ve drafted a comprehensive business plan and you are ready to venture into the world of business, your next step is to register your business as mentioned. SwiftReg assists with checking existing company names and registering your company’s name, B-BBEE certificates, clearance certificates and more.

We also offer advice to franchisees, whether you’re thinking about buying a franchise or want to turn your existing business into a franchise network. And, if it’s funding you need, we’ll work with you to find the right solution. Our business funding solutions cater for start-ups and existing small, medium and micro enterprises (SMEs) with working capital or expansion finance needs.

Related: 10 Questions to Ask Before Committing to a Business Partner

Lastly, when you need help moving your fully-formed business plan in the right direction, you can visit any of our Enterprise Development Centres across South Africa to build and grow it from inception until maturity through unlocking access to financing, markets and business development support services.

For more information or to open an Absa Business Banking Account online, visit our website.

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Partnerships

7 Ways To Quickly Spot The Wrong Partner (And 3 Tips To Get It Right)

Finding the right partners is the path to happiness, good memories and success. On the other hand, finding the wrong partners is the path to conflict, angst and failure.

Alan Knott-Craig

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Business without partners is hard. And it’s no fun. No one to share memories with. No one to celebrate with. No one to commiserate with.

No one to hand over the reins to when you have a personal crisis. So how do you find the right partner?

Related: Getting Partnerships Right: Lucid Holdings

First, make sure you avoid the wrong partner:

1. Birds of a feather flock together

The best crooks are natural salesmen. They talk a good game. Penetrating the façade is impossible, so rather look at who she hangs out with. Are they your kind of people? If not, take a pass. Birds of a feather flock together, always.

2. Live a simple life

A flashy lifestyle attracts bugs. Money attracts leeches. Living the high life attracts the wrong kinds of people. Don’t stick out for having a fancy car. Keep your life simple and you’ll find that bad people will ignore you.

3. Ask your spouse

No one knows you like your spouse. Sometimes she can’t verbalise why someone is a bad match for you, but her gut is saying, “Stay clear.” Listen to her gut.

4. Make yourself vulnerable

If you want to know whether she is going to screw you, make yourself vulnerable. Build in an ‘engagement’ period during which you can break-off the relationship easily, and then make it easy for her to screw you.

5. Watch how she treats other people

Watch how she interacts with people when she doesn’t think you’re watching. If she treats the cleaner differently to how she treats you, stay clear.

6. Play golf

Competitive sport brings out the best and worst in people.

  • Does he lose his temper if the ball bounces badly? He can’t handle adversity.
  • Does he move his ball in the rough? He’s a cheat.
  • Does he throw in the towel before the hole is finished? He lacks perseverance.
  • Does he not care about losing? He doesn’t care about winning.

7. Turn up the temperature

Don’t be afraid to crank up the pressure. The only fool-proof method of finding out who people really are is to turn up the heat to the point where they crack.

Related: Getting the Most from Marketing Partnerships

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The right stuff

Okay, so you can filter out the wrong people. Now to find the right people.

Tinder may work for casual sex, but doesn’t work for long-term business partners. In general, the best way to find the right people is to make it easy for them to find you.

How do they find you?

1. Know thyself

If you don’t know who you are, you can’t be who you are. If you can’t be who you are, you can’t be authentic. If you’re not authentic, the right people won’t be attracted to you.

Find mentors, meditate, travel, read books, take risks, reflect on your experiences, do everything you can to maximise your self-awareness.

And then be yourself.

2. Tell everyone

She won’t knock on your door unless she knows you’re looking. Tell your family and friends that you’re looking for a partner. They will naturally filter people based on your personality.

3. Hold up a flag

She can’t knock on your door if she can’t find your door. Make it easy for people to learn about you and your mission, and to contact you. The Internet is the simplest tool for raising a flag. Start a blog, start opening up, start putting yourself out there.

You might think you have nothing of interest to say, but maybe someone else has been waiting their whole life to read what you have to say. You’ll never know unless you try.

Related: The Power of Partnerships

Formalising the partnership

Let’s assume you’ve found the business partner of your dreams. Now you need to put your partnership in writing, usually in the form of a shareholder agreement.

A shareholder agreement is not for marriage, it’s for divorce. You’ll never look at that document again until the day you have to break-up, especially if it’s an acrimonious break-up.

Pay attention to the provisions for exit and dispute resolution, the rest is gumph. Partnership is like the mafia. Hard getting into, much harder getting out.


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