LNB #035: The Care and Feeding of Partnerships

We spend more time picking an Ob/Gyn that will birth our babies than we do building the business partnerships that provide the income we need to take care of said babes. We know that one out of nine new businesses experience a five year failure rate and that the survivors may not be fairing all that well.

For partnerships, more attention is spent on the legal and financial positioning of the
partnership - whether it was a limited partnership. S or C Corporation, whether it was taxed like a partnership or a corporation and how the partners would get money from the partnership. Little information exists out there on how to have an effective partnership -- one where you don't continually fantasize about pitching one or all partners under the bus.

Once the structure is in place, where do we go to work?

Smaller firms tend to stay more tactical and, unfortunately, have a harder time getting and staying strategic. Business planning is a single event, usually tied to getting start-up funding needed to open the doors, but not an informative, educational process designed to help you understand the needs of the business and the needs and best thinking of the partners.

Business partnerships tend to work best when the partners have done the work of understanding each other. Knowing these things about each partner is crucial to determining how to best allocate them as resources:

• What are you good at?
• What can you do competently, but need support for (like, I can do the financials well, but it really takes it out of me)?
• What do you do badly?

Now, everything in a partnership isn't always a box of kittens (warm and fluffy). Conflict happens. The question is: what do we do when we're not on the same page? Conflict, by its nature, is positional. People square off on things that really don't matter most but, instead, on old wounds or superficialities. By asking partners what they're committed to for the business, the partnership or themselves, you can begin to move towards what matters most.

Consider this book: The Partnership Charter: How to Start Out Right with Your New Business Partnership (Or Fix the One You're in), by David Gage is a good resource for putting together (or repairing) business partnerships. For legal and tax advice, of course, see a legal or tax expert.

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