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Bring In A Partner, Part III

One of the most difficult decisions a sole owner of a business can make is on whether to bring in a partner or not. Ask many sole owners if they want to and the answer is “no.” Some have had the experience of having a bad partner or a once successful partnership that went bad. Others just do not want the interference with their control of the business. But others are thinking about it whether for the isolation they feel at the top, or the need for capital or for the chance to bring in a younger person to whom they can sell or transfer the business later on. In this series we are looking at the things that support a strong, successful partnership:

Skin in the game. Some of the worst partnership outcomes arise from the fact that one partner has contributed money to get things started and the other has not. Or one is working in the business full time and the other is not. Setting up 50/50 partnerships in this condition can make matters worse. Unless the non-money-contributing partner is bringing something so valuable to the business-sold gold contacts, a specialized skill, etc.-and both agree in writing that both are contributing things of equal value-things can really go south when success comes. They can also go south prior to success if the part time partner is not pulling his or her weight. One way for the non-monetary partner to get that skin in the game is to earn bonuses that can be plowed back into the company that yields financial equity according to an agreed upon formula. Another agreement must be maintained by the partners-if either of them ever feels as though the other is not contributing, then they have to talk about it as soon as possible. Those feelings can get worse as time wears on if they are not addressed.