The Downside To Business Partnership

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We recently had a conversation on partnership one of our WhatsApp business groups, and we thought to share with you some of the key points discussed.

Go together – This implies partnership. However, asides the fear of setting up a business without being there, which many Nigerians believe spells failure of that business, there is also the fear of partnerships.

There is the concern that a partner could steal your ideas, clients and even your money. There’s also the worry that a partner could be bringing less than value to the table and still be demanding more.

So here’s my opinion of simple agreements that can help partnerships work. I call them the 3Rs of Partnerships. Before you start a partnership, determine these 3 Rs:

  1. Roles – who is what?

MD, Accountant, Head Marketing, etc. Titles basically. Don’t get it twisted when it is time for a big meeting or a letterhead.

  1. Responsibilities – who does what?

Title doesn’t necessarily define who does what. Some MDs are Chief Marketing Officers by their roles. Some are Administrative heads. Define who is responsible for what so everyone can be held accountable.

  1. Remuneration – who GETS what?

70/30, 60/40, net of expenses, gross after payment…

The love of money is the root of all evil. Get this out of the way before you start. Weigh the value each partner brings to the table and agree. It could even be fluid, as things change.

When done, write these down and sign, each partner keeps a copy. Notarize it if possible.

It may not be foolproof, but it surely makes partnerships work better.

Case Study – Festus N. Ugwoke, C.E.O., Smartek Nigeria

the-downside-to-business-partnership-hexavia

From my experience having been involved in a failed and successful partnership, I would call intending partners to watch closely the issue of expectations and timing. This tend to be one of the most sensitive issue leading to disagreement.

If a partner is going in with short term mindset, he/she will expect dividend or profit taking as early as within the first 6 months or one year of business while the partner or investor with long term mindset could withstand difficult moment for several years.

From my experience, having a clear definition of the magnitude of sacrifice to be made and ability to defer gratifications to stabilize the venture sometimes brings destabilizing conflicts.

In 2009, I went into a partnership that unfortunately failed. I recommended for the partners that each of the partners provide mobility for himself for the first 2years while as our venture progresses, the executives could be given a range of Saloon Cars not more than N3m then. In less than one year, for reasons I cannot explain, we reversed that guide. With my partner and other key Management staff, we expended over N35M partly borrowed on official vehicles. We were eager to live big, drive big SUVs as Senior Executives but we failed to look at our numbers. It was difficult to sustain such a lifestyle at the early stage of a venture.

So in partnership, it is critical for both parties to be willing and ready to stay off luxuries until the time is ripe.

Contributors:

Kuro John Ngoboh
Head of Faculty/Lead Consultant
Purple Training & Consulting
(An arm of Purple Plethora Concepts Ltd)

Festus N. Ugwoke,
C.E.O., Smartek Nigeria

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