I was reminded last night, as I was doing a guest speaking for WEV, on marketing, how important partner agreements are.
You are so excited you have the perfect partner who really understands you and shares your goals and values. Even better they are your spouse, sibling, best friend, parent or child. Everything starts off great and may even last for a long time until…. Maybe it’s money, responsibilities, new products, hiring or some other factor that will cause friction.
You are able to get through it this time but there are now some cracks in the solid foundation you had. If you had a partner agreement this never would have happened.
What is a partner agreement and do you need a lawyer? Sorry to my legal colleagues but you don’t need a lawyer to start this. What you do need is time to sit down and talk with an unbiased consultant who can ask the right questions and know the detail to which this has to go. Step one is an open discussion about the goals for the business, is it long term and a legacy or do you eventually hope to sell it? How much and how fast do you want it to grow
Next comes the money How much do you each invest, is it actual dollars or in kind and what is the in-kind worth? Will you take a salary or other form of compensation? Who is in charge of paying bills? When do you need 2 signatures on checks? How much is in petty cash? Who does the books?
Now let’s talk about who is responsible for what tasks. With one client we got so detailed we included who waters the plants. What are the strengths of each partner and who is in charge of what part of the business and when do both need to agree and when is it ok for one partner to make the decision?
But wait there is more. What happens if one partner wants to leave or worse yet dies? Is there key person insurance? Can spouses or children inherit the business? Is the leaving partner bought out and for how much?
Does your head hurt from all this thinking?? This is a process that can take a few hours over the course of a few weeks. It can also be changed as the business evolves. Fees for this service can range anywhere from $1000 on up to $30,000 or more, depending on the number of partners, and the complexity. Like your insurance policies, this keeps you safe. One of my clients went through a divorce but because of the partner agreement the ex-spouse is being bought out over time and the business is fine. Another client lost a key employee to serious illness but because of key person insurance, the business kept going and they had the time to replace the individual.
Then there is a colleague who has a startup that has been in business less than a year; one of the partners wants out and they don’t know how they will buy him out or what their next steps are.
Bottom line is you pay now for the partner agreement or really pay later when something happens. There is an old line that there is a place in heaven for the partners that stay together for the life of the business; it is still vacant. Yes, there are exceptions and somebody wins the lottery. What are the odds?
If you would like more information or are ready to do a partner agreement, contact me.