A business partnership is formed with the goal to bring different skills together with a common vision of achieving success for a shared business. Such partnerships are naturally prone to various risks and challenges but it also has many benefits. You may often face challenges with the leadership, decision-making, sharing of responsibilities and profits, etc. when working with a partner but at the same time, you get the benefits of professional help, assistance and suggestions in crucial decision-making, moral support, financial support and more. So, basically, a business partnership has both its benefits and risks, which we will discuss in detail in this article.
Benefits of Partnering
The potential benefits of partnership are unlimited. You not only get the financial support from your business partner but they are also there to assist you emotionally, morally, and in terms of resources. Here are some other common benefits of a business partnership.
Knowledge and Skills: Partnership is the best method of acquiring the desired knowledge and skills without having to hire paid help.
Increased Efficiency: By reducing the cost and workload, the partnership offers better success opportunities to your business.
More and Better Resources: You get access to more people with better skills, experience, contacts and technical knowledge.
Better Discussion and Decisions: Better decisions can be made when there are more than one people involved in the discussion process.
Effectiveness: Your business partner, with his unique ideas and inputs, can help increase the effectiveness and market value of your products and services.
More Business: Your partners might bring more contacts and thus more potential customers to your business. And if you are partnering with another company, you both get access to each others clients as well.
Increased Business Life: It is not easy to run a business on your own, a partner can provide the support you need to ensure a long and prosperous life for your business.
Credibility and Brand Value: Clients usually prefer to work with companies that have more than one partner as it shows business credibility and reliability.
Flexibility: Business partnerships are usually easier to form as they involve less paperwork and usually have benefits in tax as well.
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In addition to above-mentioned benefits, it is also natural for business partners to expect some individual benefits in terms of profits and personal goals. When two or more people come together to form a business partnership, they accept a common goal for the growth of the business, but they also might have some personal goals and things they desire to achieve through this partnership. Other Partners of the business should be able to respect these things and make sure that they do not conflict with the common goal of the partnership, which should always be the priority.
Risks of a Business Partnership
If you are thinking that partnership is an all-good and no-risk kind of situation, you are wrong. Each business partnership comes with its own challenges that partners need to understand and overcome in order to ensure a healthy business relationship. Following are some of the potential risks of a partnership.
Conflicts of Interest: The situation where a business decision is beneficial for the partnership but not for individual partners may result in conflict.
Shared Decision-Making: The important business decisions are supposed to be made with proper discussion and consultation with all the partners. When one or more partners are against a decision, it may cause a conflict.
Sharing of Responsibilities and Profits: When a partner believes (rightly or assumably) that the other partner is not doing his duties honestly or deserves less part in the profit, it creates a potential risk to partnership.
Risk of Dissolution: If and when one of the partners decides to leave the business, the partnership may open to the risk of dissolution.
Lack of Resources: When one or more partners are contributing less resources and/or time to the business than expected.
Negative Reputation: Wrong partnership decisions, bad service, and unfriendly end of partnerships can negatively affect your business reputation.
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The obvious solution to most of these problems is to define clear parameters about roles, responsibilities, and rights of the partners while drawing the partnership agreement at the beginning.