June 29, 2000
Make business pre-nuptial agreement before entering partnership
Dr. Lynda Falkenstein
We've asked a lot of people what they think of partnerships and would appreciate your thoughts on the subject.
A: Partnerships have few redeeming qualities -- at least not enough to make up for the nightmare overload of problems you are almost assured of finding.
You didn't say why you want to enter into partnership and that's the first thing you need to clarify. Do you really need to have a partner to achieve your business goals?
People frequently take a partner for the wrong reasons, such as wanting someone to work with or having camaraderie and support. These things are available through other arrangements such as joint ventures where you don't own each other's problems, which frequently happens in partnerships.
Business partnerships often are compared to marriage. And to a large extent, the comparison is accurate. Both institutions have dismal track records. And when their breakups occur, lawyers are usually the only winners.
The big difference, however, is that in a marriage there is presumption of similar values, liking one another, and commitment going beyond dollars in the door. Not so in most partnerships.
If, after careful thought, you decide to enter into a partnership, the following points will be helpful:
Ensure you each have a good lawyer who understands what you both want out of the partnership. You get your lawyer and your partner should get his/hers.
Figure out in advance who gets what should the relationships dissolve. Chance are 99% it will fall part, so your business pre-nuptial is not an option, especially not if you want to remain friends, which, in all likelihood isn't going to happen.
Be sure your pre-nuptial has a clear non-compete agreement included. Right now you may say you don't need it, that you are both so honest and caring about each other it might even be insulting. I guarantee you, nothing protects your relationship more than carefully spelling out rules like this at the beginning,.
Don't wait to figure out how to solve distribution of goods issues until after you've got the goods.
Clarify in advance how conflict(s) will be resolved. List every conceivable issue that might arise and the processes you will go through for resolving those issues.
Detail your individual roles in the partnership. Write job descriptions that leave no doubt who is bringing what to the relationship.
Decide in advance what you are going to do with the money you make. If you don't know the answer right now, specify how you will decide.
Most of all, create a system for decision-making that is flexible and can grow and your needs become more clear.
When all the above is done, don't forget a good supply of aspirin, keep your lawyer's phone number close by, and be sure you know where to find your friendly shrink.
You'll be looking the latter up to find out why you didn't listen to the former before choosing a business partnership, which as you've already figured out ranks in my mind as nothing less than an "unnatural act."
Q: We are a 3-year old family owned business with a product we believe is best on the market. We have taken business courses and read many marketing books but, so far our product doesn't seem to be going out the door in carloads as we had hoped. We can hang on for a while but really need to generate sales before we run out of cash completely. Any ideas?
A: Based on the limited information you provided, I can't tell WHO your customers are, nor can I tell what you have been doing to aggressively get to that audience. It's sad, but all too true, that some of the finest products in the world disappear from the marketplace simply because they were well-kept secrets from the intended buyer.
As you review your marketing strategy, keep the following "stages of innovation" in mind. Whether your widget is a tangible product or a serve to a worldwide constituency, or new idea within a large organization, it must pass through each of the following stages to be successful:
Awareness. Target public must be aware our niche exists -- simple awareness -- no deep knowledge or understanding or its nuances. This is the "billboard" in action.
- Trial. Targeted audience has opportunity to try out product or idea. Friendly demonstrator at supermarket giving tastes of new soup. The "experience" with the niche).
- Evaluation. Targeted audience has chance to say "yes" or "no" to the product; it either likes or dislikes it. While tasting the soup, you say to yourself "yes' or "no."
- Adoption. Targeted audience makes commitment to buy/use niche product or service. You pay your money at cashier.
- Adaptation. Target audience modifies or adapts niche product to its own situation. Product is "user-friendly." You adapt recipe to suit your needs.
- Maintenance. Employee education and staff-development programs. You nourish the niche.