Commercial partnership in small projects often begins with great enthusiasm and high aspirations, but with little planning and the absence of defining the basic conditions and rules, the partnership hardly passes a period of time, but many problems loom on the horizon that accelerate the dissolution of this partnership.
Entering into a commercial partnership is done through a “partnership deed”, which is a contract or agreement between the partners, and is related to a production, service or commercial activity on a fixed basis and joint ownership. The instrument contains the amount of capital each partner must provide (initial cash), how the profits or losses incurred will be shared, the number of votes each partner receives (usually based on each partner’s share of the capital), and the conditions for entering partners new or leave it. There are other people called “limited partners”, whose main objective is to invest in the partnership, and they are not directly involved in managing the company’s business, and their responsibility falls, only, within the limits of their investments.
Business Partnership
We will initially discuss the concept of partnership, its forms and types of partners, then we will review the advantages and disadvantages of a business partner, passing through the good and bad reasons for entering into a partnership, and arriving at the foundations of a successful partnership and some tips to avoid falling into widespread business partnership problems:
1. Definition of Partnership
The concept of partnership according to the Saudi Companies Law is “a contract whereby two or more persons are obligated to each of them contribute to a profit-oriented project by providing a share of money or work, to share the profit or loss that may arise from the project.” The Egyptian Civil Code states that “a company is a contract whereby two or more persons are obligated to each of them contribute to a financial project, to provide a share of money or work to share the profit or loss that may arise from this project.”
1. Types of business partnership
Partnerships are of four types:
- A partner with money only, and this is not called a partner, but rather a financier or investor
- A partner by effort only, and this is not called a partner, but rather an employee or an employee
- A partner with knowledge only, and this is not called a partner but rather a consultant
- A partner in relationships only, and this is not called a partner, but rather a mediator
The partner must own at least 3 of these four, and you must also own at least 3 of these four, and one of you must be more knowledgeable in one or more of these areas than the second partner, provided that the other partner completes the deficiency that you have one
For example, Muhammad has (knowledge of programming and can practice it, long experience in developing applications, and relationships he built over the years that can attract potential customers)
The right partner for Mohammed would be Khaled (has money to finance, good relations can also bring new clients, knowledge of management and can be practiced)
Here can be a successful partnership between Muhammad and Khalid
But in the event that Khaled (relationships only) and Muhammad (a talent for programming only), this means that there is a defect and deficiency and the two partners need someone to complete them, and in the end there will be a problem in this partnership, and this must be documented in the contract, so that no Mohamed believes that Khaled will do the financing and also so that Khaled does not think that Mohamed will run the company because he will only do the programming.
As we previously agreed, the financier with money only is considered an investor, and he is the highest in obtaining a share of the company’s shares without the remaining three partnerships (effort, knowledge, relationships) except in one case only, if one of these four partnerships is very important and pivotally detailed in The formation of the company and it cannot be replaced or rented with money
For example, a person who has knowledge, which is a registered invention and cannot be imitated, or a person who has certain relationships necessary in order to manage the work and without these relationships the work cannot be completed, or a person who can perform a specific effort that cannot be found
2. The three types of partners
There are many partners in business, and these are three main types of partners: an effective partner who supports money and is active in operations and supervision of the workflow, while there is a silent partner who provides financial support only and stays away from practical effectiveness, while the third type of partners can be called Business partner, whose work is limited to the actual progress of the work, but without contributing financial support.
Of course, business partnerships have advantages and disadvantages as well. Working with a partner may or may not benefit you and your business. Before deciding whether to participate in your project or own and operate your own business:
3. Advantages of business partnership
@startworknow
A business partner that may help in a successful startup. It may allow you to share the workload and combine different skills. Also, the partner can enrich your business by having a reliable person with whom you share the effort and responsibility. Here are the main advantages of a business partnership:
1. Combined Workforce: When you work with a business partner, you can do double the work. A lot of work has to be done to build a business. You do marketing research, networking, research and project development, negotiate sales, and meet with potential lenders or investors. All this can overwhelm the business owner and drain his time. In the early stages of a new venture, you may not have the resources to hire staff to help you.
2. Diversity and multiplicity of skills: The business partner may bring in a completely new skill that helps in accomplishing the work with distinction. A business partner might have a background in engineering and research, while you excel in sales and communication. Various skills can be utilized to increase business success. Additionally, working with a business partner allows you to divide tasks according to each individual’s strengths, conserving time and eliminating duplication of efforts.
3. Different perspectives: Business owners need an outside perspective that reinforces their ideas. You may think that you have the best idea or solution to a problem, and easily invest capital in your business plans. A successful entrepreneur has confidence in their ideas, but may need someone else to set the record straight. Decision-making becomes easier and more realistic when two or more people objectively evaluate ideas, share interest and reactions, and incompletely complement these ideas.
4. Someone who motivates and questions: Some people may lose motivation when they start a business. They may have a hard time maintaining the necessary discipline and maintaining their enthusiasm. Partners motivate each other, and each holds the other accountable for any mistake and works together to fix it.
5. Someone to evaluate ideas: Business partners talk to each other about their ideas. Many entrepreneurs find it difficult to maintain objectivity when starting a new business idea. A business partner that helps you to realistically and objectively evaluate new ideas and business plans, fix defects in them, and how to face potential challenges. Your business partner can also build on your ideas, and provide more input to improve your plan, so you have a better chance of success.
6. Expanding the network of relationships: The network of relationships is an essential aspect of business. Every time you meet someone, you have a chance to meet more people through that person’s network. You need many connections to succeed in business. Having a partner gives you the opportunity to expand the list of contacts, and multiply the potential numbers of customers, investors and suppliers.
4. Business Partnership Problems
@bukhlaw
Although a business partnership can offer you many advantages, choosing to work with a partner also has some downsides. Small business partnerships are usually bad when one chooses the wrong partner, or chooses a partner for the wrong reasons. These are the main problems of business partnership:
1. Conflicting work ethic
Many who choose to partner find themselves working with partners who do not share their passion and enthusiasm for the business. Partners who are unable to meet deadlines, follow through on clients, or by not following through on their commitments, can bankrupt an existing business or a new business. Unscrupulous business partners can also contribute to the downfall of the business. Even if you think you already know your partner, you may not realize his true meaning until after you and your legitimate reputation have been damaged, your money stolen, or you are in trouble.
2. Lack of experience: Some business partners do not have the necessary experience or skills to perform their task successfully. When working with a business partner, you need to rely on your partner to deliver results. Working with a business partner who can’t do well, leads to many disasters down the road, including poor product design, angry customers, or potential lawsuits.
3. Disagreement over orientation: Poor selection of a business partner causes major problems for any company. Sometimes, even if the partner is motivated, talented, and brilliant, he also causes problems. Business partners may differ on the long-term goals of the company. They may spend weeks or months wrangling over major decisions. Disagreements between partners may consume resources, cause stress to other employees or lead to inconsistent business practices.
4. Profit sharing: When you have a business partner, the profits will be divided. Entrepreneurs happily distribute dividends with partners when they bring added value to the company. If your partner does not increase the business enough to justify your participation, they should not receive a share of the profits. If you made the same amount of money with a partner as without, you’ve chosen the wrong person to run your business with.
5. Complicated relationships: When a businessman engages someone close to him, he is endangering and damaging his family relationship. Business partners often differ in their views on various aspects of running a facility. Sometimes, these disagreements can lead to misunderstandings or serious disputes. Because of this, a bad partnership can destroy your relationship with a friend, spouse, or family member.
6. Responsibility for any wrong actions of the partner: You are a partner in responsibility for everything that happens in your business. If a partner violates any laws, you may end up in court as well. This can result in a fine for violating government regulations, a lawsuit in the event of civil tort or if found liable for damages, you could face imprisonment in the event your partner commits a criminal act.
When you have a business partner, you have to go the extra mile to make sure you know everything your partner is doing. Even if you and your partner trust each other, you should monitor your partner’s work, to avoid neglect, abuse, or abuse. You must ensure that you both understand the applicable laws and establish a clear business ethics policy within the facility and adhere to it.
7. Your reputation is on the line: Even if a business partner doesn’t break the law, his or her actions may backfire and haunt you. A partner may do something dishonest which leads to widespread mistrust of your company. This may result in permanent damage to your reputation. People are equal between you, your partner and your project, which negatively affects the reputation of your business with any improper work from your partner.
The good and bad reasons to enter into a partnership
After considering the pros and cons of a business partnership, make sure you have the right reasons and motives for choosing to work with a partner. Many people look for partners for many reasons, the reasons for choosing to work with a business partner must be analyzed to ensure the success of your project.
1. Reasons for good business partnership
1. You lack skill and experience in some key areas (eg, marketing, communication, financial, or technical operations management). You need a business partner with expertise and skill in these key areas, to help enrich your business.
2. You work in a complex field that requires more work for more than one person to handle. Find a business partner who can fill in the gaps, but take your place in front of employees or clients when needed.
3. You know a talented entrepreneur who can add value to your business. Share the business with someone who has proven a record of success, if you know him you can take full advantage of him and his talents.
4. You are a team player and do well as part of a team. Many people thrive in a team work environment. If this description applies to an excellent candidate to become a team member, then you have good reason to enter into a partnership.
2. Reasons for bad business partnership
1. You want a “yes” who agrees with all your decisions without discussing them. Instead of working with a real partner, you want someone to tell you that they love your ideas and that they are true all the time. This narrows your thinking, and won’t give you the right feedback you need to succeed in your business.
2. You may want someone to take the direction of the work for you. You are putting your business in the hands of your partner, rather than taking a major leadership role. If you do not invest enough time in your work and follow it with interest, you may become at risk of what your partner does, or become a victim of fraud.
3. Like to go into business with a friend. Friendship should not play a role in choosing a business partner. Instead, look for a business partner who can help you enrich your business by using his or her individual talents and skills as an add on.
4. You want someone just like yourself standing by your side. You will not have diversity if you are working with someone who thinks exactly the same way as you. You do not need to have an antagonistic relationship with your business partner, but your partner should argue with you if necessary from time to time.
You should determine what you really need from a business partner before you start looking for one. Once you have completed this first basic step, you can begin the process of selecting a business partner.
The foundations of a successful partnership
@assets.entrepreneur
Before you decide to participate with someone, make sure that working with a partner will benefit you and your project and add to it and not contribute to its failure.
First, ask yourself: Do I really need a business partner to build a successful company? We should seek partnership when having a partner is critical to the success of the organization – when the potential partner has the financial resources, business connections or vital skills that you may lack. It may be better to hire someone else as an employee or specialist in what you lack.
If you have not worked with this partner before, test the partnership by collaborating on a small project together so that you both know each other’s skills and ability to collaborate together. This is also a way to learn more about each other’s personality and core values.
Partners’ professional skills should complement but not overlap. For example, you may have the ability to see details while the other partner has the gift of seeing the bigger picture. You may be an expert in marketing and sales, while the other partner prefers to stay in the background dealing with financial matters.
It is preferable, after conducting negotiations and setting goals, expectations and moral foundations, that each partner sits with himself and studies the issue from all aspects before the final agreement.
Be especially careful when partnering with close friends or family members: Like many marriages, business partnerships can end in a bitter separation. You should consider whether you are willing to risk damaging your special relationship with them if the partnership falls apart.
Make the partnership with close friends or family as with strangers: thoughtful planning and preparing for each aspect of the agreement in advance so that there is an answer about how difficult situations will be handled if they are to occur. Attention to detail in this case is an urgent necessity so as not to affect family relationships or friendships.
Develop a clear and precise partnership agreement: Once the decision has been made to start a business with the partner, a partnership agreement must be created with the help of a lawyer and accountant. Take this step no matter who the partner is. People with strong interpersonal relationships are confident that their relationships are unbreakable as their relationships are supposed to help them overcome any obstacles along the way. Big mistake. A written and notarized agreement must be obtained.
A final word: A business partner can be your greatest or worst asset. Determining whether not engaging or co-working with another person may be one of the most important business decisions an individual makes at any time. Identifying a business partner is just as important. Weigh the advantages and disadvantages of having a business partner, and carefully analyze your reasons for choosing a business partner that can help ensure that you find the right person to share your business with.
Once you have made a decision to find a business partner, take your time to make the decision, to make sure you find a business partner that truly fits your business and your goals.
