What If Your Business Partner Is a Scrooge?
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There are various benefits to forming business partnerships. Complementary skill sets, separating tasks, tax advantages, and lowering beginning costs and hazards are just a few examples.
Partnerships, however, have significant drawbacks as well. According to statistics, up to 70% of firms fail owing to partnerships. After all, there are disadvantages to forming a business partnership:
- Values and personalities that clash
- Disparities in commitment and workload
- Combining personal and professional connections
- A breach of trust
- Lack of business or a downward trend
Money concerns, like any other connection, may have an influence on your relationship with your business partner. This is especially true if they are a big spender.
Thankfully, there are methods to save the connection — or at the very least protect yourself or the company financially.
1. Don't make assumptions
Perhaps you've seen some troubling warning flags about your business partner's financial accountability. They may, for example, make rash purchases, depend excessively on credit, or be forced to borrow money on a regular basis.
While these acts should not be overlooked, you should avoid jumping to conclusions. After all, "Assumptions are the termites of relationships," as Henry Winkler put it.
Set aside some time to talk with your spouse to avert any possible disagreement. Don't point fingers and refrain from passing judgment.
Instead, express your worries and empathize with where they're coming from.
2. Engage in some active listening
"This is a common dispute-resolution tactic in which each party agrees to sit and listen to the other's position and opinion for a set amount of time — usually 3 to 5 minutes," says Ty Kiisel, a Main Street business advocate, author, and marketing professional. "It's a remarkably useful tool for calming tempers and providing new insight into the other's position on both sides."
When it comes to a business collaboration, it's less about who wins and more about how the partners feel once the conflict is resolved. He goes on to say that if one party feels isolated and resentful, it may ultimately poison the relationship and the firm.
"Practicing active listening and other similar exercises can help to relieve tensions and make both parties feel heard."
3. Make the issue tangible
It's possible that your spouse isn't aware of the effect their spending habits are having on the company. You must utilize precise terminology rather than ambiguous ones to convey the topic effectively.
To make your case, provide a spreadsheet or graphic that shows how their spending impacts your long-term ambitions, such as growing your product/service offerings or entering new markets. However, if you position their excessive spending as an issue that threatens your company's future, it will be simpler to persuade them to alter their ways.
Let's pretend they merely want to purchase new office equipment. To begin, be certain that you absolutely need the equipment. Second, consider purchasing secondhand.
If your company needs a printer, for example, you could get a used Xerox Workcentre 7346 Multifunction Color Copier for roughly $5,500 instead of $16,000 for a new 7345.
4. Work together financially
Why not join forces instead of playing on opposing teams? Then, for example, you and your partner may agree on the company's objectives.
Perhaps you both want the firm to grow into new areas or move to a larger location. However, the only way to make any of these goals a reality is to be frugal with your money.
You may need to limit your expenditure if you set common objectives and work out what needs to be done to attain them. If you and your relationship believe that achieving a goal is important, your partner is more likely to support your efforts as well as make their own sacrifices.
Following that, you and your spouse may make a budget to guarantee that you remain on pace to meet your financial objectives. To minimize overspending, make a thorough budget that includes a breakdown of your different expenses.
You can prevent overspending if you establish spending limitations for non-essential company items.
5. Agree on boundaries
Similarly, you and your spouse may select how much you want to spend on non-essentials. Even if you don't agree with how they spend their money, the bills must be paid.
Accepting your partner's spending habits may be the best way to avoid a big conflict if they refuse to compromise.
You may not agree with a service like SnackNation, for example. If you have the finances, though, eating nutritious snacks might help you be more productive.
And, unlike hitting the vending machine or buying lunch out, this is considerably easier on your money and waistline.
6. Take charge of your financial situation
Establishing a professional partnership is similar to entering a love engagement in many respects. As a result, you may wish to take a cue from couples.
"Trying to break any habit takes time," says Kayla Sloan for Everything Finance. "That's why it might be a good idea for you to take over any bill paying while your partner works through their financially irresponsible habits."
"By doing so, you'll ensure that your bills are paid on time and that you don't fall behind."
"However, if you each pay an amount, try to keep your partner informed about when bills are paid and what they need to pay," she says. "Working as a team is still important, but until your partner becomes more financially responsible, it's critical that the more responsible party take over for a while."
However, since this is a business, you should discuss it with your partner as well as a third party such as your attorney or financial counselor.
7. Establish a schedule for regular check-ins
Keep a close eye on how the budget is doing so that both parties remain on track. Establish a weekly or monthly meeting time, for example, to compare actual expenditures to the budget.
These regular check-ins should presumably improve your business partner's spending habits.
8. Take precautions
Before launching a company with someone else, you should have a good understanding of their spending patterns. You may wish to second-guess whether you should or should not join into a business partnership with them this manner.
You should always safeguard yourself and the firm you've developed, regardless matter how well you know your business partner.
Put everything down on paper. "A written partnership agreement is a must," say the lawyers of Gaslowitz Frankel, "no matter who your business partner is, even if it's your brother or your childhood best friend."
"It's critical to have clearly defined each partner's role, capital contributions, and ownership interests in the event that a dispute arises in the future." The agreement should also state how important decisions will be taken, how disagreements will be settled, and what will happen if a member dies, becomes sick, or resigns.
Make a financial safety net for yourself. "Make sure your written agreement limits the amount of debt that can be tied to the partnership without your consent to protect your financial interests," they advise. Additionally, get an insurance coverage to guarantee that the organization is appropriately secured against any loss.
Finally, you and your partner should guarantee that the firm has enough cash to develop, in addition to having enough capital on hand to meet any obligations.
Carefully consider your structure. When deciding on the right company structure for you and your partner, get advice from a tax and legal specialist.
If you need help creating your partnership agreement, you may at the very least retain an attorney to evaluate it before it is signed. Additionally, an attorney may guarantee that any important paperwork are executed when the firm is being established.
9. Seek outside assistance
If you and your partner visit a financial adviser who knows your business's aims and issues, your relationship may improve. You may, for example, construct a budget and a plan to pay off any debts that need to be paid off with the assistance of a counselor.
A financial adviser may also function as a mediator between you and your relationship to minimize misunderstandings or animosity.
Overall, a financial adviser may be a beneficial component of your team in assisting you and your business partner in establishing a solid financial basis for your partnership.
10. Dissolve the partnership
Finally, if your spouse refuses to admit that they're a big spender, you may choose to quit the relationship. After all, if they're in denial, it's doubtful they'll ever change.
Or, even worse, don't give a damn about how their excessive spending affects you and your company. So, you have two options: accept what you must or walk away.
"Whether your partnership is a general partnership, a limited partnership, or a limited liability partnership (LLP), there are several things you'll need to do to ensure the dissolution of the partnership is done properly," says Belle Wong, J.D. for LegalZoom. "It's critical that you dissolve your partnership properly and completely to ensure that you've discharged your liability under the partnership agreement."
How to end a business relationship
Examine your partnership contract. Although a formal contract is not always necessary, most partners prefer to have one to safeguard their interests. You must tell your partner if there is no partnership agreement.
Talk to your other partners about it. It's critical to be on the same page as your partners — if you have them — to prevent any misunderstandings.
Debt and other liabilities relating to the partnership should be discussed at these meetings. Organizing