For a retail or small business, planning to switch from a sole trader to a partnership can be tricky. Without any doubt, partners do bring many benefits with them to the company. However, due to conflicts, these partnerships can turn in to your worst nightmares. What we are going to focus on today are engaged, partners. This means those partners who actually work in the business. On the other hand, a non-engaged partner is one who only provides capital to the company and doesn’t get involved in the operations.
A partnership is formed when 2 to 20 individuals sign a partnership agreement. A retail partnership can prove to do wonders in becoming a business sensation within no time. With all the extra capital and minds collaborating for a single vision, this type of business has pretty good chances of surviving. However, conflicts between these different minds can lead to the partnership ending and the company closing down. Having that said, the following are various pros and cons associated with forming a partnership.
SHARE OF RESPONSIBILITIES AND WORKLOAD
Though retail or small businesses don’t really have that many responsibilities, startups can use all the help they can get. It’s true that you can make more money for yourself if you run the business alone. However, by splitting the workload, tasks can be performed more efficiently. While you can also do this by delegating specific tasks to your employees, they won’t show the required interest that an owner would. Imagine if you could split your daily to-do list with your partner, how much more could be done?
PROFITS GET DISTRIBUTED
You never get to keep all the profits in a partnership. This factor can lead to many conflicts in the future. Many partnerships dissolve just because owners start to disagree over the share of profits each gets. On the other hand, even if your partner isn’t performing up to the mark, they will still be entitled a percentage of your well-earned money.
EACH PARTNER BRINGS IN CERTAIN SKILLS
It’s pretty evident that all humans come with different mindsets and skills. Therefore, each partner can manage various functions of a business. For example, if you are a marketing and sales expert, you can create a partnership with a finance expert. That way, you can take care of the sales and marketing of your business, while your partner can manage the books and financial matters.
ALL THE WRONG DECISIONS YOUR PARTNER MAKES IMPACTS YOU AS WELL
Since you are operating in a partnership, all decisions made by you or your partner, affect the whole business. This means that you are liable for all the decision your partner makes, whether right or wrong. Not only will this damage your business’s reputation in the market, but people may point fingers at you also for being a part of these wrong decisions.
MAJOR FACTORS THAT LEAD TO SUCCESSFUL PARTNERSHIPS
Partners don’t realize that in order to run a successful partnership they need to focus on a few critical factors. Wondering what they are? Take a look!
The first aspect that partners need to establish in a partnership is trust. Partners need to have complete faith in each other. If one partner takes a step without informing or discussing with others, then maybe it’s time for you to move on. You can’t trust someone who doesn’t consider taking mutual decisions important.
A communication gap can easily destroy your partnership. Even if you have all the retail intelligence to run a business, you need to speak with your partner before taking any major step. If you spend money on something your partner isn’t aware of, that is a problem. Communication gaps also lead to trust issues between partners.
Why do you do business? For the money, right? To be precise, that’s why all entrepreneurs set up their businesses. Both partners need to be careful with what they do with the company’s money. If one is spending money for their personal reasons and the other partners aren’t aware of it, problems will arise. In the end, the co-owner will develop a thought that their partner is cheating on them by setting up a side business.
It isn’t that difficult to become a recognized retail expo in your industry. All you need to do is focus on maintaining a healthy business relation with your partner. You should always note down all mutual terms in the partnership agreement before starting the business. That way, chances of misunderstanding and conflicts will reduce. Apart from that, if you believe that you have problems trusting people, then it’s better to run your business as a sole trader.