A business partnership is really about two things--money and partnership. This important principle is often overlooked, and for that reason, many business partnerships go wrong. Many female entrepreneurs overly emphasize the relationship aspects, and place less importance on the monetary benefits. Here are some lessons learned about partnerships and money from the school of hard knocks (identities disguised to prevent embarrassment):
1. If you're not earning enough, get out. If your start-up phase exceeds the gestational period for an African elephant, you may have to face that what you're doing, how you're doing it, or those with whom you're doing it isn't working. You must meet your personal expenses. Just as you wouldn't dream of taking a salaried job that underpays you, so your business should not underpay you. This means you need to be mindful of your needs as they grow and change. When Laila started her business, she was single. By the time it ended, she was married and actively trying to get pregnant. These lifestyle changes gave Laila a totally new perspective on work, the time she wanted (and could) spend, and the amounts of money she needed to generate to support her family. Your purpose in life is not just that you work for your business - your business needs to work for you.
2.Bone up on how to read a balance sheet. Many of us are financially illiterate and cannot figure out financial statements. To run a business successfully, you must know how to read P&L statements and balance sheets ' and to know how and where to find outside help to understand what the financial statements are portraying. Ignoring the numbers is similar to the ostrich sticking its head in the sand ' what you can't see or won't see doesn't exist.
3. Understand - and don't sugar-coat — your partners' "money mindsets." How do your partners handle their personal finances? Are they in debt? Have they ever filed for bankruptcy protection? Do they pay their creditors timely? Do they balance their checkbooks? These are clues to how they will handle financial dealings with you. How do your partners talk about money? Are they optimistic and prosperity-conscious? Or is there an undercurrent of "I'll never make it"? Daniel once had a business partner who often quipped "I'm so broke, I can't pay attention." It took Daniel quite a few years to realize how deeply that mindset (negatively) influenced everything the partner did.
To make the best out of your business partnership, ensure that you and your partners are clear about your goals for business and for personal finances. To be profitable, a business partnership needs to be about business building and making money. To think otherwise is to jeopardize the partnership.
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