Building sustainable partnerships and joint ventures

As the old saying goes, two heads are better than one, right? When it comes to entrepreneurship, that may be true - having a partner means having someone to bounce ideas off of, perhaps someone with complementary skills, or even much-needed financial support. However, a poorly established and managed partnership could be the reason your business fails. The key to a successful partnership is to get it right from the start. That necessitates some difficult discussions and planning.

You will be contractually bound to that person for as long as your company exists (there are ways out, but they are difficult). So, you'll want to find someone who shares your goals and vision for the company, preferably has the same work ethic as you, is dependable, committed to the company's success, and has something to offer. Essentially, having them on board should benefit the company.

Building sustainable partnerships

A partnership is relatively simple to establish in South Africa. It is similar to a sole proprietorship in that the assets and liabilities of the business are linked to those of each partner (meaning that the profits are part of your personal income tax and that if the business fails, your personal assets can be used to service any debt), and it does not need to be registered with the Companies and Intellectual Property Commission. A partnership does not have legal status. While it is not a legal requirement, it is strongly advised that you put the terms of your partnership in writing. This is referred to as a Partnership Agreement. You can draft this agreement yourself, but you should consider hiring a lawyer to ensure that the terms comply with South African partnership laws.

Part of the benefits of a partnership is that it can help your company grow faster, increase productivity, and generate more profits. Some of the other advantages include:

Gain access to new markets and distribution channels
Cost sharing and with a partner there is access to new knowledge and expertise
Access to more resources, such as technology and finance

Building sustainable partnerships

Disadvantages of a partnership are as follows, but not limited to:

Having more employees in a company can also complicate decision-making and reduce profits.
Disagreement between equally sharing partners is one of the leading causes of company dissolution.
Losing a partner will be expensive because you will have to value that person's assets as well as replace someone who has taken on a lot of liability/responsibility.

The difference between joint ventures and partnerships is that joint ventures are created with a specific goal in mind. Each party contributes their fair share to a task that has been agreed upon. Joint ventures frequently enable growth without the need for borrowing or seeking outside investors. You might be able to do the following:

Building sustainable partnerships

Market your product using the customer database of your joint venture partner.
Provide your existing customers with your partner's services and products
Combine purchasing, research, and development efforts

Joint ventures can pose significant risks in terms of liabilities and the possibility of partner conflicts and disputes. There are likely to be issues if:

The venture's goals are not clear.
Communication between partners is poor.
The partners have different expectations for the joint venture; the level of expertise and investment is not evenly distributed; and the work and resources are not distributed equally.
Different cultures and management styles create barriers to cooperation, and leadership and support are lacking in the early stages.

Collaboration with another company can be difficult. Building the right business relationship takes time and effort, and even then, it can be difficult to completely avoid all issues.

Building sustainable partnerships