There are plenty of ways to make your business profitable, so how do you choose the right one? It depends on your location, business type, and economic surroundings. If you live in a small town and operate a small business, sometimes the best option is to partner with other local businesses to make sure you all stay afloat. This can be particularly beneficial if something affects the country—like a pandemic—that forces people to stay inside and brings commerce to a halt. Sharing products, marketing costs, and building rent are all ways you can cooperatively make the most of a bad situation, but things like this need a legal element: a partnership.
What Is a Partnership
Imagine you want to buy solar panels for the building your and three other people’s businesses are in. In a partnership, you don’t have to bear the full cost if the other business owners agree. This is the beauty of joining forces with another person or business. Partnerships mean all owners enjoy the profits and suffer the losses together. There are plenty of ways a partnership can be established, but if you have a small business it’s usually one owner legally joining forces with another business owner.
Who To Partner With
Finding the right business to partner with is the next important step in establishing a joint venture. There are a few criteria you can keep in mind when searching for another business, if you don’t already know who you’re joining forces with. The first consideration is to find a business with your common goal. If you’re a bath and body store, find another bath store or a wellness store that mirrors your values and approach. This will ensure your vision isn’t impeded in the partnership. It also makes it more likely this business shares your same workplace culture and will understand your decisions when it comes to employees. Sometimes this perfect business isn’t next door, though, which can be more difficult, but not impossible. As long as you both have sufficient communication tools and ways to help each other, distance isn’t a high hurdle to overcome.
Things To Consider
Before you decide to dive into a partnership with someone, you should consider your options carefully. First of all, you don’t want to sign any agreements with someone you don’t know well or trust. Be sure you’ve done your research on the person and their business before determining you’re interested in a partnership. You need to keep the best interest of your own business as the first priority in this stage. Second, there might be some issues you want to address before you enter an agreement, such as issues that might arise with employees or the workplace.
• Employees: Leadership lines can get blurred when two people have an equal stake in a business. You’ll want to make sure you establish protocols for hiring employees and who will supervise them. After all, combining forces can be great for your employees, too, and you want them to see that. Having an extra hand in the upper management means you’ll have more capital to hire more people to increase production and hours of operation. If you’re willing to open partnership opportunities to reliable employees, it also means you have a pool of people you know and trust who are invested in the business already. And giving hope of rising up in the business will motivate employees to work even harder so they stand out from their coworkers.
• Workplace: Some businesses complement each other, which makes excellent ground for a partnership. It can also offer some complications. For example, if you own a bakery and have a friend with a paper supply shop, you might decide to establish a partnership and use their supplies in your store. But whose logo will be stamped on the boxes? How will this arrangement benefit your friend? Maybe you’ll decide to sell some of their products in your shop to people hoping to make cakes or cupcakes at home. This means altering your storefront to include a display for these items. It also means being open to suggestions from your partner about how to run and manage your workspace. He may suggest hiring more employees or rearranging the store for optimal sales. These are all things you can discuss beforehand to be sure any changes fit with what you want for your business.
Types of Partnerships
There are four basic types of partnerships that businesses can explore.
1. General Partnership: This is the simplest form of an agreement. Two businesses sign an agreement and each have independent authority to enter the business into any other contracts, such as with suppliers. In this type, each partner also has total liability, which makes it a kind of high risk, high reward situation.
2. Limited Partnership: These are authorized by your state and include one general partner and any number of limited partners. The limited partners are more like investors than managers; they put money into the business hoping for a return, but aren’t active in any of the day-to-day management.
3. Limited Liability Partnership: This type operates similarly to the general partnership, except partners are not responsible for each other’s decisions. You would have full liability for your own decisions and loans, but the partners would only be liable in a limited capacity, which can make this the safer choice for some people.
4. Limited Liability Limited Partnership: This combines all three types of partnerships so that even the person acting as a general partner has limited liability for the businesses.
Perhaps the greatest benefits of partnerships can come from entering in a sustainability partnership—meaning you and your partners all opt to move your businesses to a greener outcome. In fact, it’s been shown that greener companies see higher profits. There’s a push for sustainable products right now, and customers have never been as informed on the issues. Many consumers will actively seek out businesses who are reducing their carbon footprint, using recyclable materials, and minimizing plastic or one-use items. If you aim your business at these objectives, you can draw in a much bigger crowd. There are also tax and subsidy benefits you can receive from the federal government for various efforts to “go green,” which saves you money come tax season. Also, switching to these eco-friendly methods can save your business money in the long run because you’re purchasing less supplies at slower rates. You can even take it so far as adding sustainable energy to your business, such as solar panels, to keep the lights on and the machines working. This will add another tax break, more savings, and grow your reputation as a sustainable business.
The best way to make these transitions is to get your employees on board. You want to hire people who sympathize with your values and will work hard to uphold them in the store so customers see the sustainable views shining through.
There’s a lot of parts to starting a partnership, but a lot of benefits as well. If you’re interested in taking your business to the next level, find a good partner, keep your employees and workplace in mind, and opt for a greener vision to maximize your profits and see your business flourish.