The benefits of a partnership charter
by David Roberts
Getting out and about, as I have over the past 3 years, meeting a wide range of business owners in North Wales, I have been struck by many things, not least the diversity and quality of businesses in this region. One aspect that has struck me less positively however, is the number of 2 to 4-person partnerships that seem less than happy, and in some cases, clearly dysfunctional. Not only must this have a significant effect on the individuals concerned, it must have a broader impact on the success or otherwise of the businesses they’re running.
There are clearly many positive reasons for entering into a business partnership: the pooling of skills and resources, sharing responsibilities, camaraderie, increased bandwidth, to name only some. However, it is also clear that partnerships are potentially perilous if not built on a solid foundation. The costs of partnerships not working as desired can be significant, especially if leading to a break-up.
In his book The Partnership Charter (2004), David Gage recommends that business partners should put time and energy into nurturing their relationship, not just at the inception of the business but throughout. “Relationships taken for granted are relationships at risk” he says.
Furthermore, David recommends that a ‘Partnership Charter’ is produced; a document that goes well beyond the principle legal structure of the business (as notarised by a shareholder agreement and/or Articles of Association) to cover the partners’ ambitions, roles and responsibilities, values, and how they’ll deal with any areas of conflict in the future. This should be a dynamic document, referred to and updated as time goes on.
By doing so, partners should be clearer at the start of their business together that they are making a good choice in joining forces, and also have a framework to help make their relationship as fruitful as possible long into the future.
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