Jane Applegate — Outside Advice Can Help Smooth Pitfalls of Partnering

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Although many entrepreneurs rely on partners to help manage their companies, a partnership can be the most challenging business structure.

“People will interview receptionists more carefully than they will a potential partner,” said David Gage, founder and director of Business Mediation Associates, a Washington, D.C.-based company that helps partners resolve conflicts. “It’s much easier for partners to work on a business plan or a marketing plan, rather than sort out how they’re going to treat each other.”

Gage, who works with many entrepreneurs, said an engineering consulting firm once hired him to sort out the problems created when the co-founder decided to retire.

“When a co-founder has been there for so long, there are certain things and unspoken understandings that people just got used to,” said the president of the firm, who asked not to be identified. “When he left, we knew there was going to be a change in the business culture. We needed to address how we were going to transition from one set of rules to the next.”

Discussing the company’s future ownership and how the stock would be divided between the remaining partners was a delicate matter. He said it would have been very tough to resolve without outside help.

“We needed help to figure out how we as individuals could communicate openly and honestly in a business-like way without letting personal feelings interfere,” said the president.

Although clear agreements between partners can establish basic ground rules, Gage said, “documents won’t fix a troubled relationship.”

In his work, Gage often deals with issues of fairness and expectation. Usually, one partner feels that he or she is putting in more effort or hours than the other partner, or they feel one partner is just in it for the money.

“These aren’t always things that can be verbalized, or even issues that people know how to discuss,” said Gage. “Either the issues are too sensitive, or enough time has passed so the partners have been lulled into complacency.”

Gage and his associates came up with an idea for a “Partnership Charter,” a sort of prenuptial agreement that clearly spells out the roles and expectations for each partner. It details many aspects of the initial relationship to put things on the right track.

The charter can also help the parties and attorneys involved unravel things if the partnership has to be dissolved.

Gage recommends that small-business owners ask themselves these questions before taking on a partner:

-Why am I taking on a partner? Have I considered all the alternatives?

-If I’m looking for money, would applying for a loan make more sense?

-If I’m looking for expertise, should I hire a consultant?

-Am I afraid to operate the business alone? Why?

-If I have a candidate in mind, is this the best possible partner for me?

Gage reminds business owners that when the business becomes successful, they may not want a partner to be involved. “It’s much easier to get rid of a loan than a partner,” he said.

Lending a hand

“Count Me In for Women’s Economic Independence,” a new organization, is asking people to contribute $5 to the Count-Me-In fund being set up to help women business owners with loans ranging from $500 to $10,000. The fund will also provide scholarships.

“Women in the United States have created 9 million businesses and 27 million jobs, but people refuse to speak of us as economic engines; they see us only as consumers,” said Nell Merlino, co-founder and CEO of Count-Me-In.

The group will operate primarily online at www.count-me-in.org. It also has an office in New York City.

Merlino, who helped create the “Take Our Daughters to Work” program, said women often have difficulty securing loans from traditional lenders/banks. Many times that’s because they lack credit history (most credit cards are in the spouse’s name), they’ve taken time off to raise children, or they lost their good credit after a divorce.

She said Count-Me-In hopes to raise $25 million and become the first online micro-lender for women.

Beginning in June, women can apply for business loans by filling out an online application. Merlino said the first loan recipients will be announced the week of July 4 to celebrate Independence Day.

“To get out of any situation, you have to have some money, especially if you’re a woman,” Nancy Evans, co-founder of iVillage.com, said at a recent press conference for Count-Me-In in Manhattan.

The nonprofit organization has support from Oxygen Media, American Express Foundation, BP Amoco and Lifetime TV, among others.

Briefly

Pacific Bell has released the 13th annual edition of “Small Business Success,” a free magazine filled with great resources for entrepreneurs.

The magazine covers subjects such as using partnerships to stretch promotional dollars, growing a business through product-line extension, and learning the fundamentals of conflict resolution.

Free copies are available by calling (800) 848-8000, or by visiting www.smallbizpartners.com.

Reporting by Julie Neal. Jane Applegate is the author of “201 Great Ideas for Your Small Business,” and is founder of ApplegateWay.com, a multimedia Web site for busy entrepreneurs. She can be reached via e-mail at [email protected].

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