How to choose the right partnership model for your business

If you’re thinking about growing your business, a partnership may be on the cards. It can be a useful way to increase your business’s reach beyond what would have been possible alone. After all, partnering with the right organisation can give your small business access to more resources, including access to infrastructure and operational assistance, technology, support, marketing, human resources, and other back-office functions. It can also let you take advantage of economies of scale.

But partnering with another person or organisation is a big commitment and it’s important to think carefully about all aspects before signing on the dotted line.

For example, what kind of partnership model is right for your business? There are four basic types of partnership:

  1. Equal. An equal, general partnership is where every partner, regardless of how many there are, is equally responsible for the business, including its operations, its profits, and its debt.
  2. Limited. Where one partner invests less than another, the result is an unequal partnership, or one where that partner has only limited obligations. This is usually calculated according to the amount they’ve invested. It can be a low-risk way for one party to explore what it’s like to work with the other.
  3. Silent. Sometimes, an investor is willing to provide capital and receive dividends without having any say in how the business is run. This is often referred to as a silent partner.
  4. Equity. In this model, each party retains some equity or ownership of the business and its earnings. The equity doesn’t have to be equal, since each partner’s equity is calculated based on their contribution to the business. This contribution can be in the form of capital or services, which is often known as sweat equity.

Choosing the right model depends on a lot of factors and you should seek professional advice before making a final decision. Some of the things you should consider include how each party wants to manage decision-making, how much capital each party will contribute, and whether any of the parties are likely to want to exit the agreement, for example, once a specific objective is achieved.

For business partnerships to work, all parties need to be committed and share compatible cultures and goals. You should do exhaustive research as part of your due diligence to find out as much as possible about your prospective partners before committing. This will help avoid a messy situation later if the partnership turns out to be a mistake.

AUB Group has run an owner-driver, equity-based partnership model for the past 30 years. It lets owners retain control over daily operations while they leverage the Group’s collective resources. This is the perfect model for our business and our partners, because it lets us complement each other’s strengths and achieve strong growth together. We both have skin in the game so we work proactively to drive growth; we have no interest in being passive shareholders.

AUB Group is a proactive partner that strives to help partners grow. We both have skin in the game, taking equal responsibility for the business’s success. We have no interest in being passive shareholders; our goal is to build partnerships with people and businesses that are likeminded, ambitious, and hungry for growth. To achieve this, we can’t be a passive investor. Instead, we take a collaborative approach that treats each partner according to their unique needs.

Based on 30 years of partnering, AUB Group has identified five key traits for a successful partnership:

  1. Shared vision, goals, and expectations.
  2. Trust between all parties.
  3. A similar or complimentary culture.
  4. Complementary strengths that let each party support the other.
  5. Adaptability and flexibility to embrace the inevitable changes in business.