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When Nicholas Mugo received his retirements benefits after working as a teacher for many years, he was excited. He wanted to start a business and join the league of successful business people.
After toying with several investment ideas, he finally decided to start a private school.
However, one hurdle stood on his way. He could only afford to build. He needed to partner with someone who could provide a piece of land.
As Mugo agonised over the challenge he was facing, he bumped into an old friend. When he sold the business idea to him, his friend readily agreed to part with a portion of his land for the project.
The construction work started in earnest. Soon, the school was up and running. After a few years in operation, the school had become an academic giant.
However, in a strange turn of events, Mugo’s partner decided to end the partnership. He wanted Mugo to bring down his buildings and leave the land bare.
Mugo could not understand how a friend he had known for many years would turn against him and edge him out of a business they had taken time to establish and nurture.
Obviously, he read mischief. Unfortunately, he had avenue for recourse since they only had a verbal agreement. He was forced to leave. Immediately he left, his friend rolled out plans to start a new school on the same piece of land.
Many people looking for business partners often go through a similar experience. By failing to shop well for an investment partner, they live to rue their decisions.
Roselyn Bogonko, a financial expert and investment adviser working in Nairobi, says there are many reasons why investors look for business partners.
“Investment partners can help to inject additional capital and new ideas into business. They can also bring in expertise that is usually critical for any business growth.”
She adds, “Another advantage of having a business partner is that they can help expand your customer base. Through their own networking, they can bring in people you would otherwise not have reached.”
However, Bogonko warns, “Although there is no way to guarantee that a potential business partnership will work, you must choose your investment partner well. This can avert partnerships going sour.”
Inject new capital
She advises, “Before you start shopping for a partner, ask yourself whether you actually need one. Do you want to inject new capital into the business or can you get alternative sources? Is he bringing in new ideas and experience?”
“You must go for a partner who is ready to share your business vision and dream. When you plan to start a business, this is your idea and others can only play the game according to your rules. Ceding too much ground can derail your original idea,” she advises.
Bogonko says one of the key reasons why people get into investment partnerships is to raise capital for the business.
“Joining hands with one in dire financial straits can only create new problems for your investment.”
Walter Situma, a financial adviser says that it is good to look out for a partner who will complement your skills and experience.
He cautions, “Bringing in somebody who will just duplicate your skill set will not add any value. Get somebody who can bring in what you do not have. He should inject new idea, skills, experience or even money.
“Take time to evaluate the potential partner’s traits. Ask yourself questions like: Is the person honest and straightforward? Of high integrity and morality? Do you share a common set of ethics. Have they been involved in any dishonest dealings? Do they have any criminal record?” he advises.
“Look for a team-player. Find a person who has good people skills,” he further advises.
It is also crucial to draw solid agreements, which give the description of the business and its goals, spelling out the powers and limitations of each partner. Be clear about which partner has more powers than the other and how profits will be shared. Procedures for conflict resolution and dissolution of the partnership should be agreed upon.
Reasons for a business partner
- To help raise initial capital
- Bring in more customers through their networks
- Complement your skills and experience
- Create a forminable team.
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