QUESTION: Dear Doctor Nahabwe, thanks a lot for teaching us how to run business. Now, I have a problem. I have a phone shop at Mutaasa Kafeero. I see my friends who have several branches are doing well. I don’t have money to open up other branches, should I look for partners and what are the challenges with partnerships?
Semakula Saidi, Mutaasa Kafeero, Kampala
Hello Saidi,
Its good you are looking at expanding. Business must grow to be sustainable otherwise, soon or later, it will go burst which I am sure you don’t want. Partnerships are good but like all good things have their own issues.
So ,we start with the good ones.
1 – Partnerships help you get more capacity in all aspects. You get people who are equally passionate about the business (because it’s theirs) that bring in more money, more knowledge, more contacts and skills. One can run one shop while the other runs the other. At each shop, you will have someone equally responsible and committed as you are.
2 – Partnerships mean you will have people to consult on business decisions. Two heads are better than one, three are even much better.
3 – With partners, you could go for a limited liability company which will protect you from liabilities should the business fail. You are separated from the business so, debts for the company may not come to you unless you have committed fraud.
4 – People respect companies/ partnerships and more corporate companies will trust and want to deal with you because you are registered.
5 – If well planned, the taxes can be managed better.
6 – Resource pooling becomes a lot easier. You have access to more money and hence can easily open the branches you want.
BUT
A – Once you do a partnership, you are no longer the boss. Decisions will need the input of the partners. This is good because then decisions aren’t made on the fly but are well thought through. However, if you are one who procrastinates and takes long to make decisions, it becomes very hard for business as you may lose opportunities because of indecision.
B – Just like you share inputs, you will also share profits. So, when you make let’s say 1M and you are 3, each might get say 330,000. If you were solo, that would be a million.
C – The process of setting up the partnership is longer and needs money to maintain. You will need to file taxes regularly, register the company, file reruns etc. In partnerships, there is a lengthy process in case of closing.
D – It might be hard to involve family, in case you want to. Business partnerships should be left to run without each other without bringing in relatives. So, in case your wife wants to be in, it might be hard.
On the whole though, I think you should go ahead and get partners. It allows you to be structured. You will be more controlled giving the business a better chance of survival. Choose partners solely based on their competences and commitment to the business you are running. Ensure they come in with value that they don’t want to lose and that they commit time.
Good luck
