Forging partnerships is one way to grow a business and to tap the many opportunities not available to those operating alone. But for the relationship to work, it is important that firms meet the right partner – one that's equally committed and shares the same culture and goals, according to a broker network.
“Choosing the right model depends on any number of factors, from financial obligations to personal preferences,”
AUB Group CEO and managing director
Mark Searles said. “The model that works in each instance will depend on factors like how each party wants to manage decision-making, how much capital each party will contribute, and whether the parties are likely to want to exit the agreement.”
The four basic partnership models firms can choose from are the following:
- an equal, general partnership, where every partner takes on equal responsibilities, risks, and profits;
- a limited and unequal partnership, where one partner invests less than the other and/or has limited obligations;
- a silent partnership, where an investor willingly provides funds and receives dividends without having any say in how the business is run; and
- an equity-based partnership, where each party retains some equity or ownership of the business and its earnings, based on their contribution to the business – whether in the form of capital or services, also known as sweat equity.
Before inking a partnership deal, AUB Group recommends that both parties do “exhaustive due diligence” to ensure they know everything they have to know about their prospective partner, and to prevent uncomfortable or expensive situations where they have to cut off ties.
Drawing from its 30 years of partnering, AUB Group cited the following as the five key traits for a successful partnership:
- Shared vision, goals, and expectations
- Trust between all parties
- A similar or complimentary culture
- Complementary strengths that let each party support the other
- Adaptability and flexibility to embrace the inevitable changes in business
In the case of AUB Group, it employs an equity-based partnership model, where “owners retain control over daily operations while they leverage the collective resources of the group,” an arrangement which “let AUB Group’s partners access discounts and preferential deals with insurers,” Searles said.
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