Business partnerships that work require a great amount of trust, shared values and a strong commitment to a balanced, long-lasting relationship.
There are different kinds of partnerships. For example, an equal, general partnership is where two or more people are equally responsible for managing the business and servicing the debt. A limited partnership limits the obligations of a partner in proportion to their investment. In ‘silent’ partnerships, an investor provides funding but doesn’t get involved in decision making or daily operations.
An equity-based partner model assigns the interest each partner has in the organisation. It consists of the partner’s total contributions plus retained earnings. Partners may receive a different share of the equity based on their contribution. This contribution can be money, assets or services (sweat equity).
Deciding on the right partnership model depends on a variety of factors including how each party wants to manage decision making, how much capital each party will contribute, how employees and directors will be paid and what to do if one of the partners wants to exit the agreement.
The owner-driven partnership model
One partnership model that has proven successful in the insurance and accounting industries is the owner-driven model, which is how the AUB Group operates. The owner-driven partnership is an equity-based model, where the owners remain directly responsible for the business’s daily operations.
The Group and its partners share equal ownership and responsibility and, because both partners have skin in the game, proactive involvement is standard. This is also true where Group representatives sit on boards: there is no room for passive investment.
At the same time, each business leverages the advantages of the Group. The advantages for the operating partner include access to infrastructure, operational know-how, technology support, marketing, human resources and back-office services, as well as economies of scale.
The beginning of a strong partnership should always include a discovery stage during which the prospective partners learn as much as possible about one another before signing off on the deal. Partnerships work best when both parties complement one another, and where both parties have something unique to bring to the table.
The owner-driven partnership model ideally ensures that partners receive all the benefits of a large group that continuously invests in the best practice, technology and infrastructure, while remaining independent.
For example, AUB Group’s business is driven by this partnership mindset above all. The success, strength, and cohesion of the partner network is the result of the company’s goal to build partnerships with people and businesses that are ambitious and hungry for growth. This model works best when the majority partner is not a passive investor. Instead, that business should support its partners in every way to ensure success.
In a truly collaborative approach, the majority partner should support operating partners with the resources necessary to let them focus on customer service, innovation and growth. There is no one-size-fits-all approach because each partnership is unique and has its own rhythm and requirements.
5 fundamental traits that underpin a successful owner-driven partnership
Shared vision, goals and expectations
Partnerships work best when all parties are on the same page. This may seem obvious but it’s important to explicitly review both parties’ vision, goals and expectations to ensure they are aligned. This provides the foundation and structure to make decisions, set goals and manage future outcomes for the business.
When partners trust in and rely on one another, the partnership becomes a force that creates new opportunities. There are two types of trust that are critical to a partnership. The first is personal trust, which is the trust that develops between people who work together successfully.
The second is procedural trust, which develops when the structure and procedure of the business prove to be effective and solid. This is the foundation to any long-term, satisfying business relationship.
To work together successfully, two businesses must share a culture based on similar beliefs, approaches to business and work ethic. This is what guides behaviour, business practices and how each partner delivers on its commitment to clients, employees and other stakeholders. When businesses have dissimilar cultures, it can be difficult to partner successfully because their actions and motivations will be at odds with each other.
Partners that possess complementary skills and unique knowledge will be able to grow their respective businesses by relying on each other’s strengths to bolster their own weaknesses. A diverse partner network is strengthened by the unique skills and specialised experience each partner brings.
Understanding and embracing change and adaptability is essential, especially in a rapidly changing business climate. The ability to adapt and be flexible to ever-changing situations is key to business growth, and delivers a competitive advantage to savvy partners.