A lot of entrepreneurs like you come to WomensNet.net in search of grants for women business owners. Nothing wrong with that. We’re one of the very few places on the internet that will give women entrepreneurs a grant.
But if you’re looking for funding, here’s another idea you should give some thought:
Ask some of your friends if they’d would like to be partners (read: investors) in your business. Your BFF could invest time or money – or both – in your venture. Yeah, I realize that’s not the most earth-shattering revelation – but you’d be shocked at how many women business owners never pursue partnerships with friends, for one simple reason…
Women are afraid that if a business partnership goes bad, the friendship will go bad as well. That’s actually a pretty good reason to shy away from partnerships. Oil baron John D. Rockefeller put it this way: “A friendship founded on business is better than a business founded on founded on friendship.”
There’s wisdom in Mr. Rockefeller’s admonition. But it shouldn’t be a deal breaker in forming a partnership with a friend. Here are a few tips for making partnerships work for women business owners.
1. Create an operating agreement. Many partnerships go south because the people involved didn’t put their expectations in writing. It’s not enough to say, “We’re business partners.” You have to put the details of the business in an agreement that everyone had a hand in crafting.
An operating agreement ensures each partner will be treated consistently in good times and bad. Your agreement should lay out in plain language how profits, assets, debts and other responsibilities will be shared while you’re in business together. It should also lay out the details of what to do if one partner wants out of the business.
There are many issues you should put in writing first, and the best way to forge an operating agreement is to do some research on the internet as to some major issues– then sit down and air your concerns honestly and openly with your partner. Two partners might agree to split all the work evenly – but what happens if one person winds up consistently working more hours? How will that partner be compensated? There are a lot of similar questions you need to discuss.
The final step is to consult a lawyer if you think there are some unique issues that should be addressed in your agreement.
2. Don’t let your friend risk money that she can’t afford to lose. This is a point of common sense. If you ask a friend to invest $20,000 into your venture – and she has $500,000 in savings and investments, there likely wouldn’t be a huge emotional toll if the business struggles (or even fails). But if your friend invests $20,000 by draining $15,000 in life savings, and borrowing another $5,000 from her mother – well, you get the picture.
Make sure any business partner can afford to lose the money she’s invested. You don’t want your friend to wince every time there’s a downturn in the business, and to be hanging on every paycheck. That’ll only lead to more stress on the both of you.
3. Partners offer emotional support. Not only can you share the labor and responsibilities of running your business with partners – but you can all lend each other emotional support. When things are going tough, you can all lean on each other… encourage each other… find solutions together… and work hard as a team. Trust me – you can’t put a price on the emotional assets that a good business partnership brings to your venture. As one business owner to me about her partnership, “When we hit hard times, it’s only half the pain. But when things are going well, it’s twice the fun!”
4. “Sweat equity.” You’ve heard the expression, “time is money.” So if you can’t find a partner who can afford to put money into your business, find someone who will put in “sweat equity.” In other words, give her an equity stake in your company for an investment of her time.
These partners are sometimes the best to have. You don’t have to pay her cash for her labor. And she doesn’t have to risk money she doesn’t have. The truth is – a lot of women can name a handful of their talented friends who can help in a business venture. Recruiting them to trade their time for a slice of your business should be a strong consideration. After all, it’s better for you to own a smaller piece of a successful business, than 100% of something that fails…
Thanks for reading these tips. And I hope you’ve been inspired to consider a partnership as another way to find funding for your women-owned business. Getting your friends involved can be a fantastic resource for you.