Just the other day, a good friend of mine announced that he was going to start his own small business. He has some amazing ideas, had been talking about it for years and was finally taking the plunge out on his own. I would like to think that my endless pestering had something to do with it but he simply needed to feel that it was the right time for him. That’s really the key, jumping in when it’s right for you. My good friend took years to learn, educate and prepare himself for this step and I’m sure it will pay off in the end. As far as I’m concerned, there is nothing more exciting or fulfilling than starting your own small business. If you have been pondering the decision yourself and have decided to do so; then give yourself a big pat on the shoulder on my behalf – you are in for one wild ride!

Just in case you are sitting on the fence, there are lots of things one should learn and consider before starting a small business. Just the decision to start one in itself is a huge step as you are likely leaving security behind. Consider as well, that even though the business may be small, it still requires good leadership, decision making, the willingness to take risks, a competitive spirit, an optimistic attitude and much more to survive. Small business management can be a huge undertaking. Consider the depth of courses offered privately and through today’s business schools. Those courses are offered for a reason so ensure you are prepared. An escrow of capital to support you through your startup is not a bad idea either. Maybe I’m getting a little ahead of myself here. Perhaps the best place to start is by defining what a small business is. I’m not talking about small business as defined in the dictionary, more so what it is in basic terms. That’s a good place to start.

So, what is a small business? The proper definition can vary between different countries, range of services and the industry that the business is operating in. However, the name really says it all. A small business is a small company with few employees; usually between 1 and 50. Its services are usually limited to a particular geographic location (pending it’s not an online business) and their volume of sales is typically low. The capital required to start a small business is also relatively small. It can be sole proprietorship, partnership or incorporation. For the remainder of this article let’s focus on this. In the case of partnership and incorporation, the profits and losses are shared equally between the partners and shareholders unless otherwise stated in the partnership or shareholder agreement. A partner can be active or silent. An active partner is one that takes part in the day to day operations of the business while a silent partner simply invests capital and contributes very little towards the business activities. They both expect to make money with their involvement.

Before you decide on partnering with anyone with your small business, make sure that you completely outline and understand all the financial and legal responsibilities you both will have. Always make sure that any other expectation each partner has are identified, discussed, agreed upon and committed to paper for signing. As well, and I know people don’t like to think this way, but you need consider the process of how the partnership will be dissolved should it not work out for whatever reason. This is very important as I have seen many great small businesses destroyed due to a negative partnership.

You need to keep in mind that everybody is different; can have different perspectives or expectations. The only way to ensure that everyone is on the same page is to put some time into discussing it before going forward. A little bit of time properly structuring your partnership and small business before you get too far into things can save you a tremendous amount of pain and time should things not go completely as planned.