There are many reasons why entrepreneurs consider having a business partner, including:
- A lack of skill, confidence, interest or resources to go at it alone.
- A desire to collaborate with someone who you think would be a good complement.
- Limited bandwidth to develop or lead the business on your own
While partnerships can certainly be successful, many are faced with challenges and fail. This shouldn’t come as any surprise since nearly half of all marriages end in divorce. Like marriage, partnerships can end in “business divorce.” For many small businesses, having a partner is like having a work wife or husband, just without the sex. Partners spend the majority of their time, emotional and physical energy, and resources, together, in the hope of achieving success.
No one gets married expecting it to fail, any more than partners expect their partnerships to fail.
Lessons learned by my clients and colleagues led to my sharing these important considerations with you.
- Carefully consider the pros and cons of having partners – Could you hire, contract, or collaborate, in any way other than through a partnership?
- Consider the partner carefully – Longtime friends may be great in personal relationships, but it doesn’t necessarily translate to business. Does this person share your vision and values? While it’s healthy to have complementary communication styles and skills to leverage, alignment of vision and values are critical.
- Stay in Control – If you decide to enter into a partnership, consider maintaining majority (at least 51%) ownership. Having a 50/50 partnership can leave you with NO control over the partnership. This can translate to a partner collecting half the profits, while doing absolutely nothing; or worse, while they recklessly impact the business! It happens more often than you think. An underperforming 50/50 partnership, without the right agreement in place, can easily cost thousands of dollars and lead to dissolution of the business.
- Plan to be wildly successful! – Even Apple started in a garage! Undervaluing the potential of your business can lead to unnecessarily giving away tremendous value.
Thinking, planning and structuring matter. Do all the right things for a partnership to be successful AND have the right partnership entity and Buy/Sell Agreement in place from the beginning.