Partnering with another business owner means sharing ownership, responsibility and trust. Should you find a partner? Is it better to associate with a friend? For some people it is a “no” because they are afraid of losing their friendship because of having money involved. For others, it’s a “why not do business together?” This seems to keep the friendship a step ahead of the game. They may feel more comfortable working with someone they already know and trust.
It’s hard to say if partnering is a good option based on business industry, financial situation, and many factors. Let’s ask some critical questions:
1. Is the business your idea or with someone else? Does he or she have any business knowledge in this line of work or passion? Do they have the same goals as you?
2. What type of business do you have or want to create? Is this a product or service business? What responsibilities or licenses must both partners obtain? Who is responsible for obtaining the necessary documentation or license?
3. Do you need to partner with someone to run this business because you can’t afford to hire people or for financial reasons?
4. What society will you accept to be? 50/50? 60/40 or 70/30 etc?
5. The entrepreneur needs to understand that the business is a long-term commitment. It’s a long run from start to harvest. What is the exit plan for a partner in case of need and how to liquidate it?
6. Do you have the ability to run this business?
These are some vital questions that entrepreneurs should ask themselves before creating a partnership.
I’ve talked to a lot of entrepreneurs and done some research. Here are some pros and cons of partnering:
• Property:
Pros: Pride of ownership, freedom from the control of others, invested time will show higher performance, flexibility in decision-making.
Cons: You never know when you might put 40 or 80 hours into the business this week. Having to compete with other companies. No guarantee of success.
If it is associated only for capital, an entrepreneur may think twice. Partnership mistakes are costly because a partner may not be experienced in the business or willing to invest the same amount of time.
• Control:
When it comes to partnering, many people immediately think 50/50, so that everyone can have equal control. You should avoid this because “there are too many cooks in the kitchen.” There has to be one person who can make the ultimate decision. Research shows that it is better to enter a 60/40 or 70/30 partnership. Every company needs a person who has overall control and responsibility. This way, employees won’t get confused as to who is the boss.
• Personality:
Pros: Different and more diverse characters can benefit in various tasks such as finance, people, products, marketing management, etc.
Cons: They face the same problems, but two people can react differently.
• Vision of partners:
Pros: It’s better to have a partner who has the same vision, passion, and goal as yours.
Cons: Partners often see the same product going in two different directions.
• A mix of generations:
Senior Partner: Lifetime experiences, knowledge, and more flexible work hours, but not a lot of energy and might be considering retirement soon.
Younger member: They know new technologies and are full of energy. Eager to work but no real world work experience or some specific skills needed. Less flexible work hours or not fully committed to work.
Think carefully before inviting a partner to your dream!
