Should You Take On A Business Partner?
Working with a business partner drastically changes the dynamics of running a business. In many ways, selecting a partner can be more difficult than selecting a spouse. Select the wrong partner, and differences in commitment, skill level, work styles and expectations can create a misalignment that is detrimental to your business. On the other hand, the right partner can be exactly the help you need to make your business thrive.
As you consider bringing on a partner, we recommend you consider the benefits and risks, and ask yourself a few key questions to ensure you’ll be setting your business up for success.
- SHARED WORKLOAD: One of the biggest benefits of a partnership is having someone share the responsibility of running your business. In theory, with a partner, you can do twice as much. If you’re not in a position yet to hire full-time employees, bringing on a partner can help with the sheer workload of a business, without requiring a large financial outlay.
- SHARED PRESSURE: In some instances, having a partner may help mentally alleviate the feeling of individual pressure and responsibility. Having a partner doesn’t mean you’ll do less work, but you will have someone to help carry the pressure of launching and sustaining a business, as well as the mental load of dealing with the minutiae – including bookkeeping, networking, sales, marketing, research and development, and securing funding.
- ADDED SKILLSET: A partner may bring a skillset to your team that you personally do not bring. This is a major benefit, as long as there is mutual respect for what one another bring to the table.
- FRESH PERSPECTIVE: When you have a partner, you get access to another point of view. This is great for having a sounding board to bounce ideas off. It also means you have someone who can help keep things in perspective, provide motivation when you’re feeling down, or give you a reality check if you’re heading in the wrong direction.
- ACCOUNTABILITY: A partner can hold you accountable. Some people have difficulty maintaining the discipline needed to launch a business. Partners keep each other on the ball and can help one another follow through on commitments and adhere to timing.
- FUNDING: If you are trying to start your own business, it may be difficult to self-fund the start-up and maintenance costs. Many individual business owners abandon their business because they run out of funds to fuel grow. A partner can provide additional liquidity to keep your business operating and expanding.
- MISALIGNMENT: The biggest risk of introducing a partner is that you likely will have to share decision making authority with another person. This means that everything may be up for debate including the company’s vision, strategy, investments, hiring decisions, operational decisions, etc. Debate is not a bad thing – in fact, healthy debate often leads to better outcomes – but debate that leads to constant standstills is a death sentence for a small and growing business. In addition to slowing growth, an unhealthy level of misalignment may lead to inconsistent business practices, stress for employees, and unnecessary consumption of resources.
- DIFFERENT LEVELS OF COMMITMENT: The best partnerships arise when both parties have equal commitment to the venture and put comparable levels of effort into the business. If one partner becomes lazy, that can lead to an understandable level of resentment. At the extreme, partners who can’t meet deadlines, follow up with clients, or follow through with their responsibilities can bankrupt an established business or a new business venture.
- LIABILITY: You are liable for your partner’s actions. From a legal perspective, if your partner violates any laws, you will likely be held accountable too through fines or other legal ramifications. Furthermore, your personal reputation will inevitably be linked to that of your partner. If your partner does something that upsets a customer, it will likely be viewed as reflecting back not only on the business, but on you as well.
Taking on a business partner certainly has its advantages and risks. A partner can help you reach your goals and support you when times get tough, but there is also inherent liability in taking on a partner and disagreements may arise. Here are some questions to ask yourself to see if your partnership will be set up to succeed:
- Do you have a shared vision for the company?
- Do you have equal financial and legal exposure and risk?
- Does your partner bring a complementary skillset that will make the business grow more quickly, or allow it to become bigger?
- Are your workstyles compatible?
- Is there mutual respect for one another’s contributions?
Think carefully before deciding on whether partnership is right for you. It might be wise to begin as a sole proprietor and then look to take on a partner as your business grows – then you can identify where your own skill set is lacking and a partner would add the most value. Whenever you do take on a partner, to avoid any ambiguity, put all financial commitments, business terms and partnership expectations in writing.