Whether you are just starting a business or are established and want to take it to the next level, many people consider bringing in a business partner to help achieve their goals. But is it the right plan? A business partnership is complex. I’ve seen many fail, and I’ve seen some that were very successful.
There are many aspects to forming a partnership to reach your business goals. By thinking through all the benefits and pitfalls of having a business partner you will have a much higher chance of success.
The benefits of a business partnership are numerous:
Source of capital – a business partner can bring in much needed capital to either fund a business or expansion
- Ideas – The old adages “two heads are better than one” and “one plus one equals three” certainly apply here. Having someone to strategize or just bounce ideas off each other can be a huge benefit to the solopreneur
- Skills – Frequently, a successful partnership is formed when the partners have different skill-sets. For example, a technical person can have the greatest idea in the world, but they may not have the sales and marketing skills necessary to bring it to market. Bringing in a sales and marketing partner could be the difference between an idea and a thriving, successful business.
- Sharing the burdens and responsibilities
- The ability to move more quickly and take advantage of new opportunities
Of course, there are drawbacks:
- The cost of conflict. What happens if the partners end up with conflict? It could be a conflict of strategic direction, ethical issues, responsibilities of each partner, etc. The cost of conflict could be far greater than any potential benefits derived.
Sharing of the profits. This may be a non-issue if the partnership can yield greater profits versus not partnering with someone to grow the business. But if your only reason to bring in a partner is capital, you may have other sources than bringing in a partner.
In my experience, businesses that start or are run based on a couple of friends believing they should be in business together, just because they are friends, usually fail. The businesses which have taken a more thoughtful approach tend to be the ones I see flourishing year after year.
I recently read a fantastic book that discusses the benefits and pitfalls, and more importantly how to setup a “Partnership Charter” to make sure you think of everything before going down that road. The Partnership Charter: How to Start Out Right with Your New Business Partnership (or Fix the One You’re In) by David Gage is a great read. In this book, David Gage uses the approach of a Partnership Charter, a document to address the business and personal sides that exist in a closely held business. It outlines the goals, expectations, responsibilities, and relationships of the partners and helps to address issues such as personal styles, values, money, ownership and power. I read this book and consider it a must-have if you are considering bringing in a partner, or are in a partnership and want to make it better. This book will really help you think through all of the considerations to make your partnership successful.