Partnering with another entrepreneur means sharing ownership, responsibility and trust. Should you find a partner? Is it better to partner with a friend? For some people, it is a "no" because they are afraid of losing their friendship due to having money involved. For others, it is a "why not do business together?" This seems to keep the friendship one step ahead of the game. They might feel more comfortable to work with someone they already know and trust.
It is hard to say if partnering is a good option depending on the business industry, financial situation, and many factors. Let's ask some critical questions:
1. Is the business your sole 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 have?
2. What type of business do you have or want to create? Is this a product or service business? What responsibilities or licenses should both partners need to obtain? Who is responsible for getting needed documentation or licensing?
3. Do you need to partner with someone to run this business because you cannot afford to hire people or for financial reasons?
4. What partnership will agree to be? 50/50? 60/40 or 70/30 etc.?
5. Entrepreneur needs to understand that business is a long-term commitment. It is a long run from startup to harvest. What is the exit plan for a partner if needed and how to settle?
6. Do you have the ability to manage this business?
These are some vital questions that entrepreneurs should ask before creating partnership.
I have spoken to many entrepreneurs and did some research. Here are some advantages and disadvantages about partnering:
• Ownership:
Pros: Pride of ownership, freedom from others control, time invested will show higher return, flexibility to make decisions.
Cons: You never know when you can invest 40 hours or 80 hours into the business this week. Having to compete with other companies. No guarantee of success.
If partnering just for capital, an entrepreneur may think twice. Partnering mistakes are costly because a partner may not have any expertise for the business or not willing to invest the same amount of time.
• Control:
When it comes to partnering, a lot of people immediately think about 50/50, so everyone can have equal control. You need to avoid this because "there are too many cooks in the kitchen." There needs to be a person who can make the last decision. Research shows it is best to go into a partnership of 60/40 or 70/30. Every business needs a person who has an overall control and accountability. This way employees will not be confused in knowing who the boss is.
• Personality:
Pros: different and more diverse characters may benefit in various tasks such as finance, people, product, marketing management, etc.
Cons: Facing the same issues but two people may react in different ways.
• Partners vision:
Pros: It is best if having a partner who has the same vision, passion, and goal as yours.
Cons: Partners many times see the same product going in two different directions.
• A mix of generations:
Older partner: Lifetime experiences, knowledge, and more flexible work hours but not much energy and might be considering retirement soon.
Younger partner: They are savvy with new technologies and full of energy. Eager to work but lack of real-world job experiences or some specific skills needed. Less flexible work hours or not fully committed to the job.
Think long and hard before you invite a partner into your dream!