Partnering With Other Entrepreneurs – Pros and Cons

Partnering with another business owner means sharing ownership, responsibility and trust. Should you find a partner? Is it better to team up with a friend? For some people it is a “no” because they are afraid of losing their friendship for having money involved. For others, it’s a “why not do business together?” This seems to keep the friendship one 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 fit based on business industry, financial situation, and many factors. Let’s ask some critical questions:

1. Is the business your idea or with another person? 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 agree 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 manage this business?

These are some vital questions entrepreneurs should ask themselves before creating a partnership.

I have talked to many entrepreneurs and did some research. Here are some advantages and disadvantages of partnering:

• Property:

Pros: Pride of ownership, freedom from control by others, time invested will show higher returns, flexibility in making decisions.

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 associated only for capital, an entrepreneur may think twice. Partnership mistakes are costly because a partner may not have experience in the business or be willing to invest the same amount of time.

• Control:

When it comes to partnering, many people immediately think 50/50, so 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 final decision. Research shows that it is better to enter a 60/40 or 70/30 society. Every business needs a person who has overall control and responsibility. This way, employees won’t be confused who the boss is.

• Personality:

Pros: Different and more diverse characters can benefit from various tasks such as finance, people, products, marketing management, etc.

Cons: They face the same problems, but two people may react differently.

• Vision of the partners:

Pros: It is 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: Lifelong experiences, knowledge, and more flexible work schedules, but not much energy and might be considering retiring soon.

Younger member: They know new technologies and are full of energy. Eager to work but lacking real-world work experience or some specific skills needed. Less flexible work schedules or not fully committed to work.

Think carefully before inviting a couple to your dream!