- The pros and cons of starting a business with partners
- For those starting a business or expanding a business
- Identify whether working with a partner can grow customer base and improve your business
Starting a business is always a challenging endeavor, and it can be even more difficult to do it alone. Engaging a partner can help broaden your access to capital and enhance your skill set, increasing your chances of success. However, partnerships also entail certain risks and you’ll want to make sure you take the necessary steps to ensure that the arrangement works out.
Bringing a partner on to form the business can improve your expertise, especially if you find someone whose knowledge complements your own. A partner will also give you additional insights on business decisions and help identify new opportunities to grow the company.
While entrepreneurs who launch a business on their own are responsible for all aspects of running the company, partners will take on some of the necessary tasks. This, in turn, can reduce stress and help make your operations more efficient and effective.
By bringing a partner into the endeavor, you’ll broaden your financial resources. Each partner can contribute some of their own personal funding toward starting the business, minimizing the financial impact on any one person.
Finally, a good partner is a valuable form of support. The best partnerships are collaborative, motivational, and inspire each person to do their best work in helping the company succeed.
One disadvantage of creating a partnership is that you give up some ownership of the company. This, in turn, means that you won’t have full control over business decisions and that you’ll need to share any business profits. If you have multiple partners, the amount of money you earn from the business can be whittled down considerably.
If your choice of partner turns out to be an unwise one, it can have several detrimental effects on your business. If one partner makes a reckless decision, all partners will be held responsible rather than just the one that made the error. A bad partner can also harm the company’s reputation.
Different personalities can easily lead to clashes between the partners. Disagreements over key business decisions can turn rancorous and even threaten personal relationships if your partner is a family member or friend. Partnerships can also breed resentment if there is the perception that a partner is overstepping his or her bounds, or that their work ethic is not as strong as yours.
Tips for forming successful partnerships
Before seeking partners, consider your own values. These include why you’re deciding to start a business, what you hope to accomplish, and long-term goals for the endeavor. Your partner should have similar aspirations.
A partnership is more likely to result in clashes if you take different approaches in areas such as management style or willingness to take on risk. However, you shouldn’t just look for someone who is nearly identical to you; bringing on a partner who will take a different approach can help you determine the most successful way to run the business, as long as you are able to respect each other and work together.
To that end, it’s best if you find a partner with whom you have an existing relationship. Ideally, it will be someone you’ve worked with to accomplish projects, handle challenges, or otherwise achieve a collaborative goal. The partnership is also more likely to be successful if you the partner is someone with whom you have a friendly relationship.
Set up the partnership in writing to avoid conflicts in the future. This document should clearly define each partner’s responsibilities, outline the profit distribution, set up a process for resolving disputes, and create an exit agreement on what will happen if any partner decides to leave the business. Work with a lawyer or accountant to create this agreement.