Working with a business partner drastically changes the dynamics of running a business. A great business partner can add a lot to a venture. On the other hand, entrepreneurs can also benefit from going solo when the alternative means an incompatible partnership or working with a partner who doesn’t have the right skill set or experiences necessary for success.
Having a business partner has advantages and disadvantages. Working with a partner may or may not benefit you and your business. Consider these points before you decide whether or not to work with a partner or to run your business on your own.
Advantages of Having a Business Partner
A business partner may help your startup become a success. Business partners allow you to share the workload and to combine skills with another entrepreneur. When you work with a partner, you can enrich your business by having a solid teammate.
Some of the advantages of working with a partner include:
1. Twice as Much Manpower
When you work with a business partner, you can do twice as much work. A lot of work goes into building a business. You need to do marketing research, networking, research and development, sales pitches, and meet with potential lenders or investors. All of this can overwhelm a business owner. In the early stages of a new venture, you may not have the resources to hire employees to assist you. Thus, you may need a partner you can trust to share the burdens of starting a new business.
2. Diversity in Skills
A business partner may bring an entirely new skill set to the table. One business partner may have a background in engineering and research, while the other excels at sales and networking. Taking advantage of utilizing the differing skill sets can help the business succeed. In addition, working with a business partner allows you to divide up tasks according to strengths, conserving time and eliminating duplication of efforts.
3. Different Perspectives
Business owners need an outside perspective to avoid tunnel vision. You might think that you have the best idea or solution to a problem, and readily invest capital into your business plans. Successful entrepreneurs have faith in their ideas, but may need someone else to put things in perspective. The decision-making process becomes easier and more realistic when two or more people objectively evaluate ideas and share their concerns and feedback.
4. Someone to Hold You Accountable
Some people become lackadaisical when they begin a business. They may have a hard time maintaining the discipline needed to stay motivated. Partners keep each other on the ball, and hold each other accountable for any mistakes.
5. Someone to Evaluate Ideas
Business partners talk to each other about their ideas. Many entrepreneurs have trouble maintaining objectivity when initiating a new business idea. A business partner helps you realistically evaluate new ideas and business plans for potential flaws. Your business partner can also build off your ideas, offering more input to refine your plan, so you have a better chance of succeeding.
6. Networking Opportunities
Networking is a fundamental aspect of business. Every time you meet someone, you have the opportunity to meet even more people through that person’s network. You need many connections to succeed in business. Having a partner gives you the opportunity to expand your list of contacts, and multiply your numbers of potential clients, investors, suppliers, and mentors.
7. Ability to Keeps Things in Perspective
Entrepreneurs often ride a roller coaster of emotions. Sometimes they become too pessimistic and other times they feel overconfident. Pessimism and too much confidence can both hinder a new business plan. A partner can help you keep everything in perspective and not get distracted by fluctuating emotions.
As Warren Buffet once said, “Believe in yourself, but don’t be full of yourself.” Avoid going to emotional extremes by using a business partner to help you identify and pursue new opportunities, without relying only on your opinion and experiences.
Disadvantages of Working with a Business Partner
Although working with a business partner can offer you many advantages, choosing to work with someone else also has some downsides. A bad business partnership typically happens when an entrepreneur chooses the wrong partner, or chooses a partner for the wrong reasons.
Some of the disadvantages of working with a business partner include:
1. Different Work Ethics
Many entrepreneurs find themselves working with partners who don’t share their enthusiasm or passion for business. 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.
Unscrupulous business partners can also contribute to the downfall of a business. Although you hope to know your partners beforehand, you may not realize their true colors until they have damaged your reputation, stolen money, or got you in some kind of trouble.
2. Lack of Experience
Some business partners don’t have the experience or skills to do their job successfully. When working with a business partner, you need to count on your partner to deliver results. Working with a business partner who can’t deliver can lead to many disasters down the road, including poorly designed products, angry customers, and potential lawsuits.
3. Disagreement on Direction
A poor choice of a business partner causes major problems for any business. Sometimes, even working with a motivated, talented, and brilliant partner also causes problems. Business partners may disagree on the long-term goals for the company. They may spend weeks or months bickering over key decisions. Disagreements between partners may consume resources, cause stress to other employees or lead to inconsistent business practices.
4. Sharing Profits
When you have a business partner, you have to split the profits. Entrepreneurs happily share profits with partners when they bring additional value to the firm. If your partner does not increase business enough to justify their involvement, however, they shouldn’t receive a share of the profits. If you make the same amount of money with a partner as you do without a partner, you may have selected the wrong person to help you run your business.
5. Complicated Relationships
When people go into business with someone close to them, they risk damaging the relationship. Business partners often have differences in opinions. Sometimes, those disagreements can lead to serious misunderstandings. Because of this, a bad business partnership can devastate a relationship when the partner is a friend, spouse, or family member.
6. Liability for Your Partner’s Actions
You take responsibility for whatever happens in your business. If your partner violates any laws, you may end up in court, too. This can lead to a fine for violating government regulations, a lawsuit in the case of a civil tort or if you are found liable for damages, or possible imprisonment in the event your partner commits a criminal act.
When you have a business partner, you have the added stress of making sure you know everything your partner is doing. Even if you and your partner trust each other, you have to monitor your partner’s work, to avoid negligence, misuse, or violations. You have to make sure you both understand applicable laws and establish a set procedure for running the business.
7. Your Reputation on the Line
Even if your partner doesn’t break the law, his or her actions may come back to haunt you. A shady or dishonest partner may lead to widespread distrust of your company. This may permanently damage your reputation. People align you and your partner with your business, and the company you keep while building business relationships may negatively reflect upon the reputation of your business.
Before you decide to take on a business partner, make sure working with a partner benefits you and the business.
What to Consider Before Working with a Partner
In addition to considering the pros and cons of a business partnership, make sure you have the right motivations before going into business with someone else. People go into business with partners for many reasons. Analyze the reasons for choosing to work with a business partner to ensure the success of your business.
Good Reasons for Entering into a Business Partnership
Create a business partnership for the right reasons. Good reasons for entering into a business partnership include:
- You lack strength in certain essential areas (e.g. technical, marketing, networking, finance, or operations management). You need a business partner with strength in these key areas, to help enrich your business model.
- You run a complex business that requires more work than one person can handle. Find a business partner who can fill in the gaps, and take your place in front of employees or clients when needed.
- You know a brilliant businessperson who can add value to your business. Go into business with someone who has demonstrated a record of success, if you know you can fully utilize his or her talents.
- You are a team player and work well as part of a team. Many people thrive in a team environment; if this describes you and you have an excellent candidate for a team member, you have a good reason for entering into a partnership.
Bad Reasons for Entering into a Business Partnership
Entering into a partnership for the wrong reasons can harm your business. Bad reasons for entering into a business partnership include:
- You need a “yes man” who agrees with all of your decisions without question. Rather than working with a true partner, you want someone to tell you he or she loves your ideas. This leads to narrow thinking, and won’t provide you with the feedback you need to make your business successful.
- You may want someone who takes direction of the business for you. You put your faith in your partner’s hands, rather than taking a key leadership role. If you don’t invest enough time in your business, you may risk becoming liable for your partner’s activities, or becoming a victim of fraud.
- You want to go into business with a friend. Friendship shouldn’t play a role in choosing a business partner. Instead, find a business partner who can help you enrich your business using his or her individual talents and skill sets.
- You want someone exactly like yourself standing beside you. You won’t have diversity if you work with someone who thinks exactly the same way as you. You don’t need to have an adversarial relationship with your business partner, but your partner should challenge you from time to time.
Identify what you really need from a business partner before you start looking for one. Once you have completed this essential first step, you can begin the process of choosing a business partner.
Where to Find a Business Partner
Today, you have many options for finding a business partner. In addition to old school networking, many websites also foster business relationships. Ways to find a business partner include:
1. Someone You Already Know
Many people tend to work with friends, spouses, close family members or other people who play a significant role in their lives. I’ve already noted some downsides to partnering with a friend, but those don’t always apply. Although you shouldn’t choose a business partner solely because he or she is a friend, a friend can make an excellent partner.
If you know what a friend can bring to the table, and have intimate knowledge of his or her business successes, your friend can make an excellent business partner. You also already have an existing rapport, and your ability to communicate effectively can positively impact your working relationship. On a related note, if you want to offer a partnership to a former coworker, make sure to carefully examine any non-compete agreements before you go into business together.
2. Networking Groups
Expanding your network can help you find a business partner. Many entrepreneurs partner with people they meet at networking groups, or in their MBA program if they’re enrolled in business school. Look for potential business partners at industry-specific or professional association meetings.
For example, if you plan to start a web design company, you may find a potential partner at a meetup group for web designers or networking hub for Internet professionals. You can also find potential business partners at rotary groups, BNI chapters, and business incubators. I even know two people who started a business together after meeting at an unemployment center!
Check out Meetup.com to search for business networking groups in your area.
3. People You Meet Online
You can find potential business partners on social networking sites (e.g. Facebook, Twitter, and LinkedIn) and online jobs boards. Some people have even used online marketplace sites like Elance to find compatible partners for their businesses.
This critical business decision takes time. Don’t rush to judgment and make sure you have a good idea of how the two of you might work together, before you sign a partnership agreement.
Business partners can become your greatest asset or worst liability. Deciding whether or not to go into business with someone else may be one of the most important business decisions you ever make. Deciding who you go into business with can be just as important. Weighing the advantages and disadvantages of having a business partner, and carefully analyzing the reasons for choosing a business partner can help ensure that you find the right person to entrust with your business.
Once you make the decision to find a business partner, begin expanding your online and offline network to find the best partner for your business. Take your time making a decision, to make sure you find a business partner who really fits with you, your business ideas and your goals.
Do you have a partner for your small business? What were some of the factors that you considered, and how has the relationship worked out so far?