Part 3: Partnerships

Is a business partnership the right way to go? I think the answer is, like so many other things, it depends on who you are.

I got into a partnership with a 50/50 split even though the business idea was mine for several reasons:

  1. I hadn’t put in any money into developing the idea.
  2. I like to bounce my ideas off of someone.
  3. I wanted to motivate my business partner.
  4. We would be splitting the work 50/50.
  5. My partner had a strong connection that could get our company off the ground.
  6. I wanted to share financial risk.
  7. I’d worked with my business partner before so I knew I could work with him.
  8. My partner had skills that could complement my own.

I thought long and hard about all of these things before I decided to commit to my partnership. I actually was on the lookout for a partner to begin with (see reasons 2 and 6).

If you are someone who likes to run the show without outside interference you may not want a partnership, at least not one that you don’t have majority ownership. Remember that although you may have a great idea and you think you know how to execute it, it is impossible for you to know everything. This is why it’s important to surround yourself with good people, people that will complete your skill set with their own unique set of skills.

If all a partner can offer is money than you may want to consider a silent partnership, giving them preferred shares instead of common shares. Preferred shares are senior to common shares meaning that they receive any payouts first (ie. dividends or claims to any assets in the case of bankruptcy), but at least you still get to make all the decisions.

If you choose a partnership don’t expect to agree on everything no matter how much you respect their opinion. In fact, there’s not much point in having a partnership if you are going to agree on everything. Chris and I disagree often, and sometimes just agree to disagree. If we have reached a stalemate one of us will usually let the other go ahead with their idea and if it doesn’t work we try something else. We also ask friends and mentors for advice if we feel we need a third, fourth, or fifth opinion.

Here are some questions you might want to ask yourself before getting into a partnership:

  1. Do I have enough equity to accomplish my goals?
  2. Can I work with this person?
  3. Will adding a partner make a major immediate positive impact?
  4. Can I get help from this person without giving away equity? (Maybe you can just pay them.)
  5. Do you want to spread your risk out?
  6. What is the best choice for my business long term?

Assess your situation carefully and take note that every business has a different situation. Just because my choices have worked for me doesn’t mean they will work for you. My best advice would be to consider all the pros and cons before making any decision, but once you know, you’ll know!

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