The Art of Business: The Ins and Outs of Teaming Up
In uncertain times like these, when the economic and now geopolitical news seems catastrophic, many sole proprietors feel the urge to partner up, if for no other reason than to find someone to share the very real emotional and financial stress of today’s world.
Partnerships offer great advantages, but they can create as many problems as they’re intended to solve. So if the urge to partner up overtakes you, stay calm and reasonable, and make sure you’re entering into this significant relationship for the right reasons. Here are a few questions you might want to ask yourself before tying the partnership knot. If you answer “no” to any one of these questions, seriously reconsider the partnership alternative.
Question 1: Am I the partnering type?
If you’ve been a sole proprietor for some time, you’ve probably gotten used to the luxury of making decisions by yourself. To thine own self be true. Could you live in a world where you have to consult with someone else before taking an action or, even worse, where you must allow someone to make decisions on your behalf? As a free agent, chances are you left your last job at least partially because you hungered for greater autonomy. Are you willing to forgo it once again? If the answer is no, and you still feel the need to expand your business, think about hiring a subordinate with special skills.
Question 2: Do I have a compelling reason to find a partner?
Everyone loves company, but loneliness is a poor reason to seek a partner. A partnership in many regards will be more intense than a marriage, given that you’ll spend most of your waking day with your business partner. Why even consider a partner? Here are some worthy reasons:
- You need capital.
- Your business needs someone with specific skills or knowledge, such as Web development, business development, or marketing.
- Your business needs someone with familiarity or deep connections in an industry or niche you want to crack.
- There is simply too much work for you to do alone.
Many people see partnerships as a money-saving strategy. After all, why pay the expense of two offices and brands when you can share the expense of one? If that’s your thinking, explore office-sharing arrangements or other co-working alternatives before you merge simply to save a few bucks. With a partnership, you’ll pay in sweat what you don’t pay in dollars, guaranteed.
Selecting a friend as a partner, as enticing as the idea may sound, also isn’t the smartest choice. Unless your friend satisfies one of the criteria above or brings to the table something of great value other than a warm fuzzy feeling, think twice before taking the plunge.
Question 3: Does my potential partner share my vision?
Where do you want your business to grow tomorrow? Don’t assume your potential partner wants the same thing. Detail your goals and ask your potential partner to do the same.
Are you interested in becoming a high-end boutique design firm or a design factory with lots of employees? Do you want to introduce new products or services or extend existing offerings to new industries? Print or the Web? Do you want to work 60 hours a week or 35? Will your customers be Fortune 1000 companies or family businesses? Can the family dog hang out in the office?
If it seems you’re on the same wavelength, than start working together on a business plan that lays out the partnership’s goals including specific milestones, along with a clear explanation of the major responsibilities of each partner. Be as specific as possible, if for no other reason than to encourage dialogue before the daily grind of work makes it impossible to talk through potential areas of conflict.
Question 4: Is my partner willing to give what it takes?
Here’s the big enchilada. Many people enter into a partnership because they think it will reduce their own workload or, worse, to take a free ride on someone else’s coattails. You want someone who is willing to put the time and energy into the business to make it work — and who has a proven track record of devoting this kind of effort to a business. If your partner ends up being a drain, you will suffer emotionally and financially. You’ll also put your reputation at risk, as your clients will soon become your partner’s clients. Do your due diligence on your potential partner, just as you would on any investment in your future.
Question 5: Do we have an exit strategy?
Keep this bit of old business wisdom in mind: There are two types of partnerships — those that are forming and those that are breaking up. A break up may not be inevitable but it’s certainly possible, and therefore a clear exit agreement should be in place before you establish your new entity, be it a partnership, a corporation, or some other legal form of organization.
Have your attorney draw up a formal agreement covering every eventuality you, your potential partner, and the attorney can dream up, including the unthinkables of death and disability. Discuss and agree on the division of profits, clients, and assets.
As much as we’d like it to be so, business relationships rarely end on a smooth note. All those initial good intentions vanish in a puff of angry smoke as the partnership disintegrates. Therefore, as inauspicious as it may seem right now, it’s essential that you focus on the end even before you begin what hopefully will be a fruitful relationship.
And don’t forget to draw up an exit plan for retirement because, who knows, maybe you’ll strike it rich and find a beach hacienda more appealing than 70 hours a week in front of a computer screen. We should all be so lucky, and perhaps with the help of a business partner, you will be.
This article was last modified on December 14, 2022
This article was first published on October 1, 2001
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