Inside Small Business | Small Business & Home Business Marketing
My brother-in-law wants to be my business partner. Do you think its a good idea?
The quick answer: No! It has been my general observation and my personal experience that business partners can make good friends. But friends (and – even worse – family members) usually make lousy business partners.
The longer answer: A business partnership is like a marriage, only with much more personal, intimate contact. It can be a tough relationship.
I don’t know the exact statistics, but many – if not the majority of – partnerships fail. Of the dozens of partnerships I’ve known over the years, the ones that seemed to succeed best have been those in which the partners rarely saw each other, with each focusing on his or her own areas of the business. Many rarely socialized outside of the office.
Roll a family member into the mix, and the stage is set for disaster. Imagine if things go wrong. Not only is the business in jeopardy, but the family is also at risk of being torn apart.
Here’s my personal experience: I took on a partner about six years ago for a great business idea I had. The result was disastrous! The partner, a family member with unproven business skills, became paralyzed by the risks, worried about that first year of projected losses, refused to make decisions and, worse, vetoed every decision I tried to make. Struggling through managerial gridlock, we never made it to year two; the store closed its doors nine months later, a complete loss, and I was out $150,000.
The lessons I learned:
• A 50% partner can control 100% of the business decisions. If you must take on a partner, always retain no less than 51% control.
• Better yet, whenever possible, avoid having partners. Be a control freak. It’s what makes small-business owners successful. For me, it wasn’t that I couldn’t relinquish control, but that my partner became a control freak, something I had not anticipated.
• If you do take on a partner, make darn sure he or she has unique and extraordinary skills that you need. For example, if you are both creative types, that’s bad; if one of you is a creative type, the other a marketing or business expert, that might work out.
• Draft a partnership agreement, so everyone knows what is expected, who owns what, etc. Invest in a good business lawyer to help you.
• Make sure your partner has the personality and temperament to work in the high-wire-no-net atmosphere of business. Business can be a high-stress lifestyle, especially at first. The pressure can bring out the worst in otherwise even-tempered people.
• Most of all, make sure your personalities are compatible and that you have the same work ethic and agree upon goals. (Imagine if you enjoy putting in 60-hour weeks, but your potential partner thinks that owning a business means half days and lots of vacation!)
The bottom line: Most people take on partners because they’re afraid to go it alone. That’s understandable. But if you really do decide you need a partner, make it a steely-eyed, cold, impartial decision to find someone who can help you and your new business succeed.
Work hard. Make money. Have fun.
John R. Ingrisano
The Freestyle Entrepreneur
www.TheFreestyleEntrepreneur.com
Posted on Wednesday, June 4th, 2008 at 9:05 am and is filed under Boardroom, Entrepreneurial, Small Business. You can follow any responses to this entry through the RSS 2.0 feed.
