You know the old saying, “two heads are better than one”? While having a partner can make a lot of things in life much easier, it’s not always ideal to have a partner when you’re starting a new business.
If you’re considering going into business with a partner, it’s important to understand the pros and cons of this arrangement. That way, you can make an informed decision.
Read on to learn seven important things you need to know about starting a business with a partner.
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Benefits of Starting a Business with a Partner
There are lots of reasons to consider going into business with a partner, including the following:
- Get multiple perspectives on various issues
- Your business may be easier to establish (start-up costs will be lower)
- More capital will be available for the business
- You’ll have greater borrowing capacity
- Opportunities for income splitting and subsequent tax savings
It’s also easy to change your legal structure later on if the circumstances of your partnership change.
Drawbacks of Starting a Business with a Partner
At the same time, there are some important drawbacks that you’ll need to take into account before you pull the trigger:
- Each partner is both jointly and severally liable (this means that they’re liable for both their share of the partnership debts and all the business debts)
- Friendships can’t always survive partnerships
- Each partner is liable for the other partner’s actions
Of course, there’s also the fact that you will not have total control over the business decisions. All decisions are shared, and you might end up experiencing a lot of disagreements.
1. Give it a Trial Run
Before you go ahead and make things official, it’s important to get an idea of how you and your potential business partner work together. For example, before you jump into a full-blown business, try taking on some small side projects together.
Over time, you can increase your shared workload and see how you do with the added pressure and challenges. If all goes well, you may be able to proceed and work toward starting your business.
2. Divide Responsibilities Equally
If you and your partner have decided that you do work well together and can handle the ups and downs of business, it’s important to take some time to figure out who’s going to handle specific responsibilities.
It’s important to figure out things like who will handle the creative sides of the business and who will handle the administrative aspects.
But, it’s also important to discuss more complicated matters. For example, who gets the final say when an important question about the business arises? Who has the leadership skills required to take charge during meetings with clients or future partners?
Ask and determine the answers to the hard questions early on so that there’s no confusion when trouble comes up.
3. Take Time for Yourself
When you start a business with a partner, chances are you’re going to spend a lot of time with them. This can be great, but it’s also important to make sure you take time for yourself to recharge and regroup, too.
In the early stages of starting a business, it’s easy to let your business consume your life. By taking time away from work, you’ll be able to look at things more objectively and make better decisions.
You’ll also most likely have an easier time working with your partner and handling challenges with patience.
4. Be Honest
When you’re running a business with a partner, it’s also important to make sure you’re honest with each other (and with yourselves) about how things are going.
If you’re having a hard time handling certain aspects of the business, or if you’re feeling frustrated with your partner, you need to air those grievances right away. The longer you let things fester, the greater the likelihood that you’ll have a more serious issue with your business.
Be honest and open, while still being fair and tactful. If your partner doesn’t appreciate this kind of communication, maybe you shouldn’t be in business together.
5. Have Regular Check-ins
Schedule meetings regularly and frequently. That way, you and your partner can assess the business and determine whether or not everything is working properly.
During these check-ins, look at how you and your partner are performing and address any problems that either of you may be experiencing.
Make sure you’re also looking at how close you are to accomplishing both your long-term and short-term goals. Set new goals regularly, too, so that your business is always growing and improving.
6. Consider Signing a ‘Prenup’
In some ways, a business is a lot like a marriage. For example, a “prenup” agreement can be very helpful.
Before you officially go into business together, you need to talk about what will happen in the event that things don’t work out. If and when you decide to go separate ways, you need to have a clear plan in place.
You need to prepare for this so that you’ll know how everyone will be compensated, how resources will be divided, and how clients will be served if you and your partner decide not to continue working together.
7. Accept and Support the Limitations of the Partnership
Finally, it’s important to acknowledge and support the limitations of your business partnerships. Limitations are areas of the business in which neither partner has experience or interest.
Limitations can present themselves in any aspect of the business – marketing, sales, financial management, etc.
Wherever you’re experiencing limitations, it’s important to acknowledge and accept them.
Then, if neither partner is willing to take on the extra work required to handle those issues, it’s important to find someone else (an accountant, a business manager, etc.) who can do it instead.
Looking for More Business Advice?
As you can see, there are definitely pros and cons to going into business with a partner. If you’ve decided the pros outweigh the cons, be sure to keep these factors in mind. That way, you’ll be able to choose the right partner and ensure your business is a success.
Do you need more help getting your business off the ground? If so, contact me today to learn about my business consulting and coaching services.
