Building a business alone is hard. Shoot — building is hard period. That’s why it’s so common to have partners. Yet not everyone should be a partner.
My first big foray into business was a consulting firm, or a ‘service business’ as I typically refer to it for more mass appeal. I started with two partners. We were naïve and made a ton of mistakes but managed to find more success than setback so we grew quickly. To the tune of $10 million in annual revenue and 50+ employees in our first 5 years together.
The partnership was hard. We all excelled in the same essential areas and suffered from the same classic issue of ‘not knowing what we didn’t know’, focusing our efforts by working IN the business instead of ON it.
“Most entrepreneurs are merely technicians suffering from an entrepreneurial seizure. Most fail because they work IN the business rather than ON the business.”
— Michael Gruber, The E-Myth Revisited
Yet going into the third year, we realized our focus needed to change. We gave ourselves distinct titles (no more ‘Manager Partner’ for us) and began dividing our duties based on our passions. Using economics terminology, we discovered our comparative advantages and worked them into our business.
We grew rapidly, with three consecutive spots on the highly-coveted INC 5000 annual listing of the fastest-growing private companies in the US. Yet we had conflicting goals around whether to scale the service business or morph into a software company. In my eyes, it was one or the other — not both. In the end, I chose to sell my shares and move on.
As I said, partnerships are hard. Most don’t work out in the long-run, but you didn’t come here to hear my break-up blues. You want to know what to look for in a great partner… or partners.
As with anything important, defining what makes a partner “great” is complex. So I’ve codified my thoughts into several questions that you’ll need to answer. I can’t stress this enough, do your best to be objective. Bringing on partners is serious business with long-term consequences.
1. Do they share your core principles?
By that I mean, do they share similar ideals. Do they value people the same way you do? Would they abandon an existing customer to land a better one? If so, for what reasons? Do they offer objective reasons or can you see unfavorable biases in their reasoning?
Obviously, questions like those above would probably be hard to discover in routine conversation. However, these are the kinds of questions that help each of you understand the other’s character. Take the time to define your important questions.
The rule of thumb here is to spend as much time as necessary to unearth core beliefs that overlap. And those that do not. Do your best to decide whether 5-, 10- or 20-years with that partner would be rewarding and satisfying.
2. Do they challenge you to improve?
I’m not talking about shoring up weaknesses. While not a terrible idea, you should focus your efforts on improving your strengths rather than trying to eliminate your weak points. Being well-rounded works in some scenarios, but is not a prerequisite for achieving greatness here.
The challenge I’m speaking of deals with evolving your perspective to take in more data points. A great partner helps you understand viewpoints that don’t match your own. Each of you should strive to keep learning, to share new ideas, and routinely revisit prior assumptions, strategies, and tactics.
3. Do they offer unique strengths?
Said another way, are they strong in places where you are weak? It makes little sense to take on partners that all excel in the same areas. Partnerships work best when you can divide the workload.
These don’t need to be absolute strengths. In economics, this is called “comparative advantage.” In a nutshell, while you and they may be great at the same thing, one of you will be better at another thing. That’s your comparative advantage and where the focus should be spent.
Other times, this may boil down to who is most interested in a given area juxtaposed with who would be most likely to succeed in pursuing that area. These are considerations that must be fleshed out early-on and with a sense of urgency.
4. Do they share your long-term vision?
A startup business can only run in one direction if it wants to increase its chances of success, avoid becoming mediocre, or reaching escape velocity. While there are many examples of businesses diversifying, they do this by sacrificing their true potential if not sufficiently large enough.
Your partner needs to see the same future you do and want to help realize it. That means saying ‘no’ far more often than ‘yes’ when it comes to choices that would steer your venture away from its potential future. At its core, you all need to be marching towards the same set of long-term goals.
5. Are they committed to the journey?
Business is hard. There will be times when everything feels like it is going well and then times when you don’t want to get out of bed. If your partner doesn’t plan to roll up their sleeves and muscle through the bad times, you and your business will suffer. It’s easy to say they will stick with it, but words aren’t actions.
You owe it to yourself and your business to be objective here. Do they have a track record of perseverance? Or do they split when things get tough? What do they want to achieve in the long-term? Will they stick it out just as long as you will?
A caveat for those that read this far
While there are benefits to having partners, you don’t necessarily need them to succeed. There are plenty of businesses that have succeeded with one owner. But far more that started with a partner (or several) and eventually morphed into one person owning everything.
Should you take on a partner? That’s a very personal question based on your tenacity, experience, and ambitions.
In a nutshell, with great partners, you can divide and conquer — splitting the duties to grow and nurture your business. And that’s key. Dividing duties is crucial. If you overlap, you trip one another up and confuse your teams.
But just because someone can help spread the workload does not mean they would make a great partner. As with any business, you should guard your ownership fiercely. It’s no small thing to give up equity as that has plenty of ramifications that may cause more pain in the long-run than prosperity in the short-term. There is no magic answer here given every situation is unique yet I’ll venture to say this:
If you can afford to hire a person as either an employee or contractor, go that route. At least at first. Think ‘try before you buy’. That person may want more out of the relationship, but this is in their best interest as well. No one is committed long-term (yet).
I will always recommend avoiding partners as my default stance. Not just to keep 100% control of the business, but also because you can often incentivize people without the need to share equity.
This article originally appeared in Entrepreneur's Handbook on Medium.
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