Many businesses are started by just one person, working alone. We are social creatures, and from kindergarten through college, we´re in the company of our peers. When we enter the workplace, most of us work with others. We tend to take working with others for granted.
So when people start a business, why do so many start alone? If someone hatches a business idea with their school or work peers, they´re likely to go into business together. But if the business idea is purely your own, you probably don´t visualize partners being part of it.
Is it a good idea to go solo? It depends on a number of factors including your own temperament and the complexity of your business. No one is expert at all aspects of a business, so if you go it alone you´ll need to hire someone to do what you don´t do well. And hiring someone before you have a revenue stream is a problem.
Plus, let´s face it, it´s lonely working solo, even if you see customers every day. It´s almost enough to drive you into partnership, just for the company. But wait! That´s not a good reason. There are plenty of horror stories about failed partnerships. Barry Moltz in his book, You Need to Be a Little Crazy, devotes an entire chapter to "Having a Partner". He points out that getting into a partnership is a lot easier than getting out.
Let´s look at the pros and cons. (I´m not talking about legal partnership; I mean teaming with someone else who shares in the effort and the success of a business. See references at the bottom for the legal considerations.)
* A sole proprietorship is the simplest organizational structure
* There won´t be conflicts about business decisions
* You are indisputably the source of your own success
* You need to do it all, even though you´re not expert at everything
* You can´t go on vacation without shutting down the business. Or you use technology to take business along on your vacation.
* The greatest potential problem? You have no sounding board for your ideas, and nobody to provide a second opinion. This is the flip side of the "no conflicts" coin.
* More heads are better than one. Professor Ed Roberts of MIT Sloan School found in a study that the probability of success increases with team size up to four or five entrepreneurs.
* Partner(s) contribution to startup capital allows you to scale up your business sooner
* Chances are better that you´ll have the right talent for all facets of the business
* Decision-making is difficult if the partners are of different minds. Conflicts will invariably arise
* You need to choose a suitable organization structure to meet the needs of all partners. Will some be limited partners?
* An exit strategy is much more complicated, and at the same time is more necessary.
What should you look for in a partner?
The ideal partner complements your shortcomings with corresponding strengths, shares your values, and is respectful of your opinions. Sounds a lot like a marriage, doesn´t it? Partners need to share your belief that the business idea has legs and be willing to invest time and money proportional to their share of the business.
A third alternative is to enter into business partnerships where another business takes on an aspect of your business that isn´t your strong suit, but maintains their own business identity. You´re too small to get the geographic reach it will take to achieve a viable scale? A distribution partner can be the answer. Or perhaps your expertise is in design and sales, but you don´t have manufacturing experience. A manufacturing partner can be a solution.
Whatever you do, don´t take on a business partner without a detailed, viable agreement that spells out each person´s share of the ownership, how profits (and losses) will be allocated, and identifies roles, responsibilities and time commitments of each partner. Your agreement should consider how disputes will be resolved and clearly define how assets, liabilities, and expenses will be distributed if the partnership must be dissolved for any reason.
More information on partnerships: