Thursday, June 12, 2008

Are Partnerships Really Worth It?

Are partnerships for dummies? My lawyer pretty much thinks so. In fact, his advice to most coming to him asking about going into a business partnership is pretty simple: Don’t do it.
Most entrepreneurs need partners when they start their businesses for financial reasons. That’s pretty easy to understand. I get that.
However, keep this in mind: Partnerships are like marriages, but worse. In some cases, they are harder to get out of, more costly and can involve more people (all your employees and families).
The problem with partnerships isn’t at the beginning when everyone is motivated and pulling for a certain goal. The real problems come years later when priorities of all partners begin to change. Maybe you want to grow the business into another market, while your partner is happy with your current success level. In the last year, I’ve seen two partnerships go bad after at least 15 years in each instance. That’s a lot of time, effort and sacrifice to end abruptly.
In the spirit of full disclosure, I am in a partnership. My partner is a 40% owner of the firm, while I hold 60% ownership. So far (at least a couple of years), so good.
My partner and I received these three nuggets of advice before we entered into our partnership that really helped us:
-Someone must be the majority owner. 50%-50% just doesn’t work. Someone must be in a position to make a final decision, and everyone needs to understand this from the beginning.
Duties and roles must be spelled out before you begin the partnership. As many details as possible need to be ironed out. My partner and I talked through salaries for ourselves and employees, hiring, firing, etc. We ended up with pages of situations. Plan out how all those decisions will take place and get it in writing.
-Personality tests are often a great way to find out how each partner operates. Opposites attract and, if done correctly, can operate as a complete team together.
-Get some third party perspective and help.
If you have any other items to help others, let me know. We’ll continue to add to the list.
--Ron Ameln, SBM


Post a Comment

Links to this post:

Create a Link

<< Home