Business Partnerships suck, don’t do them. As blunt as that statement might be, it’s a fact that once you’ve brought outside individuals into your business, whether they be family or other, you are begging for problems in your organization.
It’s no secret that I’m a firm believer in the best business partner being yourself, and though I understand the prospect of bringing someone in to help “Carry the load” sounds appealing to many business owners, I cannot stress the complications that come as a result, enough.
Whatever your reason might be for considering a partnership, I implore you to ask yourself the following two questions before bringing in a partner:
- Would you not be better off getting a loan instead? If you need cash and you think that bringing in an extra set of pockets will help carry the financial load of your business, you have the wrong idea. Never give up equity in you business, because once it’s gone, it’s very hard to get back.If you need money, get it as a loan; don’t take it in as equity.If you don’t have enough assets to secure the loan, and you need to take it in as equity, then set provisions in place that will allow you to get the equity position back.Too many times people take out a $50,000 investment, and give up 25% of their business, and it’s insanity. You are the one who put in the sweat equity to get your business started, or keep it growing. Why should you be giving up equity and control?
- Have you prepared a detailed partnership agreement? Bringing in a partner is a complicated process, one that demands a business partnership agreement. Some considerations include: Establishing job roles; Who is in charge of what; The how, what and when people will be compensated, and most importantly what happens when a partner is not carrying their load.Pay careful attention to protecting yourself, and your business against the possibility of things going south. As the owner, you have to ensure that you have a way out of a failing partnership. In doing so, also protect the intellectual property of your business by having your partners sign non-disclosure, and non-compete agreements.
If you decide to bring in a partner, do so with caution. Make sure they control no more than 49% voting rights in your business, and don’t just give away shares and control if you are hurting for money. It’s your business; do your best to keep it that way.
As I have stated many times, I firmly believe your best partners are your left hand and your right hand. Don’t do it!