Photo: http://catholicquarter.com/blog/2010/06/03/fighting-words/

Like a messy divorce, the breakdown of a business partnership can cause stress, anxiety, law suits and, often, the destruction of the business. But when you in the throes of giving birth to your business idea, many people don’t want to go it alone.

I have conversations with would-be business owners all the time who want to go into business with their best friends “because they think it will be fun”, or with their mate “because he’s great with numbers and I’m more creative”, or with family members “because I have no money and they can fund the start-up”.

In some cases, this works out. In many cases, it doesn’t. Or it’s fraught with angst, disagreements and problems.

If you are considering going into a business partnership, stop! Before you plunge headlong into a joint commitment from which it could be hard to extract yourself, think long and hard about why you want to do this.

“I need the funding”

If the only reason you are going into a business partnership is so you can access funds, consider whether you can find the money another way. While a cash injection from a business partner may seem quick and easy – especially if they are ready to hand over the money – it may not be the best idea in the long run.

Investigate if you can find the money another way, perhaps as a loan that you can repay with interest, instead of a cash payment for part of the company.

“I hate doing the books”

Going into business with someone just so you can avoid doing the accounts is not a good reason. Plus, handing over the financial reins of your business to your business partner is not the best good idea in the world. Even if you “hate doing the books”, you still need an understanding of your accounts, cash flow, debt levels, profit and so on.

It doesn’t mean you have to go into business with someone. Hire an accountant.

“It would be fun”

I often hear this from besties or acquaintances who usually have a great time together socially. They have a common interest and think that it will be the great basis for a business idea. Yes, it’s great to have a business that you are passionate about. But this “fun” can quickly dissipate when you realise that you both also have to shoulder hours of hard work, administration, planning, marketing, stock control…the list goes on.

The idea may be fun, but the execution often isn’t. Stick to having fun socially.

“My partner has connections”

Usually, this isn’t a good enough reason to go into partnership with someone. It may be true that this person is incredibly well connected. The first thing to consider is whether they are connected to the right people. That is, can those connections really lead to lucrative contracts for your business?

If the answer is “yes”, consider whether they would be open to a “finder’s fee” – or some sort of commission for every contract that has resulted from their connections. This could be a flat fee or a percentage of the contract.

That way, you don’t have to give away the farm by going into a partnership. But you can both still benefit from working together.

“I have a great idea but I don’t know how to market it”

Get a marketing or PR consultant. Again, this is not a good reason to go into business with someone. Sure, we all have our strengths and weaknesses and, in some business partnerships, one person looks after the marketing while the other looks after administration.

However, if you have a great business idea and you really have no idea how to market it, then I would suggest that you are not ready to go into business yet. This means that you have not thought through a business plan which should include a clear strategy on how to market, sell and distribute your product/service.

It can be worthwhile to engage a marketing consultant to help you determine this strategy.

Talk to a business coach

If you are considering going into partnership with someone, talk to a business coach. Most good business coaches will be able to throw questions at you to determine the real reasons why you want to go into partnership. And they will be able to help you understand what the other person is going to bring to the party.

Importantly, if you do decide to go down this path, talk to both a coach and a lawyer. Think of it as pre-marriage counselling. You want to plan your divorce at the start.

Then you will be clear about your roles and be able clarify what will happen if things go sour from the outset.

– Sydney Morning Herald, found in the NZ Herald

Heike’s opinion:

I understand the desire to work with a business partner as it can be lonely in business by yourself and the ideas in the article above are those that come up in most people’s minds, especially entrepreneurs who often are specialists in one area, such as coaching, writing books or advising on health, business or finances.

If we are a marketing expert, we often don’t like numbers, if we are a finance geek we often can’t create an inspirational marketing strategy. There are the creatives on one side and the numbers people on the other side and we often feel when we lack the other skills, a partner would be the answer.

A less risky solution: hiring support people

This is where outsourcing comes in. If you feel you need support in your online business do consider hiring a virtual assist (VA) as it is a very cost effective solution – especially if you can’t afford an employee yet.

The VA needs to have complimentary skills to yourself, eg. there are bookkeeping VAs and marketing VAs out there who are specialists in their field. Don’t let yourself fool by the term “assistant”, it’s an old fashioned term that nowadays is often replaced by “specialist” or “consultant”. The field of virtual assistant becomes more and more competitive and many highly educated people enter this new niche of virtual work to be able to work from home, work at their own hours or earn more than a typical employee in the same profession.

For entrepreneurs with a business that already has crossed over to 6 figures an online business manager (OBM) can be the ideal solution to help you brainstorming, assist with strategy planning and managing a team of virtual assistants who are specialised in finance, marketing, Social Media, websites etc. The OBM will keep you out of the operations and you have your hands free to come up with new ideas, programs, books, or coaching a larger clientele.

The above mentioned risks of jumping into a partnership are much more costly when things go wrong than hiring people who only charge you per hour of what they work and without the risks of getting on your case or fighting with you about who gets what and who does what, like a business partner may do.

Different people, different directions

Another risk with a partner is that sometimes people develop differently. One person grows, the other doesn’t. One partner likes to market the business, the other person may be shy and feel marketing too “out there” or don’t agree with the brand direction.

I’ve witnessed a situation like this and it’s hindering one person from progressing and earning more money. The other person digs their heels in and tries to hinder any progress by behaving like a donkey.  Those partnerships are heading into big problems that affect the bottomline of the business. If one is happy with a lower profit and the other is ambitious and wants to move ahead, then both get frustrated and fights can destroy the business. In the case I am thinking of another problem was the confusing messages to staff members. They were confused as to what marketing message to convey to clients and felt torn as to what tasks to do as both partners were pulling into another direction.

Photo: http://www.rpmgo.com

Another situation I remember is a former business my brother and his former business partner founded. My brother is a more frugal person who wants to earn money first and then spend it while his business partner was the opposite. The first tasks of the former study friend and new business partner was to buy a new BMW and a big leather chair for the office while my brother rather spent his time persuing new clients and finding new business. Needless to say that the partner was too busy impressing other people with his flash car, which didn’t help him find new leads. He spent all his time showing off and sitting in his big leather chair flirting with women and not enough time focusing on the business. For him the idea of “being a businessman” was more about image and not much about work.

Rest assured that the relationship became very messy and broke up with quite a loss for my brother. Strangely, the same happened to my father many years before my brother made the same mistake of going into a business partnership. The only difference was that my father’s former friend and business partner bought himself a Porsche and not a BMW.

If you are starting to reflect a bit more about the risks, why don’t you try to hire some outsite help first to see how you are going with hired help. You can still decide later if you want your friend, relative or partner with you in the business.