The Good and Bad of Business Partners
A business partnership has its advantages: shared financial investment and the ability to grow faster, for example. But not every entrepreneur is cut out to be a partner and not every partnership is a great success story.
Read our pros and cons to find out whether forming a partnership is best for your business.
Pro: Two heads are better than one
One of the most appealing aspects of a business partnership is the increased potential for success. With two of you to brainstorm ideas, solve problems and operate the business, you’ll make headway more quickly.
Just be sure to partner with someone whose personality is compatible with yours. Focus on complementary skill sets so you can ‘divide and conquer’ with each person taking ownership of different roles based on who is best suited for the job.
Con: Disagreements happen
It’s a plus to have a partner to discuss the future of your business. After all, your personal vision won’t always be 20/20 and a different perspective could save the business from a serious mistake.
However, you won’t always see eye to eye with your business partner so you must decide if that’s something you can live with. A lasting partnership depends on good communication skills, willingness to compromise now and then, and a high level of mutual respect. Ongoing, destructive disagreements will lead to resentment.
Pro: The benefit of experience
Very few business owners have experience running every aspect of a business so finding a partner with a different background can be a real asset.
For instance, you may have years of retail experience in the clothing industry but know little about marketing. Your partner may not know much about clothes, but has an impressive track record of successful marketing in a similar industry.
Con: Work ethics vary
Both partners should be equally motivated to achieve agreed business goals and be willing to share equally in the work to achieve them. Many businesses have come undone because one person feels they’re doing a disproportionate share of the work. A less motivated partner who cuts corners to save time, produces low quality work or consistently leaves early will lead to frustration, burn out and jeopardize the stability of the business.
Pro: The financial advantage
Business owners typically devote a large chunk of their savings, incur debt and raise funds to keep the business going. A partner gives you additional access to capital and a better chance of qualifying for a loan or line of credit than you would as a sole operator.
Con: Financial risks
Naturally, business partnerships come with a degree of financial risk for each partner. An uncommitted or dishonest partner can drain the company of precious financial resources, time and focus.
Before committing to a formal partnership consider testing the relationship for a trial period of time – for example, a six-month working arrangement. Use that time to see how both of you work together.
- Talk to any previous partners of your potential partner to get a sense of the individual’s work habits and personality.
- When you’re ready, hire a lawyer to help you draw up a legal business agreement that includes division of labour, financial contributions, asset ownership, profit sharing and a buy-sell agreement.