That’s something you have to answer yourself. There are issues either way. On your own, you can be in control in a way you never have.
It makes decision making quicker and you only have yourself to congratulate or blame for the consequences of your decisions. It can be fulfilling and humbling. Working with others increases the support but also the ultimate cost as you have more people who need paying.
The difficulties associated with partners are usually related to control and decision making. What happens if you fall out or someone drops out for another reason? What happens if someone does not pull their weight? Who is going to be responsible for what, and how do you hold each other accountable in a way that is business like?
This depends to an extent on the type of business and on your nature. Advantages of partnership include: Complementary skills; Sharing of the work-load and to a degree the risk; Greater range of contacts and networks; Business less dependent on one individual – important in practice and also in perception of customers, suppliers and potential investors.
Disadvantages include the risk of falling out/ disputes and the need to share the ownership rewards.
No man is an island. If your business needs a specific skill-set that you don’t have, which is so important to its success that you need the owner of those skills to be an integral part of the business, a partnership (or a share of the equity in a limited company) may be a good way of tying him/ her in.
But do remember that disagreements can arise and make sure you write a formal partners’ or shareholders’ agreement at the outset while you are both still friends. This can ultimately avert a lot of difficulties later if things don’t work out!
Every business needs a good team of people with complementary skill sets. You can go out and hire people with the skills you need. There are many skilled individuals around: your only limitation will be to have sufficient cash to attract that talent. For entrepreneurs with few funds to spare, partnership may be an attractive option. The partner not only brings in capital but also his or her experience and skills at no extra cost.
Partners do take away a share of profit but they do so at the expense of sharing the business risk with you. Partnerships can be strengthened with well-defined rights, responsibilities and duties and with an effective system of controls in place.
Surekhah Aggarwal of Carnelian Financial Consultancy answers a series of your common business questions.
In this video, Surekhah discusses the pros & cons of business partnerships.
Watch her video response here: Watch Surekhah’s advice in full
There are pros and cons to both options. When working for yourself, a key advantage is you have full control of the business, you can do it your own way and you are entitled to 100% of the profits. This advantage of full control and entitlement to profit is usually a key reason for going it alone.
Although you are unlikely to have all the skills needed to run the business, you can solve this problem by asking for support from third parties and buying in that advice. However, the issue with working alone is it can be lonely not being able to bounce ideas off a partner on a regular basis.
Furthermore, having another partner or partners – all of whom are financially invested in the business and thus more motivated than employees – means the business will benefit from your complementary skills. For example, a client of mine with 5 equal partners complement each other perfectly with one partner each having expertise in one of their 5 key function areas: design, sales, management, operations and manufacturing. A perfect partnership!
The key issue with partnerships, however, is trust and the ability to work together cohesively. Sometimes (as in another partnership client of mine), disagreements can occur and partnerships can terminate, with legal action sometimes required to end things. This then can impact the viability of the business going forward. Ultimately, before any decision is made to work with a partner, you should ask yourself:
1) Do I trust them?
2) Can I work with them long term?
3) Do they bring key skills I lack?
4) Can I also make the business work if I go it alone?
It depends on what skills are crucial for your business to succeed, and which are desirable. If you don’t have all the essential attributes and experience yourself, then you might need a partnership to bring those missing skills on board.
Partnerships will inevitably mean some loss of control and accountability to someone else. However, if a partner can bring significant benefits to your business and you believe they will outweigh the drawbacks, then partnering can enhance both your organisation. It could also have the same effect within your company’s chances of meeting its goals.
Having a partner is preferable because you’ll get cover for sickness/ holidays etc, but they must be as able and hard working as you, and you need to trust them more than your most trusted family member or friend!
I’d suggest a partner in the context of a fellow shareholder in a limited company; not as in a Partnership – one reason being that your partner can put your own personal assets at risk.