Business Partners – Are they worth it?

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Question: Am I better off to do it myself or partner with someone?

At Solve, we get asked this question a lot. And I have asked myself this question many times. This is a question with no easy answers. You will generally not know the answer until after the fact.

I find that for most clients, the question has one main driver: Fear. Fear of the unknown, of failure, of not having all the answers or fear of XYZ….

Case Study

I recently had a client which had 3 partners in a private company started several years before coming to us. They had similar goals so “joined forces”. I doubt very much at the time they sat around and said “I’m really scared that I can’t do this on my own, lets join together” but that is what happened (they just didn’t talk about it).

Needless to say people change and the subtle differences started to magnify. The financial reality of having partners sunk in. As there were 3 owners they all needed to earn a living and therefore too much capital came out to support their respective families, cash flow suffered. Then resentment set in as others were perceived to not pulling their share of the weight.

Ultimately, we then had the disastrous task of unwinding it (a business divorce).

Don’t get me wrong, partners can add tremendous value to your business. Generally a partner will bring something to table you lack, normally skills, capital or both. But it is critical you understand your motivation. To help determine whether you are driven by fear, ask yourself the below questions.

Goals
  1. What am I trying to build – an empire or enough to earn a good living?
  2. Who do I want as customers and how many?
  3. What’s the feel of the business – corporate, friendly, hipster?
  4. What’s the end point – build to keep or build to sell?
Skills
  1. Do I know what skills, experience, relationships, resources I need in the business?
  2. Do I know which ones I don’t have (honestly)?
  3. Can I buy them? And how much will it cost?
Capital
  1. How much money do I need to succeed?
  2. Do I have it or can I borrow it?
  3. Can I fund it another way (i.e. an investor)?

If you have reasonable clear answers to the above and realistic means to address them then you need to consider what is the point of having a partner. Why are they coming along? What value are they bringing at you can’t source another way? Be honest with yourself.

If you are still on the fence, as yourself this:

Will the business generate enough profit to support more than one owner? If it can’t … well you know.

Summary

In my experience, 9 out 10 times you are better off to go it alone. Sure this might make things a bit harder, take a bit longer, or cause more sleepless nights but you have control of your future. You will make mistakes but we all do (even that partner you want will). But unless the partner can bring something to the table that is truly invaluable, you get along very well, and you want to work together for the next 10-15 years then I’d say go it alone. Or at least try it first.

At Solve we love to help people find the right answers (whatever they may be).

Contact Us at Solve Business Accountants to discuss working through these issues, before or after you have “joined forces”

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