1-On-1: Growing Your Business
Q: I have started a business and a friend wants to join me. I am not sure if I should make him a co-owner and partner or not. What do you think?
John Assaraf: It may feel like a great idea to have a friend in business with you—someone who can help boost your confidence as you grow the business and manage all the tasks at hand. However, a partnership in business is no different than getting married. Two friends usually don’t get married just because they’ve known each other for a while. More often than not, a business partnership is a recipe for disaster because the rules for friendship are vastly different than the rules for growing and maintaining a business. Sometimes it will even lead to the loss of the friendship because of the many complexities, including money, that get in the way.
The key to a successful partnership in business is to make sure both of you have complementary skills, vision, work ethic and expectations. Once that is established, I would set a timeline of six to 12 months to “date” and really experience the business relationship.
In addition, you can agree on what the terms of the deal are in advance and set measurable benchmarks to strive for. Once these benchmarks are achieved, you can offer whatever piece of your company you want to offer for cash, sweat equity or a combination of both. I always suggest the “Four Season Rule,” allowing four seasons to pass to make sure you really get to know your potential partner under as many situations as possible.
Nancy Michaels: I don’t recommend friends work with each other. Should something go south in the relationship or you feel that obligations are not being met in the business because there’s some perceived leeway due to friendship, problems are likely to arise. Personally, I feel partnerships are inherent with problems. They’re like marriages without the physical intimacy and, therefore, a challenge to maintain long term. Even hiring a friend can be risky business because oftentimes familiarity breeds contempt, and you may be listening to too many excuses when your friend (turned employee) can’t show up one day, misses an important appointment, etc.
Mark LeBlanc: Congratulations on starting your own business. The decision to partner with another person is a serious one most people take too lightly. Partnerships fail because people often get into them for the wrong reasons. Sometimes, a person is insecure about his or her ideas or the potential of the business, and seeks someone else who bolsters confi dence and will share the risks of venturing out into the entrepreneurial world.
Partnerships can succeed when two people share common values and complement each other’s skill sets. When two people share a similar work ethic, and agree to share the risks and the rewards, it can be very exciting to link up with a partner.
A real partnership agreement is crafted with help and support from a trained professional. Go online or find a template for creating a partnership agreement, and then find someone who can help facilitate the hard but important questions, such as the process for dealing with different perspectives and navigating different ways of running and growing your business.