One of the most crucial stages of entrepreneurship is setting up the right business structure to ensure you start on the right foot. One option for many at this stage is setting up a business partnership, which sees you partner with other entrepreneurs – and share the equity in the business – to get your business off the ground.
Diluting ownership of your business, and choosing the right business partner are big decisions however and it’s essential to know what you are getting into before you decide to do this.
So, what are some of the pros and cons of having a business partner and what questions do you need to ask potential partners before bringing them on-board?
Pros of having a business partner
One of the biggest benefits of having a business partner is that you have someone to work with, hopefully with a complimentary skill set, who is just as invested in the business emotionally and financially as you are. Business and start-up success requires many things, not least amongst them hard-work. A business partner will be able to share the burden of this hard-work, and lighten the load.
In terms of those complimentary skills, business partners can also bring skills to the table you might not have. If finance isn’t your strongpoint, for example, finding a business partner who has a financial background may be a good move. By the same token, it can be useful to have a business partner who has a different yet complementary personality to your own. If you are overly cautious in business, partnering with someone who is bolder may help move the company forward.
Just as a business partner can share the work-load, so too they may be able to share the financial burden. A partner in your business may mean you can reduce your capital outlay as start-up costs and investment will be shared.
Cons of having a business partner
While there are many pros to having a business partner, there are also potential downsides that should also be considered.
One of the primary disadvantages of having a business partner is that no matter how professional a relationship may be, we are all human, and the relationship has the potential to fail.
If your business partner is domineering for example, or has radically different ideas about how things should be done, your company may go in a direction you don't agree with. Some people can even enter into a business partnership and then find their partner has values they do not share.
The other major downside is that, just as start-up and capital investment in your business is split which can be an advantage, so too will be profits so, while capital outlay is reduced, so is eventual income.
What should you ask a potential business partner?
So, before entering into a business partnership then, questions need to be asked, of yourself and your potential business partner. Questions you should ask any potential business partner to ensure they are a good fit, include:
- What do they want to get out of the partnership?
- Are they willing to invest any capital into the partnership?
- What skills and experience in business do they offer?
- Will the partnership and business be their main priority?
- How do they think their skills and personality complement your own?
- Have they entered into a business partnership before?
By asking the above questions before signing a deal, you will get a good idea of whether they are the right business partner for you. Your objective first and foremost is to build a successful, sustainable business and any discussions with a potential partner need to be framed by this objective.
Is having a business partner the right move for you?
As the above shows, there can be benefits and drawbacks to having a business partner, so it is worth taking your time and asking the correct questions to find the best fit. This will ensure your new business not only succeeds but that you have someone to help you on your journey too.