At some point, you've gotten drunk and thought to yourself:
I wish I had a business partner!
This wouldn't be so scary!
It would make it so much more fun!
We could do it together!
We'll ride off into the sunset!
Like Thelma and Louise!
And they'll keep me accountable!
And we'll make ALL the money!
…and having double the capital wouldn't be bad, either. *wide grin*
As someone who's had multiple business partners, negotiated multiple business partnerships, worked alongside multiple business partners, and worked on the behalf of multiple business partner teams, I have a few things to say about this.
#1: Don't do it.
#2: If you need them for their skill set, hire a contractor.
#3: If having a business partner makes you feel all warm and fuzzy inside, or you really need one for a real and practical business purpose? Hire a good lawyer. And don't whine about it.
Allow me to explain.
Have I had business partners? Many. Do I still have business partners? Yes. (And some really great ones!) Will I have them in the future? Probably. BUT, that doesn't mean it's a good move for everybody. Somewhere along the line, you may contemplate partnering up, and my honest opinion is that for most situations, business partners are not a good idea.
You might be best friends, you might have a great working relationship, you might think they're the bee's knees, you might trust them with your life, your soul, your sister and your savings—or, maybe you just want to hump them. Whatever the case may be, going into a business partnership can be tricky, and here's why:
1. Ever have joint custody of a baby?
You can't split a child in half, and you can't split a business in half, either. Going 50/50 is a stupid idea. If and when the romance dies (and it very well may), how do you intend on splitting a mailing list in half? How do you intend on splitting a trademark in half? While you might be able to split profits, there's so much more that goes into a business partnership that you can't split. And usually? Those assets are the most important of all.–
2. Workload bias kills.
Listen—no matter what you have outlined in an agreement, or how much work you actually do, both partners will always feel like they're individually doing more work than the other. Why? Because we tend to give our own efforts more weight than other people's…and that's a fact. You only see what you're doing on your end—and don't see, firsthand, what the other person is doing for the business. Therefore, you'll almost always feel like you're doing the brunt of the work—even though your perspective is likely distorted. The result? You'll feel resentful, and guess what? Your partner will, too. And this will happen.–
3. Except sometimes, you really will be doing all the work.
Consider why your prospective partner wants to partner up with you. What motives might they have? Is it possible they're looking to take advantage of your skill set—and then ride your coat tails all the way home? Be choosy.–
4. Whoever has control of the money will begin to feel possessive—and eventually they'll get greedy. This will cause big problems.
Money messes with people—period. That person that you spent months oooohing and aaaahing over design concepts with? Could eventually turn into a green-eyed monster, especially if they're the ones handling the moo-lah. My best recommendation? Make absolutely sure you set up a separate Paypal and bank account for your partnership, where both of you have access. Then, get a neutral third party to handle the reconciliations every month. These things should be done, regardless, but I'm guessing most people avoid this step so they can quickly “ship.” Let me tell you something—when Seth Godin encouraged the world to ship, he meant for everyone to stop overthinking it. He didn't mean for everyone to be a herd of irresponsible jackasses.–
5. You give up control.
It's nice to think that you'll be able to have productive, professional conversations about every business decision that needs to be made—and then come to a heartwarming mutual agreement where everybody gathers to sing gospel—but the reality is we're emotional creatures, and it's never that simple. She thinks you should spend thousands of your profit advertising in a magazine; you think that money would better be spent reinvesting in the product. She wants to run promos every five minutes; you want to spend more time providing genuine value. She wants to use phrases like piping hot bonuses; and you, well…you would never. There are going to be disagreements, and to some extent, you could lose control over your brand if you aren't careful—how it's perceived, and how it's represented. And your brand is as your greatest asset.–
6. Most people stink at being brutally honest—and tactful.
Business partnerships require massive amounts of communication—and when one party or both are sucky communicators, it leads to a lot of passive aggressive ick that isn't healthy for anyone…much less the business.–
7. You may have different goals for your business or project.
Maybe it's in her best interest to take it one direction, and in your best interest to take it another. The challenge? Figuring out what's the best interest for the business—and then working together to find a mutual way to accomplish that. If you start off with two different visions for the future, your partnership may already be doomed—and you won't even know it until it's too late.–
8. You, ahem, have to split the profits.
The most obvious of all, of course. Sure, in certain situations you may need someone else's skill set to make a certain business or project work, but ask yourself: Do I truly need to set them up as a business partner? Or can I simply hire them as a contractor or employee to leverage their skill set…without giving them an interest in my business?–
9. If you wouldn't willingly hand them $10,000 cash and say, “Hang onto this for me in your sock drawer,” then you should not be going into business with them.
Trust is critical. And it's hard to know how trustworthy, principled, and honest any Joe, Jane or Joshua is—especially if you just met them on Twitter. (Seriously.) Business partnerships are legally binding, and they're a big deal. Even if it feels fun, it's not child's play. Whether you're starting an actual company, working together on an offshoot project, or even just building out some kind of webinar series together, it's crucial you know who you're dealing with. And even then, get everything in writing. Especially what happens if things go south.–
10. Sometimes, no matter what you do, you just won't see eye to eye.
It'll cause the worst of both of you to come out. And it'll break your heart.
Going in with a business partner is like going into a high-powered marriage—except you don't even get foot rubs, you guys.
While they can certainly be useful in the right situations, and they're not always a bad idea, I encourage you to consider your own motives. Do you just want a business partner because it'll make it less scary, and you want someone to hold your hand? Or do you want a business partner for a real, practical, business-driven purpose?
If it's the former, I want you to remind yourself that your balls are bigger than you think.
And if it's the latter?
Follow TMFproject's 5 Ruby Red Rules of Business Partnerships (Because golden is so 2010):
1. Get as many details as possible in writing—including what happens in every scenario you can possibly imagine.
Sometimes people don't do this because they get pre-nup syndrome: In other words, they worry about offending their business partner with a handful of what-ifs. Two words: Who cares. This is simply a sound business practice, and it's a necessary evil. If they balk? It should be a hot red flag.
Need to know what details you should be including? I teamed up with an attorney to make this for you.–
2. Hire a good lawyer.
Don't try to save money, and don't try to negotiate this stuff on your own—even if you think you guys can always “work it out.” That's a naïve perspective, and it'll get you into trouble. There are things you could not even possibly think of that will need to be addressed. You might wear multiple hats in your business, but one hat you should not wear? Is that of attorney. Unless you actually are one. (And even then you might hire an attorney.)–
3. Set up regular check-in meetings.
Make it the expectation that you'll have recurring open discussions on everything you think is working well, everything you think isn't, and what you'd like to change. This will make approaching difficult subjects more natural, and less intimidating—and make it more likely that you guys actually talk about the stuff that needs to be talked about…without sticking your tail in between your legs. Because that's never been a graceful look.–
4. Record your phone calls. Keep your emails. They might come in handy later.
Sometimes in the heat of the moment, you might start to second guess what was really said. Guess what? Having a recorded version of what was said will help ease your doubts, and affirm your position. I personally use this software for recording calls, and have found it to be useful on more than one occasion.–
5. Never back down. You've got rights.
Never let a business partner bully you into doing things their way—especially if you don't think what they're doing is kosher, ethical or above board. Too often, I see people roll over. I see them give in. I see them resent. Seethe. Go along with it. You aren't a rag doll. You're a partner. And you have rights, too. Go with your gut, and do the right thing. You will always know what that is.