When starting up a new business, is it better to found it as a team — with a partner or partners — or go at it solo?
It’s a fundamental question and a legitimate concern. Personally, I think it depends on your working style. If you work well alone and are good at bringing in the key skill sets to drive your business’ growth at the appropriate time, you may be better off on your own.
On the other hand, if having a business partner is likely to drive the growth of your business and motivate you and lead to a synergistic relationship, then a partnership is probably a wise choice.
Even so, you should be very careful who you choose as your co-founders.
At the point of founding a company, the path for the life of the business is almost entirely decided. At this point, your company share can be diluted more than at any other investment point.
As such, you need to choose very wisely the entrepreneur or entrepreneurial manager you bring on board.
Here are four key areas to think about:
What is their level of commitment?
There’s no point giving equity to a partner who is already working on 83 different projects, four of which are in Papua New Guinea. You want a co-founder that is equally as focused and dedicated as you. That’s 110 per cent, right?
You need to ensure that your co-founders are as committed to your idea as you are. If you’re going to pour blood, sweat, tears and sleepless nights into the business without the slightest resentment, your co-founders must be doing the same.
How deep is their experience?
Has your potential co-founder got ‘been-there-done-that’ experience? Just like when finding a mentor, you want to find someone who’s walked the path, at least in come capacity.
Also make sure you have an objective idea of the value that they bring to the table.
Of course, you want to work with people you like. The problem at the outset is that, when you like someone, you naturally will think highly of them. Make sure you are being objective, or ask a third party. How much value do they really offer?
How well do you work together?
Strong partnerships tend to be built on previous friendships and relationships – best friends, co-workers and the like. You need to have put your relationship through some kind of trial period in a pressured environment.
In that regard, consider the overlap in your expertise.
Are you choosing your business partner primarily because you work together really well and get along like life-long friends (or you actually are life-long friends)? You need to question whether your strong relationship is founded on mutual expertise and perspectives. You need a business partner who contributes and can be critical.
Also crucial is the need for complementary personalities.
The concept of good cop/bad cop extends well beyond law enforcement. Think about the kinds of personalities your business will need throughout its whole life cycle. Does the business have a core focus on IT and need someone who can speak technical jargon?
Will it require wordsmiths or math-geeks?
Are they in this for the long haul? (Are you?)
What is your time frame to exit? Before you can evaluate your potential business partner on this point, you need to understand it for yourself.
Think about when, how and if you want to exit the business. Then consider what you want and expect from your co-founder(s). Then make sure they know this and you know where they stand.
When it comes to founding the company, ensure you do it properly. Be sure to include ‘divorce clauses’ so that you have the right (and so do they) to regain equity if certain things happen.
These clauses prevent people from putting in little to no work and reaping an unfair reward – all within the bounds of the law.
We do it with our personal relationships. And, yet, there is nothing more personal than a business partnership.
So, choose your partners carefully!
Bryce Summerell is a young, serial entrepreneur and CEO of The Entourage. In 2010, Bryce was elected as the President of the Entrepreneur Society at UTS.
Image by homesbythomas [Thomas Cunningham]