Business partnerships can be incredibly rewarding experiences that provide the support to build a successful company. Where would Google be if Larry Page and Sergey Brin didn’t partner up? Would Microsoft even have gotten off the ground, let alone become a multibillion-dollar company if Paul Allen hadn’t encouraged Bill Gates to drop out of college to focus on their business idea? But business partnerships do not always have happy endings and as if it weren’t discouraging enough that 90 percent of startups fail, it is an unfortunate fact that up to 70 percent of business partnerships fail, too.
While the risks are significant, so are the benefits. When you agree to a business partnership with a cofounder, each of you will bring your own history of failures and successes and merging your joint skills can help insure you against some of the pitfalls of entrepreneurship. Partnering up with a cofounder can also introduce you to new ideas, help you expand your contacts and perhaps, depending on your niche, even furnish you with production facilities or equipment you wouldn’t have been able to acquire on your own.
So, while you shouldn’t shy away from a promising business partnership with a cofounder, there are some factors to consider carefully before diving in headfirst.
Have shared business vision/values
If you’re interested in opening a microbrewery and have your heart set on small-scale, quality production and your partner aims for eventual international production, you’ll run into some serious friction. Consider the alliance of Ben&Jerry’s cofounders. Their ice cream brand is unique because of its commitment to giving back to the community. As Jerry (Greenfield) said, “We measured our success not just by how much money we made but by how much we contributed to the community. It was a two-part bottom line.” Take the time to each write out your business vision and share it with your proposed cofounder. If it looks like you align on some key points like quality vs. quantity, ecological vs. industrial, purpose-driven vs. profit-driven, then I’d say you have a pretty good chance of succeeding together.
Define goals, short-term and long-term
Just as it’s important that you share a similar business vision and values, it’s just as critical that you and your cofounder can align on short and long-term goals. Where do you want to be in a year? Five years? Ten years? Beyond? If your company is going to go far, at least one of you should have a bit of the visionary in them. In the case of Steve Wozniak who cofounded Apple Inc. with Steve Jobs, Wozniak was the technical guy, while Jobs, unsurprisingly, was the visionary. According to Wozniak "I was just doing something I was very good at, and the thing that I was good at turned out to be the thing that was going to change the world...Steve [Jobs] was much more further-thinking. When I designed good things, sometimes he'd say, "We can sell this." And we did. He was thinking about how you build a company, maybe even then he was thinking, "How do you change the world?"
Have strategic planning sessions
All businesses run the risk of disruption. That’s because technology is constantly evolving, markets change and you want a partnership that will put you ahead of those changes rather than make you a casualty of them. If your partner doesn’t want to explore business model innovation strategies, when your business needs to make adjustments to continue thriving, you might find your strategy has gone the way of the dinosaurs, along with your business partnership.
Communicate often
The more often you and your cofounder meet about your business, the better chance you have of curbing conflict down the road. If you’re frequently sharing information including both stumbling blocks and successes, you’re staying on the same page and that’s where you want to be. You should also frequently check in about each other’s level of contribution and satisfaction about that contribution. Jen Tadin from Gallagher warns that: “Partnerships often dissolve over time due to the fact that one party benefits more from the partnership than the other. Over the course of time, if the party that isn't benefiting as much isn't finding value or reward, the effort they put toward the partnership could lessen and eventually dissolve altogether. The key to making partnerships work is to agree upon the inputs and outputs from both parties up front.”
Be transparent
All of the company’s financial transactions, contracts and policies should be shared freely between the cofounders. Whether partner A is responsible for the finances and partner B is responsible for production, both partners should have equal and full access to all information relevant to the business’ solvency and legality. When the deal is “I take care of my part, you take care of yours” you may as well be running two different companies. Information is power and if both partners are armed with the proper information to make sound decisions, that puts the company in jeopardy.
Solve problems together
It may be tempting to try to fix a problem on your own when you’ve been put in charge of that area of the business. However, involving your cofounder in solving an issue will reinforce your ability to work together, build trust and result in a higher chance of the problem finding a long-term solution that protects your company. Besides, if you were going to solve everything on your own, why do you need a partner anyway?
Have a contract
Saying, “We shook on it” is not going to stand up in a court of law. Don’t let today’s good will rob you of what’s rightfully yours if that good will should sour tomorrow. Additionally, you and your partner might simply have a misunderstanding about what rights and responsibilities you’re each entitled to and/or required to fulfill. Putting it all in a contract will help spell it clearly. As CEO and Founder of Media Frenzy Global, Sarah Tourville told Forbes magazine “When entering a partnership agreement, it’s important to address three key rules of engagement: compensation, exit clauses and roles and responsibilities. For example, you’ll want to clearly define who owns what percentage of the business, who is investing what, where the money is coming from and how partners will be compensated.” Don’t forget to update the contract as relevant changes arise.
Conclusion
Some of the most inspiring entrepreneurship stories of the modern era have occurred because two people got together with a similar vision and worked to bring that vision to life. The right cofounder can absolutely elevate your business and even take it to heights you couldn’t reach on your own. Follow the above advice to stay grounded while you’re shooting for the stars.
12th June 2020