There are many benefits to forming partnerships, but only a select amount of reasons why you should. The barista has asked if you were planning on paying for that abundant pile of napkins that have your business ideas written on them, you realize you have been sitting around all day at the coffee shop. Perhaps, you have jumped head first off the diving board into the deep end of the pool, and suddenly you remembered you don’t know how to swim! You just finished your third consecutive week of overtime at your job. The extra money looks good in the bank, but you haven’t had time to yourself in a while. Then you think, “How many years will I be able to keep this up for?” Forming strategic partnerships is a solution to overcoming the obstacles preventing you from reaching your full potential, but how do you know when to form these partnerships and why would you want to?!
Hire Them or High Five Them?
So you have been brainstorming for some time, and now you think you’re ready to start a business, but aren’t sure if you should go solo or create a partnership. Well, I can say right now the worst thing you can do is start a business with a friend, just for the sake of working side by side with your friend, unless of course you no longer want to be friends. I'm not saying that it is impossible to create a successful business with a friend, but if you both have similar strengths and weaknesses then you may get competitive over credit or play the blame game on short comings.That is a common mistake, and the polar opposite of what makes a partnership a strategic one. There are three basic ingredients that are needed for any of your business ideas to be a recipe for success, and they are:
1. Time
2. Money
3. Skills
Now if you possess all three ingredients, and you have no obligation to withhold from doing so, then there is no need for you to form a partnership. Get your lazy butt in the kitchen and start cooking! Say, even though you possess all the ingredients for your business idea, you decide you have more important priorities you'd like to use one or more of those ingredients on, then in this case you may want to consider hiring an employee or intern. Why hire?
Example 1:
· You decide that your Time would be better invested in other endeavors
· You have the money to invest in the business
· And you have the skills to run the business
In example 1 hiring is your best option, because you have the skills to train someone to do what you would have been spending your time doing to run the business. You have the money to pay your hired help up front in exchange for their time spent working your business. This is a better option than creating a partnership, because as your business grows you will retain 100% ownership of equity and influence in the business, and it will continue to run on the original agreed upon rates for hire (with growth I would hope that you reward your employees with much deserved raises/bonuses, though!).
Example 2:
· You have plenty of time to dedicate towards projects
· Money is tight
· You have acquired some skills and are putting them to practice
You have a couple options in this example. The risky option available is that you can try to secure a personal or business loan, so you can spend your time and use your skills to get your business idea rolling, by yourself. A less risky option is to use other people’s money by creating a strategic partnership with someone who has plenty of money to invest, in exchange for an equitable stake in the business venture. The terms are completely negotiable, and you may find an individual willing to be a “silent investor” who would be willing to invest without you having to give up influence of the business. This will allow you to keep decision making control of the business, and get the funding you need without the worry of the financial risk creating static in the back of your mind.
Example 3:
· You have limited free time for projects
· You live paycheck to paycheck with a small savings
· You have more weaknesses than strengths in the skills needed
The first step I would take in example 3 would be to seek out an entrepreneur who is already doing what it is I am trying to start, or something similar. I realize that I will need to have a clear understanding of how the business will need to operate for the best chances at succeeding. From there I would sit down and figure out what operations I could take care of myself by utilizing my own strengths with the skills needed, combined with the amount of time I have available to dedicate to the business. Next I would calculate how much it would cost to get the business to a point where it can start making sales, and how much of that money I have in my budget to invest towards getting it there. Lastly I add up everything I can contribute, and see what is left. I wrap what’s left up in a nice neat little package entitled "business proposal", and start hunting for partners who can fill in these gaps, and begin a pitching/negotiating process. In this example, you basically just have an idea to contribute and not much more, so sharing both, business equity and creative influence with a partner(s) would create the best odds of success for the business.
So you have been brainstorming for some time, and now you think you’re ready to start a business, but aren’t sure if you should go solo or create a partnership. Well, I can say right now the worst thing you can do is start a business with a friend, just for the sake of working side by side with your friend, unless of course you no longer want to be friends. I'm not saying that it is impossible to create a successful business with a friend, but if you both have similar strengths and weaknesses then you may get competitive over credit or play the blame game on short comings.That is a common mistake, and the polar opposite of what makes a partnership a strategic one. There are three basic ingredients that are needed for any of your business ideas to be a recipe for success, and they are:
1. Time
2. Money
3. Skills
Now if you possess all three ingredients, and you have no obligation to withhold from doing so, then there is no need for you to form a partnership. Get your lazy butt in the kitchen and start cooking! Say, even though you possess all the ingredients for your business idea, you decide you have more important priorities you'd like to use one or more of those ingredients on, then in this case you may want to consider hiring an employee or intern. Why hire?
Example 1:
· You decide that your Time would be better invested in other endeavors
· You have the money to invest in the business
· And you have the skills to run the business
In example 1 hiring is your best option, because you have the skills to train someone to do what you would have been spending your time doing to run the business. You have the money to pay your hired help up front in exchange for their time spent working your business. This is a better option than creating a partnership, because as your business grows you will retain 100% ownership of equity and influence in the business, and it will continue to run on the original agreed upon rates for hire (with growth I would hope that you reward your employees with much deserved raises/bonuses, though!).
Example 2:
· You have plenty of time to dedicate towards projects
· Money is tight
· You have acquired some skills and are putting them to practice
You have a couple options in this example. The risky option available is that you can try to secure a personal or business loan, so you can spend your time and use your skills to get your business idea rolling, by yourself. A less risky option is to use other people’s money by creating a strategic partnership with someone who has plenty of money to invest, in exchange for an equitable stake in the business venture. The terms are completely negotiable, and you may find an individual willing to be a “silent investor” who would be willing to invest without you having to give up influence of the business. This will allow you to keep decision making control of the business, and get the funding you need without the worry of the financial risk creating static in the back of your mind.
Example 3:
· You have limited free time for projects
· You live paycheck to paycheck with a small savings
· You have more weaknesses than strengths in the skills needed
The first step I would take in example 3 would be to seek out an entrepreneur who is already doing what it is I am trying to start, or something similar. I realize that I will need to have a clear understanding of how the business will need to operate for the best chances at succeeding. From there I would sit down and figure out what operations I could take care of myself by utilizing my own strengths with the skills needed, combined with the amount of time I have available to dedicate to the business. Next I would calculate how much it would cost to get the business to a point where it can start making sales, and how much of that money I have in my budget to invest towards getting it there. Lastly I add up everything I can contribute, and see what is left. I wrap what’s left up in a nice neat little package entitled "business proposal", and start hunting for partners who can fill in these gaps, and begin a pitching/negotiating process. In this example, you basically just have an idea to contribute and not much more, so sharing both, business equity and creative influence with a partner(s) would create the best odds of success for the business.
