Should You Consider Taking a Partner in Your Business?

Your business is dynamic and ever-changing, much like your time in military service. New opportunities and challenges arise, and you have to be ready to face them. One common opportunity is the choice of whether to take on a partner in your business. Maybe it’s a key employee you want to grant increased responsibility and company equity. Or perhaps it’s someone who wants to invest in your business, allowing your company to expand and your revenue to grow.

No matter the circumstance, you should think through the decision carefully. Partnering with an ally can create an asymmetric advantage enabling tactical, operational, and strategic mission accomplishment. However, it can also place unwelcome constraints on your business that conflict with your goals.

To help you think through the decision, we’ve outlined the biggest advantages and disadvantages involved with taking a partner in your business.

Advantages of Partnerships

Expanded Product or Service

Often, a new partner will have skills and abilities to contribute to your business which can allow you to expand your product or service offering. For example: A gym owner who partners with a nutritionist or chef to offer nutrition coaching and healthy, prepackaged foods for gym members.

Shared Risk and Financial Burden

Although there are different partnership structures, they all distribute the burden of financial responsibility to some degree. Sometimes risk sharing comes through a grant of company equity to your new partner, and other times it’s established through a new partner’s initial capital investment. Either way, a partnership allows you to share the burden of business ownership.

Reduced Workload

If your new partner is a managing partner, as opposed to a pure investment partner, you can also expect to share some of the day-to-day responsibilities. This shared workload often means having the ability to go on that much-needed vacation and spending more time with your family.

This benefit can be critical to the success of your business because it helps you avoid burnout and maintain a healthy work-life balance. After all, running a business is a marathon, not a sprint.

Disadvantages of Partnerships

Reduced Autonomy

With the reduced risk and workload usually comes a corresponding reduction in autonomy. In a partnership, you no longer serve as the sole decision maker. Even if your partner is an investment partner, company voting rights are distributed according to your partnership agreement.

This adjustment can be challenging for entrepreneurs who’ve poured a significant amount of energy into their business. It’s often one of the biggest growing pains associated with bringing in investors.

Shared Profits

Just as partnerships reduce the risk of business ownership, they also reduce your share of financial rewards. However, sharing profits is usually a small price to pay for the benefits associated with sharing financial risks and management responsibilities. Moreover, in a well-thought out strategic partnership – your business should grow. This means there’s all the more revenue to share.

When it comes to deciding whether or not to take a partner, you’ll want to weigh the advantages with the disadvantages to come up with the decision that’s right for you. Keep an eye out for another post on this topic where we share the steps to take to make sure any partnership is a success.