Episode 5: Are millennials jumping into business partnerships too quickly?
A while ago, a friend of mine ran her business idea by me and I thought it was brilliant but several months later she still didn’t have it up asnd running. Why? Because she was looking for a partner. She gave me a few names and I was a little confused because I struggled to see what value they would add. She had the capital required to start the business, she had access to the same network of people and potential customers as her proposed partners and she had a better grasp of the numbers.
After a few conversations, it became clear that her hesitation to start the business boiled down to fear. The fear of failing, the fear of putting herself out there, the fear of failing alone, to her it would be less terrifying if she had a partner and wait for it…. the fear of social media!!! Social media was a big part of her sales strategy but she was convinced she was couldn’t hack the whole social media ‘thing’ and was willing to give up 40% of the equity in her new business to someone who had a better understanding of that terrain than her.
I found this hilarious but sad at the same time. She would be making the same mistake a lot of millennial entrepreneurs tend to make, giving up equity instead of hiring for the role. A business partnership is like a marriage; you have to think long term from day one. It is inevitable that over time people evolve individually within the partnership, so is this a partner you would be willing to deal with over the next 30 years? Partnerships can be great because as the saying goes, sometimes two heads are better than one but there are several things to consider because of the high rate of failure when it comes to business partnerships.
Here are a few of them.
Clearly define the roles and responsibilities of each partner
You have to decide very early on, the value that each person brings to the table. An ideal business partner has strengths where you have weaknesses. For example one person could be good at sales and marketing while the other is great at operations and the financials of the business. Most people go into partnerships with an abstract notion of what these strengths and weaknesses are but fail to clearly articulate, define and put in writing each person’s roles and responsibilities and this could be a recipe for disaster.
Shared Long-Term Vision
Even more important than having a partner who knows what you don’t know is having one that has the same long -term vision for the business as you. Many people make the assumption that because their partner believes in the idea of the business they have the same long -term vision and this can cause disruption later on in the business. You can both love the idea but have different opinions on how the idea should be executed. Have discussions early on about your values, objectives, operation and marketing strategy and even exit strategy to make sure you are on the same page.
Consider working on smaller projects together first
Many people often have different personalities in social and work situations. So you can know someone socially but you’ll never know what they are like professionally if you’ve never worked together before, so consider collaborating with potential partners on smaller projects first to see if your work styles are compatible. For example, one partner could be someone who likes to take decisions, execute quickly and fail fast and the other partner could be a slow decision maker and takes their time to plan extensively before they take decisions. Neither of these is a bad approach but could cause disruption in the business if both partners don’t understand each other’s work styles early on.
In my opinion, every business should have a board of directors or an advisory board from the beginning. Even in the best partnerships, disagreements occur so having a group of people who have the best interest of the business in mind and can be relied on to take the final decision in situations where partners can’t agree is crucial.