Starting a business with someone else, whether a professional associate, friend, or family member can be a rewarding experience. Forming a partnership rather than venturing into the industry solo allows you to divide risk, share and multiply resources, and lay the groundwork for a stable, profitable business.
However, launching a business with someone else will also add a few complexities to the process. While collaboration can amplify strengths and accelerate growth, it’s not without its special considerations.
Here are 5 things to think about before starting a business with another person.
1. Trust & Decision Making
Trust and compatibility are the bedrock of any successful business partnership. Even if you’ve known each other for a long time and already have a strong relationship, it’s important to consider how this may carry over to everyday business operations.
Running a business means making a lot of decisions – big and small. In some cases, one person could oversee an important decision while the other isn’t there.
Do you trust your potential partner’s judgment and decision-making abilities? Are your communication styles compatible? These are crucial questions to ask as you think about pursuing a joint entrepreneurial venture.
2. Aligning Goals & Vision
Before entering into a formal partnership, it’s crucial that you and your potential partner share a common vision for the business. This alignment should go much deeper than just the type of business, your name, and your logo.
Sit down with your partner and talk about your motivations for starting a business. What are your long-term goals? How do you envision the business evolving over time? What are some non-negotiables?
During this exercise, you should also discuss potential strategies for mitigating any potential conflicts that may come up. While occasional disagreements are bound to happen, having a conflict resolution plan in place can prevent smaller issues from escalating and potentially impacting the business.
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3. Roles & Responsibilities
As joint owners, you’ll both have important responsibilities within the business. With that in mind, creating clearly defined roles for each partner can help prevent confusion and conflicts over tasks or decision-making. It also ensures accountability when potential challenges arise.
Although having a set structure in place may seem restrictive at first, having a well-defined division of labour can help you stay organized as you get the business off the ground. Keep in mind that you can always reassign responsibilities down the line.
4. Finances
Finances are a key component of business planning, and when you’re working with a partner, it’s critically important that everyone is on the same page. Starting and running a business requires a financial commitment from all parties involved.
Be clear about how much capital each partner is bringing into the business and how additional funding will be secured if needed. Discuss financial expectations, investment contributions, and how profits and losses will be shared among partners.
In addition to the financial reserves between the two of you, working with investors may be an important part of securing the capital needed to fund your business. If that’s the case, it’s important to recognize that investors will also have a stake in certain business decisions. Therefore, vetting potential investors will need to be a hands-on and collaborative approach between the two of you.
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5. Long-Term Planning & Exit Strategies
Owning and operating a business with someone else can be exciting, rewarding, and professionally fulfilling. However, not all ventures will see permanent involvement from each initial owner. That said, you’ll want to consider what happens if one partner wishes to move on.
An exit strategy outlines how partners can depart from the business if needed. This could involve selling one partner’s share to the other, finding a third-party buyer, or dissolving the business altogether.
At first glance this step can seem a little pessimistic, however, it’s worth doing. Having an exit strategy in place from the beginning demonstrates foresight and will help mitigate potential complications in the future.
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