Things Entrepreneurs Should Know About Business Partners
With more online avenues, finding a fellow entrepreneur can be easy – and profitable.
US News:
1. Business partnerships aren’t exactly popular – but that’s all the more reason to have them. Somewhere between 50 and 60% of start-ups are founded by just one person, according to research cited by Scott Shane, A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University, in his recent book The Illusions of Entrepreneurship. But what’s more, they like it that way: One study he mentions says that 63% of entrepreneurs say that other people are helpful to them in their work, compared with 74% of people in general. The kicker, however, is that Shane goes on to show evidence that most entrepreneurs make the wrong decisions—they make decisions that make their businesses less likely to succeed. In the case of business partners, Shane says the evidence shows that businesses founded by teams of entrepreneurs are more likely to succeed than those founded by a single entrepreneur. Working with a biz partner can give an entrepreneur a competitive advantage that many others don’t have.
2. Partnering with family and friends can work—just be aware of the risks. The mom and pop business is the stereotypical image of a small business, and the trust that comes with working with someone you know on a personal level seems comforting. But new risks come up when you take a personal relationship and make it business. ‘There are many cases where trying to build a business relationship on top of a personal relationship can ruin both,’ says Tim Berry, an entrepreneur who founded Palo Alto Software and speaks and teaches on small-business issues. Berry recently named one of his daughters CEO of his company. He says that partnering with family members can work as long as you carefully delineate the business relationship and personal relationship and make it clear that the way you interact with them in the first will be different from in the second. Rich Sloan, who cofounded StartupNation—an outlet for practical information and networking for entrepreneurs—with his brother Jeff, warns against assuming that because you are personally close with your business partner, each knows what the other is thinking when it comes to business. ‘You have to treat a family relationship at least as professionally as a third-party relationship,’ he says.
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