Setting up a new business venture can be one of the most exciting things anyone can do. Very often two or three individuals with an idea will pool their financial and mental resources to get an enterprise off the ground. At that point, everyone is in it together and the energy created is extremely motivating for all concerned. These strong personal alliances geared to getting started in the early days can appear trouble free – discussions with solicitors and other professional advisers are viewed as an unnecessary bureaucracy. My advice is, be clear from the outset what happens if the wheels start to come off the wagon and disagreement ensues.
For as many partnerships I have seen work wonderfully, I have seen an equal amount go sour several years down the line. People live their lives in chapters and all too often individuals who started their company together with a common aim very often end up with opposing views on direction of travel. The attitude towards risk, differing views on markets and products, misaligned values and ambitions along with conflicting approaches to putting in a long shift can very quickly destabilise a business, one that often has massive potential. I have seen this all too many times, the only winners are the legal and financial profession – the ones who should have been consulted at the start not when things are going wrong.
50:50 shareholdings can be a particular recipe for disaster, so my advice to anyone setting up as equal partners is, set clear ground rules from the outset, this means:
- Have clear shareholder agreements in place
- Set a clear and common vision for the business
- Define precisely who is going to do what
- Be clear on what is important personally, financially, emotionally and commercially
- Have grown up conversations when one or the other is particularly unhappy about an issue
- Have an open relationship that means no dancing around handbags when something starts to get on your nerves (e.g. “I am doing all the work and my partner is sitting back and taking as much as me out of the business” – a classic!!)
- Have regular out of office discussions about how each other feel
- Don’t let bad feelings fester, get them into the open fast
Partnerships set up the right way can be a massive positive for growth when approached maturely, they can spread the load when things are not going to plan, two minds are better than one and the lonely feeling is not quite as bad. However, very often things change, so prepare and look over the horizon. These challenges can be even more profound if you are going into business with a friend. Get it right from day one and listen to your gut feel about whom you are going into business with.