In the late 1990’s, I started my own business. At the outset, I planned to be a principal in a firm with another gent, but circumstances at the time persuaded us to start off as separate entities and wait a while before joining forces under the same roof as owners of a company. As time went on, we both discovered that running our own operation was a great way to be – so much so that we never officially joined forces. We simply stayed working together on various projects, but remained legally separate as two different companies.
Let me go over some of the benefits of being associates rather than business partners. As first blush it may seem that there isn’t much difference. In many ways that’s true, but as always, the Devil is in the details, so let’s take a look. Here are five major points to consider before you dive into being a partner with someone instead of simply remaining associates who work together.
1. Funding – the single focal point of many problems in life is money, and it’s no different in the world of business. When you’re in a small partnership, you’ll likely be funding the operation from separate sources – one from each partner. When to fund, how much, where to hold the resources, and how best to protect them from unnecessary risk are all issues that need to get resolved with your partner. There is much opportunity for disagreement.
If you’re funding your own operation, there isn’t anyone you need to consult with or disagree with when it comes to funding. Nor is there anyone to help you share the blame for underfunding the enterprise or putting your investment at undue risk – it’s all on you. It may make your business life a bit more intimidating, knowing that you’re the only one calling the shots, but I find that’s so much easier than trying to argue with someone about how to finance a startup operation.
2. Expenses – again, another issue about money, but this time it’s about spending it wisely or foolishly. There are a multitude of issues regarding business expenses, including what kind and how much office equipment is necessary, how travel expenses will be handled, and what kind of investment will be made in business development. One partner may want a company car, the other might want cherry wood paneling in his office. The list of potential disagreements goes on and on without end. One person’s investment may be seen by the other as simply a luxury or item of prestige that doesn’t contribute to the bottom line.
If you’re on your own, you can spend like a sailor on leave, or pinch pennies until they scream. It’s much easier for you to implement your own set of values with respect to spending money if you’re the only one in charge of the purse strings. By far, the most troubling aspect of any marriage has to be household finances. It’s no different in a corporate partnership – you’re “married” to your partner and you suffer or succeed according to how well you’ve selected your partner.
3. Flexibility – it’s one of the things that we all cherish in both a service provider and a product provider. We all enjoy folks who can “work with us” and accommodate our interests. When you’re in a partnership, you need to check with your partner (s) about any number of things before proceeding. It might be associations, proposals, production commitments or travel schedules. There will always be something that reduces your flexibility to respond to customer needs. The larger the organization, the more difficult it is to be flexible and responsive.
As a “one-zee” you work for your customer directly and can be as flexible and responsive as is necessary to meet their needs and capture their loyalty. The idea of flexibility extends beyond simply serving customers. It also includes being able to team with other associates as necessary. Getting together as a team and offering customers a combination of small business resources is sometimes an exciting way to be responsive in the marketplace. Again, if you’re tied up with one or more partners, this slows down decision-making and can complicate matters, thus interfering with one of the main advantages of being in business for yourself – flexibility.
4. Changes in interest – another eventuality of being in business with others is that at some point there will be a shift in interest. One or more members of your joint venture might experience a change of heart, various personal distractions, a life-changing event, or any other shift in interest that alters the understanding or intentions on which you based your decision to go into business with another. Such perturbations can place quite a strain on the relationship that you have with your partner(s).
If you stay with a sole proprietorship model, as interests among your associates change, you can easily change the relationship that you have with your associates. Changes in relationship can include finding other individuals or business organizations to associate with. It’s not so easy with a partnership because, as you’ll recall, you’re essentially married to your partner(s) in business. Changing a relationship in such cases may involve a buy-out or lawsuit to settle the matter.
5. Dumb moves – not exactly a legal description of what your partner in business might do, but an apt description nonetheless. Whether it’s signing a contract, hiring employees, extravagant spending, inappropriate employee disciplinary action, engaging in unethical behavior, establishing precedence with your customers, or compromising the trust of your organization, sometimes your business partner can make a dumb move that places you in an embarrassing situation, or one where you can lose a valuable employee, associate or customer.
Again, as a “lone ranger” in the business world, you have a degree of insulation against dumb moves that others make because you’re at least one giant step removed from your associates. Not only can others not represent you without your consent, but it’s much easier to distance yourself or terminate a relationship with an associate that turns out to be a consistent liability rather than a dependable asset.
Not everything is rosy in the world of working on your own, but from my perspective, it’s a good place to start. Based on my experience, I was convinced to stay on my own and opt for associates instead of risking the entanglements of being a co-owner of an enterprise. My decision to stay on my own has served me well. I find one can still benefit from the advice and counsel of close associates, yet maintain sufficient distance when things go wrong – and sometimes they do, through no fault of your own.
About the Author:
Clair Schwan is a sole proprietor who started a successful management and technical consulting business in the electric power utility industry. He has never been so happy and successful as he has been on his own, calling his own shots, and recognizing that there is really only one boss, his customer. See his advice regarding small business startup and operations at Sensible-Small-Business-Ideas where it’s clear that the only business you’ll really ever be part of is your own.