Startups.ie

[Stephen]

Rachael Elnaugh, aka the ex Dragon and founder of the business Red Letter Days in the UK (the business which she subsequently lost) released a book entitled 'Business Nightmares'. The first word on the chapter on Partnerships is this ......Don't. Full stop.

Having just come through a gruelling partnership dispute (I will do a blog on this when I am able to face it) I could not agree more.

Rachael reckons that the majority of people enter partnerships out of insecurity (I Know I did), this is a recepie for disaster because 9 times out of 10 the underlying insecurity proves to be misplaced and you find yourself tied down and held back by something (read someone) that you never needed in the first palce.

Has anyone any experience of partnerships working or advice on how to frame the partnership prior to starting. I for one am going solo from here on in, my advice for what it is worth is the same as Rachael's - Just do it yourself.

[PaulOFlaherty]

From experience the issue with partnerships is not having partners, but WHO you have as partners.

I have been involved in a number of partnerships and can solidly say that family members are a major no-no. Also, do not partner with someone because you are comfortable with them.

Partners need to be driven, ambitious, must bring a skill set to the board the compliments yours but is not the same and perhaps most importantly, must not agree with your every word. The have to be willing to challenge and question, that is the only way growth will come.

Having parnters in a venture significantly reduces the workload for you. Allows your startup to be represented in more than one place at a time. Gives you a larger network of resources and people to draw on so you don't have to always pay for external services (somebody always knows somebody which is great when you are boot strapping).

The only real issue with partners is the numbers. I would highly advise against ever having a two partner startups. Either go it alone or have three (always an odd number). This prevents deadlocks in the decision making process and brings a lot more to the table.

[Stephen]

Thanks for the reply Paul,

Maybe I am just a bit scarred, my partnership was with a family member and an otherwise successful business was destroyed as a result of the partnership. Money has a funny way of changing people!

[dbran]

Hi

If you are thinking of going into partnership with anyone you really have to imagine you are marrying them. You will have to live with their bad habits, get used to their punctuality, tidyness, attitude to hard work and commitment to the partnership.

Suppose for example they are offered a job at a critical part of the start-up. Will they just loose interest in everything and leave you in the lurch in a project you are unable to complete by yourself?

Also if you are a partnership I would also recommend that you form a limited company. in this way the share ownership and split of the business as well as the split of the capital that is to be introduced is set out clearly from the start.

Never ever ever form a "partnership organisation". As these will have unlimited liability, the individual partners are jointly and individually liable for all the debts of the partnership. This means that a rouge partner can run up huge debts (which you may not have authorised) and you are liable to pay them if he defaults.

dbran

[Stephen]

Good advice!

Another major thing for me from my previous bad experience is to never have a 50 50 arrangement. I know that it can be difficult at the start when everyone is best freinds but trust me someone needs to be able to make decisions for everyones sake,

S

[selleri]

I have done two 50-50 partnerships. In both cases I found the idea, got the thing off the ground, and then found a partner that would bring skills I did not or that reduced the start up risk. In both cases the other partner failed to meet what I expected of them and in both cases hampered the business moving forward. I agree with the comment that one often does it out of insecurity and a few months realises what a mistake it is. It is similar to starting a job you feel unqualified for and hence insecure about your ability to succeed in it. Six months later, once you have learned the job, you realise you should have asked for double the salary. Except once a 50-50 is in place it is in stone and getting out of it usually means breaking up the business, losing clients, splitting assets, getting egg on your face, and having to literally start from scratch again. Much better to found a company yourself. Ask someone for a loan that is convertible in to equity (even 50%, but at your discretion and base don performance) and if not satisfied pay them back and keep the business.