For those of you that don’t know, I started my agency with a business partner.
We were 50/50 at the time, but the truth is… I basically had no idea what I was doing from a legal standpoint.
But we used the last few hundred dollars we had to file on LegalZoom, and got started.
Two years later, we had a partnership break up, and I ended up buying him out.
And… let’s just say it wasn’t cheap.
If you run an agency, you might wonder if you should find a partner to help you grow. Maybe you already have one.
But if my experience has taught me anything, it’s this:
One argument against finding a partner is that in the potential scenario you sell your company, you’ll have surrendered part of your equity and the money that comes with it. But that should not even be your biggest concern, at least not now.
First, you are giving up control from your company – and that can get back and bite you. If you guys are partnering at 50-50, who’s going to make the final decision when you disagree (and you will). Who’s the captain of the ship? (someone always is). Can the other person follow?
Answer: 50-50 rarely ever works because, at some point, there will be disagreement and someone has to make the call. At 50-50 equity there can be a stalemate (even if you never think there will be – there will), and I highly recommend NOT doing 50-50.
And equity is not even that important for most service-based businesses such as agencies and firms. For the company I started, Jakt –a digital product and innovation studio–, it was less about equity and more about profit sharing – who gets to keep the profits at the end of the year, and decision power. And yes, equity and profit sharing percentages can be different.
Instead of giving up the reigns of your company, and a share of its equity and profits, try to hire that other person instead of making them your partner.
So, instead of having a technical co-founder, you can hire a CTO. Or instead of partnering with someone because you can’t sell to save your life, hire a salesperson or a CEO.
Hiring over partnering has the advantage of minimizing the risk of one party leaving the business relationship (and putting the company in jeopardy) while still having someone that provides the missing elements of your skill set.
My partner and I parted ways because our understanding of where the company was heading to and our expectations with it did not align. Buying him out was a long, emotionally-exhausting (and extremely expensive) process – one that I hope you never have to go through.
In theory, finding a partner should help you move faster and achieve more.
They should have a skill set that you don’t – one that is extremely necessary.
However, before you go and find someone to co-found your business with, make sure you do this: Really, really, (really) decide if you actually need a partner, or if you could just hire that skill instead and keep onto your equity, profit-share, and decision power.
You can also always share profits with your employees but not have to give up equity.
Keep in mind…
One thing that can definitely hurt a business partnership is the differences in the relationship you have with money.
Are they okay with investing in your company and scaling… or do they keep their cash under the mattress?
Are they financially solid… or are they in debt and owe a lot of money to the bank?
Is your owner’s draw equal… or is it different because their needs, spending habits, and expenses aren’t the same as yours?
There are many, many nuances to this. And you can make decisions yourself on how to navigate this scenario.
But what if you could directly learn the best financial practices from someone who’s grown an agency with (and without) a business partner?
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