Benefits of having a business partner - Pros and cons
It has become imperative in the last couple of decades, for anyone who wants to succeed financially, to form some kind of business. This "business" does not have to be an old-fashioned brick-and-mortar company or a money-making machine. It can be a side hustle you use for extra income. And this income is a perfect way to enable you to do many things. But, what does all this have to do with a post about the benefits of having a business partner?
Do we need to have a business partner to start a trucking or dispatching business?
Definitely not. But is it easier to have one? It depends.
I had a business partner a few years back, and in this text, I will elaborate on my experiences and my take-outs from this "relationship." I will try to look at it from a third-person perspective and attempt to be as unbiased as I can be. Let's start with the benefits of having a business partner and the pro sides it might bring to your firm.
Pro sides of having a business partner
Two people are smarter than one
When you run into a wall, there is a better chance two people will come up with a solution. What's obvious to one person, might not be to the other one. The same goes for business improvement ideas or planning. If you put two similar visions together, there is a better chance for a more desirable outcome.
You are bringing different talents together
Let's say you are good with computers, but you suck at people relations. Your business partner, on the other hand, is an outgoing guy that everyone loves, but his tech skills are terrible. Here is when your talents come together to form a perfect business owner. These are just a couple of examples.
Everyone has their strong and weak spots. Combine the good ones and compensate for each other's bad qualities.
Now you have double the time to get stuff done
Imagine if you had to start everything by yourself, and even worse - once you manage to put all the little details in place in your new company, you are now stuck with maintaining everything. Try looking for new customers like this! Very hard. That's why having another owner by your side helps. He or she will care as much as you do, and the two of you, as equal team members, can do much more quality work together.
You have more start-up funds
I would never recommend getting a loan for your new start-up. Some people will look for investors, and that, I guess, has its up and downsides, but getting into debt before you even open the doors of your company is downright stupid. (No offense. I have done it, and I would never do it again)
Now, imagine if the two of you (or three, or four...) put your savings together, and invest this substantial amount of money in your idea. You will not have a large payment for your loan. You will work harder to bring this idea to life, because, after all, it's the money you earned that you invested, and not "easy money" you borrowed from someone.
On the other hand, if you take out a start-up loan from a bank, you will have this loan follow you probably for a long time, and you will pay thousands of dollars towards interest. And even worse, if everything goes down, not only will you lose your firm, you and your business collaborator will have to pay this back out of your pockets.
It's easy to share a profit, but much more challenging to share a loss.
You can use the business partner with better credit for loans or anything else
If and when it comes to having to borrow money for an expansion or new equipment, having an excellent personal credit score is a must. Not only that. Insurances and other agencies determine your "worthiness" by your credit score. So, if you missed a few payments here and there, or if you are in a lot of debt, your credit score is probably not that great.
This is where your friend comes into play. Hopefully, she or he has been handling their finances more responsibly. Hey, no judging here. We have all been there. :)
I would say picking someone with decent credit history is a high priority on this list of benefits of having a business partner.
You can go on a vacation with peace of mind
Picture yourself building a company for two or three years. You put everything into it: your money, your sweat, and your blood. Long hours away from family. The worries and the problems... Oh, the horror! But now, you hired someone, and you are exhausted. Your friends are taking vacations, and they are going away for weeks. They call you a business owner and you feel important - but they are the ones enjoying life - not you.
Not anymore! You are ready now to go away and recharge your batteries. Business is doing great, and you are financially stable. You have help too, and you don't have to do everything yourself anymore.
But how can you leave your baby in the hands of someone else? What if something happens? What if there is a big emergency? Will you have to be on the phone continually or check your emails while you are on this long-overdue vacation?
Well, guess what? You have your business partner who cares about your "baby" as much you do! Leave it in his hands, and you can go away with peace of mind - all this while leaving your phone in the hotel room. Thanks, partner!
A better moral support
When problems arise, it's nice to have someone give you moral support and a positive perspective.
Tax benefits
If you are filing your taxes as a partnership, you may get some tax breaks, or if you report taxes as an S corporation, you can split the profits between the partners and show them on your personal returns.
Same thing with losses. If you have a lot of assets and you depreciate it on your taxes, you might even go into negative at the end of the year. You would split these losses and show them on your tax return, which may save you some money.
Now, you can do all these things even if you have no business partner, but this way, you are only required to report half of it on your personal tax return.
What are some of the disadvantages of having a business partner?
We talked a lot about the benefits of having a business partner. Let's take a look now at some potential negative sides of running a business with a co-pilot.
Having a business partner means a lack of independence
Most decisions and ideas of yours will have to go to the co-owner’s approval ( and vice versa), which sometimes can be frustrating. It may sometimes feel like you have a boss, but I would instead look at it like the government's checks and balances. It simply means no one has absolute power, which can sometimes be helpful.
It might prevent you from making rash decisions, but on the other hand, if you have a partner that doesn't like risk, your business may never fully thrive. It's hard to grow if you are not willing to try out new things, and in a lot of cases, a conservative partner will prevent you from your full potential.
Different views and problem-solving tactics
Two different people could have an opposite tactic to solve a problem, and even though the potential outcome could be the same, there could be two or more ways to reach it. And of course, both of you will think his or her plan is the better one.
The same thing goes for ideas and long-term plans. Before you partner up, try to discuss some important things like
Short term goals
Long term goals
Investing your money
Taking out loans
Hiring
Roles of partners
When you have a business partner(s), it means shared liabilities
Everything you acquire through your business, no matter whose idea it was or if you were in favor of it or not, has your name attached. Assets, loans, liabilities, employees, and everything else is your responsibility.
This would be the case, of course, even if you were the only owner, but it's much easier to grasp failures or problems if you only have yourself to blame.
Problems arousing blaming in hard times
When trouble knocks on the door, you start analyzing every decision you and your business partner made, and who are you going to criticize, other than everyone else? People tend to look for the causes of their problems everywhere but in their own actions.
So, if you are enduring any hardships, try not to blame your business partner as this will make matters worse than they all already are.
When to split with your business partner and how?
All romances come to an end sooner or later, and such is the case with business collaborations. There could be a lot of reasons why someone might go different ways in the business world.
Money
Lack of trust
Embezzlement
Different views and ideas
Business closure
Sickness
Death
It's tough to part ways without a lawyer, especially if you are in debt or if your company is not in good standing. Think about that before you partner up,
One partner might slack off while the other one is doing all the work
This is a big one. I worked for a company a long time ago, where one of the owners was getting to work around noon, and the other one was there around 9 AM every day. The company was struggling financially, and after a couple of years, they finally split up.
What was very weird about the whole situation is that once they formed their own companies in the same industry field, they both became very successful and wealthy. And it only took them a couple of years to achieve that.
Their example shows us how two persons can have diverse ideas that will lead to the same outcome. Only if you wholeheartedly accept a concept, can you succeed. If you close your mind and intentionally sabotage other people's work, you will never win in a team environment - which leads us to the conclusion that if you are not a team player, you should probably never consider a partnership.
What are your thoughts on the benefits of having a business partner? Leave a comment below and subscribe to the newsletter to get more content delivered to your inbox.
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