What do the Beatles, Destiny’s Child, Spice Girls, and Guns N’ Roses all have in common – huge success, and then they broke up.
Now, I know that is a random comparison but stay with me, I will get to the point. There are so many ways a partnership can go wrong that it almost has to be perfect for it to go well.
Starting or acquiring a business is a significant decision that requires careful consideration and planning. One approach that some aspiring entrepreneurs take is purchasing a business with a partner. While this arrangement can offer certain advantages, it also comes with its fair share of challenges and potential pitfalls.
We will explore the pros and cons of buying a business with a partner and ultimately argue that it may not be a good idea in most cases.
The good aspects of a partnership
- Shared Financial Burden: One of the primary benefits of partnering with someone to buy a business is the ability to share the financial burden. Pooling financial resources allows you to invest in more substantial opportunities that might be out of reach individually. This can increase your chances of acquiring a business that you wouldn’t be able to afford alone.
- Complementary Skill Sets: A business partnership can bring together individuals with different strengths and expertise. Your partner may possess skills or knowledge that you lack, which can enhance the overall operations of the business. This synergy can lead to better decision-making, improved problem-solving, and increased efficiency in various areas of the business.
- Emotional Support: The journey of entrepreneurship can be demanding and emotionally taxing. Having a partner by your side can provide emotional support and motivation during challenging times. Sharing both the highs and lows of the business venture can help alleviate the stress and pressure that comes with it.
If you’re going to buy a business with a partner you may want to strongly consider a “silent partner” who would not have any role in the business. If you can get a very tight agreement on what you will do and how you split the money, this could work. However, it is difficult to write these types of agreements and silent partners may not stay silent if the business looks like it is on a path to failure.
Why you should not buy a business with a partner
So yeah, I told you all the wonderful ways buying a business with a partner may work, I will now tell you just a few of the numerous ways it could go to the crapper.
- Conflict of Interest: When partnering with someone to buy a business, conflicting interests and disagreements are almost inevitable. Differences in vision, goals, or decision-making styles can lead to conflicts that may hinder progress and create a tense working environment. Resolving these conflicts may require compromise and compromise may not always be easy to achieve.
- Shared Financial Risk: While shared financial burden is a potential advantage, it also means that both partners share the risk. If the business fails or faces financial difficulties, each partner is liable for the losses, which can strain the relationship and personal finances. Financial disputes and disagreements over risk management can arise, leading to further complications.
- Decision-making Challenges: When two or more individuals are involved in the decision-making process, reaching a consensus can be time-consuming and inefficient. Conflicting opinions and preferences can slow down progress and hinder the ability to adapt to market changes quickly. This can result in missed opportunities and decreased agility, impacting the overall success of the business.
Also, consider the money split. This is almost always the death of a partnership. “I do this so I should get more than you” is a popular tune. I also like the “I have a family to support and you don’t” story.
And who could forget the old but goody “I am more valuable to the company than you so I should get more”. At some point, there will be a “discussion” about money.
Once, a friend of mine wanted to partner with me but sometimes he does not feel like working and would lounge around his house and do nothing for a day or two.
Well, at least he was honest. The point I am making is that it is almost impossible for partners to put the same amount of time and effort into the business and eventually, that issue will come up.
It is also very difficult to structure an effective partnership agreement that covers all of the things that go wrong. If things go south, no one is going to care what the agreement says, they just want things to go their way. Most likely if you get to this point, you will end up in court with a bunch of legal fees.
Go deeper
The BIG brains at Harvard have written a guide to help you buy a business and it is worth a read. Think about it, buying this book is cheaper than a $200,000 Harvard education.
But really, this is very helpful to understand what types of people you want to help run your business and find the right business to buy for you.
If you need to learn more about buying a business including bringing on a partner, the Harvard Business Review Guide to Buying a Small Business can help you out.
Click on the book image to learn more.
The bottom line on buying a business with a partner
So, is it possible a partnership will turn out to be sunshine and rainbows, yes. Is that the likely outcome – probably not.
Think very long and hard about bringing on a partner to start a band or buy a business, you can start off making beautiful music but it will get challenging sooner or later.
Now get out there and take life by the horns and shake the crap out of it.
