3.31 – Should I take on a partner in my startup?

Should I take on a partner in my startup?

In deciding whether you should take on a partner in your start up you need to ask two questions:

  • Do I require someone in my business to complement my skills, or to make up for my lack of skills?
  • If I do, should I employ or subcontract somebody for this, or should I take on a partner?

The pluses and minuses

There are pluses and minuses for these options.

  • With employees, you have permanent overhead costs. But you also have close control of their activities and you should be able to work well as an integrated team.
  • With subcontractors, you probably have a higher hourly cost than with employees. Also, your team might b not be so well integrated. On the positive side, subcontractors are not a fixed overhead cost. You can also terminate their involvement quickly.
  • A partner should provide not only extra skills but personal and financial support. However, partners bring their own problems and many businesses fail through fall-outs between partners. If you do decide to take on a partner it is imperative that you draw up a partnership agreement in writing. The agreement should layout the respective responsibilities and undertakings of partners. It will also deal with such things as equity contributions and the sale of partnership interests should a partner leave, die or retire.

Further reading

For further information on the trading styles available please see FAQ 3.1 https://www.freeforumofideas.com/faq/what-trading-style-should-i-use-in-my-business/.

Information on setting up a new business is available free in the Road Map to Success booklet, which you can download here: https://www.freeforumofideas.com/free-help/road-map-to-success/.

By John Hawkey

John is the founder and owner of Freeforumofideas.com.