Why you shouldn’t partner in business

Some people ask me why I’m working on something as big as an MMOG by myself. Here’s a list of reasons why you shouldn’t partner with someone in a business: A partnership is a marriage My neighbor runs the biggest Mailboxes Etc. in Newport Beach and complains about this topic every time I bring up […]

Some people ask me why I’m working on something as big as an MMOG by myself. Here’s a list of reasons why you shouldn’t partner with someone in a business:

A partnership is a marriage
My neighbor runs the biggest Mailboxes Etc. in Newport Beach and complains about this topic every time I bring up the issue. When you have a partner no longer can you do what is best for the business. On all major points you now need to consult your partner. You’re going to spend most of your waking hours with your partner, more than your girlfriend or wife. If you don’t get along a ‘divorce’ is going to be just as expensive as a real divorce, and possibly kill the business you put the years of your life into. You wouldn’t marry someone unless you knew them well first and only 1 person in 1000 is worthy marrying. How many people do you know that well at all, much less are worth partnering with?

Your reasons for finding a partner is probably short-term but the partnership is long-term
When starting a business there’s a lot to do and a lot of difficulties that can be most easily and effectively solved by someone else. In my case, I need art for my game and I don’t have much money to pay for it. One solution is to partner with an artist. So lets say I were to grab a friend who I know well, get along with, and who does a good job at art. If the business is successful, 10 years from now I gave up half the business so I could save 30K on artwork. Stupid.

It’s like those idiots who get venture capital from Y Combinator. They give up some percentage of their startup for a measly $6000 per founder. If you are so hard up you can’t scrape together $6000 you don’t have the connections, work experience, or qualifications to run a business.

Your payoff is p/n, where n goes up by 1 for each partner
That’s profit / number of partners. Of course p may go up too, and if p goes up by more than the inverse of (n+1) then it’s worth it. But that’s unlikely unless you partner with a superstar. At n=1 you’d have to double your profit to make up for it. It’s easy to envision two people doubling income but I didn’t say that. I said two partners doubling profit. Would a partner, vs. an employee, make that much more? Keep in mind a partner, unless they work for free, is going to draw a salary from your income too, thus reducing profit.

Do you need a partner, or an employee?
Following from my previous message, do you really need a partner, as opposed to an employee? You have to ask yourself “Am I partnering for someone to do a specific job?” Because if you are, hire an employee instead. If you can’t afford an employee… this is one reason to find a partner. They can bring the money you need where otherwise it would be impossible to make your business succeed (I’m talking hundreds of thousands, not $6000). Another reason is if your partner is such a superstar and they are so critical to the business that you would never be able to hire them otherwise. That’s rarely the case.

Most people aren’t cut out to run a business
Not everyone is a superstar. If they were, we wouldn’t call them superstars anymore. We’d call them average. Most people are average by the very definition of the word, with half the people below average and half above average. How many superstars do you know at work? Probably 1 or 2 right? So they can program, or do art, or whatever. How are their social skills? Their business sense? Do they bring capital with them that they are willing to part with? Are they good at managing people? Are they a superstar at every one of these things, or enough of them to compliment yourself? You have a 1 / p^n chance of finding such a person. So the odds are, whoever you are thinking of partnering with might help you today but won’t be carrying their weight tomorrow.

Some people can’t hold long-term interests
A business isn’t a 9-5 job. It’s a 9-9 job, and will be for some number of years, if not the rest of your life. Can your potential partner stick with things this long? If not, it’s going to cost you a lot of stress and money down the road when they decide they work too hard and should stick to management.

Back when I was in Alaska there was a good opportunity to start a computer store. There was only one other computer store in the city and they overcharged, were rude, and had a poor selection. At the time the internet was still growing so there was no real way to order over the internet either. At the time I didn’t have much business sense so I partnered with my cousin to start such a store. I wrote up some business proposals to send to family to try to get money to get the initial batch of parts and open the storefront. I called and looked around to try to find a suitable location. I worked out the math on the finances and contacted a vendor who I could order from. My cousin… well he was excited to talk about what to name the store. After a week of my bitching at him to help, he said “Why should I do anything when you’re doing it all?”

As it turns out I was right. About 2 years later a Computer City opened there. They went out of business, but then CompUSA opened a year later and has been there since. With a 2 year lead into the market I could have potentially done very well for myself.

Don’t partner with someone just because it’s exciting to do so, or you need a short-term employee. Partnerships only make sense if you

  • Know someone incredibly talented in a wide variety of fields
  • Will make you far more money than not partnering with them
  • Is mission critical
  • You have no other way to get what you need

4 replies on “Why you shouldn’t partner in business”

Awesome post. I am in this situation atm. I am doing everything to make my business successful and have a partner that doesn’t want to do much. And I have been working full time on the side. So now in order to quit and be on my own, I have to provide a salary for two people, which is a lot harder. I agree with your post completely.

1. Never get a partner unless you absolutely have to and..

2. make sure its not family.

This is what I have learned

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