Are Partners Bad for Business?
Yes . . . and no. Most of you saw some good in partnerships, but the majority felt the personal costs ultimately outweighed all benefits.
Is partnership a bad way to run a business?
Yes 59% No 39%
This is obviously an emotional, volatile, and very personal issue. Nearly all of you who responded said you have a partner now or have had one at some point in your career, and you spoke of the experience in very personal, familial terms -- though only 20% of you are actually in partnerships with family members.
Why is partnership bad?
Personal conflicts outweigh the benefits 60%
Partners never live up to one another's
Companies function better with one clear
Dilutes equity too much 6%
You can't call your own shots 6%
Those of you who disliked partnerships focused on the souring of personal relationships as the main reason for your opinion. Some told stories of rampant lies and deceit, while others simply spoke of differing priorities: "Too much time is spent on partnership problems and structure, which diverts the focus from the business," said one.
Surprisingly, very few of you who have little confidence in partnerships mentioned money as the reason. Only 6% felt the dilution of equity was a good reason not to take on a partner. But several of you did refer to the costs of a partnership's breakup: "Dissolving my partnership was expensive and emotionally draining. The attorneys were the only winners."
A number of you chastised us for phrasing our questions as if this were a black-and-white issue, and perhaps you are right. To prove your point, a significant percentage of the antipartnership group still chose to weigh in on "Why Are Partnerships Good?" And those who supported partnerships also gave us input on their darker side. For instance, among those of you who felt partnerships were a good way to run a business, 18% voiced serious doubts about whether the inevitable personal feuding was worth it.
Why is partnership good?
Spreads the workload 55%
Spreads the emotional burden 41%
Buys executive talent not otherwise
Spreads the financial burden 33%
Makes company building less lonely 26%
Those of you who said partnerships were beneficial clearly feel that benefit lies in spreading the burdens -- emotional, financial, and operational -- of entrepreneurship. "It's nice to know that when one partner is out of the office, the other can handle things," was a frequently heard response. Even among those not in favor of partnerships, 13% volunteered that burden sharing was an advantage.
Forty percent of the propartnership group said partnerships were great for infusing a company with executive skills that would be hard to come by through hiring. "A good partner will allow for faster growth for the business," said one; "We were successful because of our complementary talents," offered another. Still, on that point, at least one of you warned that taking on partners was an inefficient and risky way to build your talent pool: "Don't take on a partner if you can hire someone to do the same thing."
A number of you stressed the importance of establishing certain goals up front for anyone who chooses to be in a partnership. "It's a great business form when the partners take the time to get their legal/ethical stuff clarified and aligned at the start."
In your partnership, who really runs the company?
Equal Partnership 39%
Your Partner 9%
In the final analysis, it was your perception of the equality of your partnerships that most strongly colored your opinions. Of those who characterized partnerships as bad for business, the majority (75%) said they were or are in partnerships in which one or the other partner is perceived as running the company. Of those who characterized partnerships as good, the majority (60%) said they were or are involved in "equal partnerships."