As entrepreneurs we hold a lot dear. Our pride, our product, our brand. Most important, I think we would all agree, is equity. That is our prized possession.
Second to that is probably control—the buck-stops-here-decision-making ability that only comes from being the sole owner of a business and having a vision for what that business should be. And it’s entirely exhilarating to know that, for better or for worse, your decisions will make or break your business.
Business Blind Spots
So what happens when we come to the startling realization that there is one facet of the business—be it marketing, technology, sales—in which we have a blind spot? Heaven forbid we micro-managers cannot do everything!
This is the moment at which we must make a crucial decision:
- Do we cede a bit of control and/or equity in order to move our business forward?
- Do we trust another human being to execute on our vision as we would?
- Do we believe that this is the moment at which our little idea can become a bigger idea ONLY with the expertise / capital / resources of another entity?
- Are we willing to take a smaller piece of a bigger pie?
The Value of Partnering
Here’s our advice (and in full disclosure, my business partner and I are 50/50 business partners, have been since Day One, and couldn’t have built our business without one another, so we feel we have something to say on this matter). A trusted business partner is a beautiful thing. If you are at the point where you feel you are up against a brick wall in a specific area, explore this option. You should be absolutely willing to take a smaller piece of a bigger pie. There is no one human being that can possibly be so well-rounded that s/he can execute every aspect of a business perfectly well.
Now, having said this, these decisions are all relative to your resources. If you are well-funded and/or cash flow positive, we would actually recommend that you hire contractors and consultants instead of giving up equity, because, well, you can afford it. But for the true startups, sometimes the “drips and drabs,” as we like to say, of paying contractors become more annoying than mentally coming to terms with equity dilution.
We’re not just talking about 50/50 scenarios, because those clearly only make sense if they are in place from the beginning. Consider giving a small equity slice to an expert who will serve as an advisor in one area. The important point is that no one will treat your business like an owner unless they really are an owner.
Good Working Relationship is Key
How to go about doing this? Obviously, you want someone with a solid resume, complementary background and skill set, and all the credentials.
We’re not telling you how to hire here. But equally as important is that you must have a good working relationship with the person. You are not their employer—you are their partner and you have to treat them as such. Your job is to bring them on board and get them to buy into the strategy as you see it, and to set them off to execute on it.
Many times, people turn to friends or former colleagues because that is who they know and trust that they can work well with. That is great—we were friends for 5 years before we started our business together. If you have a pre-existing friendship, just make sure you agree at the outset that whatever happens, it’s just business. Having said that, we believe that doing business with friends is highly motivating because you want to succeed so that your friend succeeds, and you’ll be even more embarrassed if it all goes up in flames.
Also, make sure you have a solid operating agreement and lay out ahead of time the expectations for the arrangement on both sides. And learn how your partner operates – learn their ticks, their tells, their personality. Are they confrontational? Passive aggressive? Do they get up early or work until late?
You need to know these things and respect them. Your business partner is your most important relationship outside of your marriage and your children. If either one of you is dissatisfied at any point and you don’t confront your issues, just as in marriage, it will come back to bite you.