Starting a business with multiple owners is much different than flying solo. Many liken the relationship to a marriage, which you don't enter into lightly. Here are important steps for when you're not going it alone.
Step No. 1 — Choose your partners wisely.
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Meltmedia.com CEO Justin Grossman spent a year consulting for his two partners before joining the interactive website design and software firm in Tempe, Ariz.
"We were able to see each other’s strengths and have some perspective to get started," Grossman says.
Testing the waters before diving head on into a business with strangers increases your chances for success. Entrepreneur Liliana Amatore knew her two partners well before launching their business. Both women worked for Amatore when she served as a vice president at a company that ultimately went under — and laid them off.
"You can’t just jump into [business] with someone, you have to know who you’re dealing with, and like them, and know you can work well together," says Amatore, president of New York-based Company 20, an event management and marketing company.
You'll also want to look for partners with different strengths, but similar values. Business owner Brian Holtzinger says he started an organic and natural home food service with two partners, partly because he felt assured they would move mountains to make the business work.
"Partners must have the same commitment, work ethic and determination as you do," says Holtzinger, who co-founded King of Prussia, Pa.-based Five Star Home Foods in 1994.
Step No. 2 — Define roles in detail.
Once you have the right partners, you have to be clear about who will do what. Write it down. Details count.
Before launching Company 20, Amatore and her partners hashed out their strengths and weaknesses and then used the results to determine who would be responsible for what. It was a process that tested the relationships early on, and ultimately cemented the future of the business.
"As the business grows though, it gets harder to balance responsibilities," says Grossman, who makes the day-to-day decisions at Meltmedia, while his partners focus on the creative and technical aspects of the company. "We decided to bring in a management team and we're now working through how that gets balanced out. Partners have to have a lot of trust and respect for each other."
Step No. 3 — Establish an exit strategy.
No one wants to think about the break up of any relationship, especially before it even starts. But in business, it's a must. Draw up a buy-sell agreement that spells out an exit strategy for all partners, so no one can just walk out on a whim. Think of it as a pre-nup for your business.
"You don't want a partner to stop the company dead in its tracks," says Grossman, whose company has a buy-sell, and recently added life and disability insurance. "If someone gets sick, disabled or just says, 'I’m done,’ you don’t want to be fighting through it later, you want to know what’s going to happen."
For example, Holtzinger didn't know what was going to happen when one of his partners was injured while on vacation this summer.
"He was out of work for a few weeks, and it made us ask, 'What if Bob didn’t come back?'" Holtzinger says. "We realized that each of us only knew how to do certain things."
The partners are now cross-trained on various aspects of the business.
Step No. 4 — Be focused, but stay flexible.
Even the best business plans require tweaking as the company and its needs evolve. Expect change — and a lot of it.
Since Amatore and her partners started their event management company four years ago, their personal lives have changed significantly. All three have since married, and one has started a family, which has prompted them to now go back and review their buy-sell agreement.
Grossman and one of his partners also started a family over the last few years, while adapting to Meltmedia's fast growth.
"We now have people in charge of functional areas, instead of people going to each partner for decisions," Grossman says. "Whatever plan you put together it’s going to have to change, adjust and evolve. Nothing is ever clear-cut."
The partners review their shareholder's agreement every few years to make sure it still fits their needs.
Step No. 5 — Think one for all, not all about you.
Like any relationship, building a business with partners requires mindful attention.
"You have to constantly work on your partnership," says Grossman, who holds weekly meetings with the management team and his partners, as well as a partners-only monthly session to discuss long-term planning. "Nobody should get into this if they don’t understand that you’ve got to work on the relationships all the time."
Meanwhile, Holtzinger meets with his partners for two hours every Thursday.
"It’s important that if we have an issue, we don't let a wedge come between us," he says. "Part of the reason we’re successful is that we respect each other and can look at things from the other person’s perspective."
As for Amatore, she acknowledges that, at times, the trio can squabble like sisters, but quickly get over it.
"We’re open enough that we listen to each other," Amatore says. "I can share the good and bad times with them because we’ve all been through it together. I never feel like I’m in it alone."