by Elaine Biech, author of “The New Business of Consulting: The Basics and Beyond“
Working for yourself is one of the greatest perks of being a consultant. Without a doubt, it’s great to be your own boss, set your own schedule, make your own decisions, and be responsible for you and only you. But once the business really starts rolling in, that may need to change. When you find yourself struggling to manage a massive workload, it’s time to at least consider forming a partnership.
Admittedly this is a good problem to have. But proceed with caution: If you decide to partner with someone, you’re about to dramatically change your life.
Never take this choice lightly. Even if you believe you will work well with another person, there are always growing pains at the beginning. Once all the bugs are worked out, a partnership can be really rewarding, but it could also go the other way.
The relationship is more like a marriage than marriage itself. You and your partner must complement one another’s skills, trust each other, be able to make decisions together, and communicate well.
Being a consultant is far different from a 40-hour-a-week job. You’ll be spending a lot of time with the person, and his or her life will deeply intertwine with yours.
That said, here are six factors to consider before you form a partnership:
Do you truly understand the pros and cons of partnering?
Consulting is a lonely business, and the thought of having a partner to bounce ideas off of and cover for you if you become ill (or just want to go on vacation) can seem like the perfect answer. Partnering broadens your business capabilities, expertise, skills, and experience. When you take on a partner, you send a message to the world that the person you have partnered with is at least your equal — critical if your present clients are to accept that this person is a qualified substitute for you.
Yet there are plenty of disadvantages as well. One of the biggest is also one of the advantages, depending on how much you value independence: You must share decision-making with someone. Depending on your agreement, each of you will probably need to check with the other before making a change. Also, you will need to share resources. This can be a concern, especially if one of the partners is either generating or billing a greater proportion than the other.
Can you really work together? (Don’t just guess at the answer!)
I highly recommend forming a trial relationship to explore the likelihood of a successful permanent one. Make an arrangement that allows you and your potential partner to work together for 6 to 12 months before making the relationship permanent.
How would you configure your partnership?
Both parties should agree upon the way you will legally set up your partnership as well as how you will handle its ownership.
My partner and I chose to incorporate legally as a subchapter S corporation. We decided that because I had more equity and eight years in the company, I would maintain slightly more than half of the ownership. And although we didn’t consider it at the time, my slight edge of more than half of the ownership meant that the company would be a woman-owned business. Some organizations use that designation to make final decisions for awarding contracts.
Does your potential partner have the right qualities?
Make sure your potential partner:
- Shares your values and vision
- Is a natural entrepreneur
- Is financially stable
- Brings credibility to the business
- Brings skills, experience, resources, and contacts to the business
- Is good in sales and marketing
- Is ethical and trustworthy
- Is someone you respect and genuinely like
How will you decide on salary?
Both parties need to feel fairly compensated for their work. So figure out the monetary arrangement early. Will you both earn equal salary? Will you have a different arrangement?
Prior to becoming an official partnership, my partner and I agreed that he would work for at least one year at a reduced salary. The salary not taken was his way of buying into the company. We agreed that we would draw the same salary after the partnership was formed. The split of dividends, of course, is governed by law. We would each receive an amount proportionate to the percentage of ownership.
How will you divide responsibilities?
Dividing responsibilities and roles is often the most difficult task. Do all you can to create roles and titles that clearly define the responsibilities. For example, a founding partner can focus on work with major clients and maintain the corporate vision, while a managing partner can manage the daily operation of the company, including taking over responsibility for sales and profitability.
In my case, my partner and I were separated geographically: My office was in Wisconsin, and his office was in Virginia. Each of the offices was responsible for different aspects of the business — for example, invoicing clients, bookkeeping, or producing client materials. Each of us had responsibility for running an office and managing the staff at its location.
One more note: If, after weighing all these factors, you do decide to bring in a partner, be sure to plan for the possibility that something could go wrong in the future.
Put all agreements in writing and devise a plan for the details of a breakup, should one be necessary. Depending on your situation, you may want to tap your attorney to help make it official.
I loved working with my partner and would do it again if I could find another exactly like him. I share all of this information not to be negative about taking on a partner but to encourage consultants to think carefully, not rush into anything, and plan ahead. If you decide you’re ready to move forward, you’ll be glad you took the time to weigh the pros and cons and will feel confident that you’ve made the right decision.
Elaine Biech is the author of “The New Business of Consulting: The Basics and Beyond“. She is a dedicated lifelong learner who believes that excellence isn’t optional. As a consultant, trainer, and president of ebb associates for more than 35 years, she helps global organizations to work through large-scale change and leaders to maximize their effectiveness. She has published 85 books, including the Washington Post #1 bestseller “The Art and Science of Training“.
This is an article contributed to Young Upstarts and published or republished here with permission. All rights of this work belong to the authors named in the article above.