When starting a business with a partner, you could do worse than take British politician Benjamin Disraeli’s advice. Almost 200 years ago, he said, “I am prepared for the worst, but hope for the best.” Business gurus such as Dale Carnegie to Zig Ziglar have rehashed his words and issued them as their own since. It is great advice.
Prepare for the reality that most businesses fail sooner or later
The chance that your startup fails is high. According to the Bureau of Labor Statistics (BLS), you have an 80% chance of surviving year one. You have a 55% chance of lasting five years and only a 35% chance of making it to 10 years.
Preparing for the likelihood of failure is essential when starting a business. When starting it with a partner, there are additional complications you need to prepare for:
- Who decides when enough is enough: Some people are more optimistic than others. Some have more finances than others. The chance that you and your business partner are equal on both accounts is slim. If one of you is willing to keep propping up the business when the other one cannot or will not, what happens? Who has the final say on whether the company fights on or throws in the towel?
- What if one of you wants out before the other? If one of you wishes to continue while the other does not, how will you manage this? Even when things are going well, one of you may wish to exit the partnership at some point.
If you seek legal help to draw up your partnership agreement, it reduces the chance you end up facing your partner in court if things do not work out.