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(Reading time: 5 – 8 minutes)

Welcome to the third and final part in a series of articles on starting a small business. In this article, we’ll examine the advantages and disadvantages of partnering, and what kinds of leverage partners bring to the table. Don’t miss the previous articles on business bootstrapping and business outsourcing.

What is partnering?

Partnering is a process of collaborative teamwork to achieve measurable results through agreements and productive working relationships.

This means that when you’re doing business and want to partner, you need to find someone who complements you and will bring in more profit than if you just run the business by yourself. In exchange your partner will receive part ownership of your business.

What kind of partner should you look for?

When you’re looking for a business partner, make sure he or she shares a similar entrepreneurial spirit, similar business ethics, and isn’t carrying too much personal baggage, such as family and personal problems. It’s wise to choose someone who can offer you something that you don’t have and in return you can offer them something they don’t have. Why go into business with someone who isn’t bringing any new ideas, skills, capital or customers?

It’s best that you complement one another. If you lack a large network and client list, then it would be ideal to find someone who possesses a large network and client list.

Advantages of Partnering

1. Your business can be more successful

If you find the right partner, you can potentially build a formidable team that is motivated and committed to growing your business; you have a partner that can come up with new ideas and creative solutions that you alone may not be able to; you have someone who can see holes in your ideas, which you may not notice; and you have someone who can keep the business operating while you take time off now and again.

2. You can share time, cost and effort

This is another great advantage of partnering. You can split the time giving yourself time to get away from your business now and again. There is more to life than just your business. Don’t forget you have family, friends, and yourself to spend quality time on, too. You or your partner can keep the business operating if the other partner is taking time off.

The investment needed to complete certain projects can be too much for those running a business by themselves. You may find that your business partner can invest capital into your business allowing you to develop it quicker and to a greater degree than if you were running it by yourself.

Doing everything yourself is undesirable when it takes up all your time and energy. It’s better that you and your business partner agree who is responsible for which tasks and when tasks should be completed. This can help you avoid mental and physical burnout.

3. Partnering allows flexibility

You can have more than one partner and you can choose to partner with individuals or a company. For example, Brian Clark, founder of Copyblogger.com and co-founder of LateralAction.com successfully partnered with Chris Pearson to develop one of the most advanced and popular WordPress themes for blogging called, Thesis. That partnership that brought them tremendous success. Either of them alone probably couldn’t have got the Thesis theme off the ground so quickly and promoted so rapidly by himself. It was their partnering that allowed them to come up with innovative ways to create Thesis, market it and sell it generating large revenue.

Even more importantly, when the partnership no longer served their purposes, they were able to easily part ways.

Remember, as with outsourcing, you don’t have to limit to looking for a partner in your locality. You can find them in different parts of the country or even overseas. For example, you may be from India selling Indian pearls and jewelry. If your market is the United States, rather than moving or traveling there, you may want to find someone who is already based there, has contacts there and knows that market better than you do.

Disadvantages of Partnering.

1. You have to share ownership and profits

This can be difficult, especially if you’ve been working on your business for a while by yourself. When granting part ownership and control of your business to your partner, you’ll have to calculate how much capital the partner needs to invest to buy in. You’ll have to make sure that your partner is going to help increase profits for your business. In future, if your business is doing really well and you want to get full ownership back, you°Øll have to buy your partner out at a price that both of you agree to.

2. You’ll have to compromise

When you’re inspired to develop a new product, find a new niche, or start a new marketing campaign, etc., you’ll have to run it by your partner first. Sometimes your partner will fully support your idea. However, sometimes your partner may have reservations about your plan. You may find yourself having to dilute some of your ideas due to your partner’s concerns or doubts. Depending on what the result is and your personality, you may feel resentful for being forced to water your ideas down.

3. Legal issues

You are pretty much responsible for your partner’s actions and he or she is responsible for your actions when you are in a formal business partnership. You hear horror stories where a partner runs off with a business’s money or commits some fraudulent or illegal act leaving the other(s) exposed to legal action.

You’ll also have to write a contract that is clear and detailed to deal with potential problems and situations that can arise when partnering. It would be wise to have a lawyer look over the contract to make sure it’s legal and reasonably fair for both parties.

Conclusion

That concludes this three part series on starting a small business with by bootstrapping, by outsourcing, and by partnering. I’ve really only skimmed across these topics. Feel free to leave a comment below of your experience of using any of these models. If you haven’t already, then you may want read Part 1: Business Bootstrapping and Part 2: Business Outsourcing of this series as well. Thank you.

Max Bronson lives in Auckland, New Zealand and is fluent in Mandarin. He lived in Tianjin, China for 7 years teaching English. It was in China that he discovered his passion for entrepreneurship. He also enjoys writing about personal development at Personal Development X.

(Reading time: 4 – 6 minutes)

This is the second of a three part series on starting a small business, where we focus on the advantages and disadvantages of business outsourcing. Don’t miss Part I Bootstrapping: Advantages and Disadvantages.

What is outsourcing?

Outsourcing is contracting another person or company to perform a particular task for your business. An example of how you could outsource would be to get someone in India to build your business’s website.

Tim Ferriss, fierce proponent of outsourcing and author of the highly acclaimed book, The 4-Hour Work Week, said that between 2000 and 2004 he was working an average of ninety to one hundred hours per week, first as an employee of a start-up and then as owner of his own start-up. Four exhausting years later, he came to the conclusion that that way of doing business was unsustainable and not scalable. After interviewing many business people around the world over a twenty month period he came to the conclusion that outsourcing was the way to go.

Outsourcing is about giving the smaller or more technical tasks that need doing to somebody else in order to increase your time, income and mobility, which in turns allows you to focus on the most important task of developing strategies for growing your business.

Advantages of Outsourcing

1. You save time

How can you multi-task for everything that needs to be done and still develop strategies to grow your business? Short answer: You probably can°Øt.

When running a business, you’ll soon discover which skills you possess are strong, weak and non-existent. Rather than using your time and money to learn several new skills, you can simply outsource to someone who is already proficient. Perhaps you have other things in life besides your business that you want to focus on. You may want to spend the extra time outsourcing gives you to learn a new skill such as public speaking, a new language, accounting, or some other subject. Perhaps you want to use the extra time to enjoy a hobby, travel or simply spend time with your family.

2. You can concentrate on networking, business growth strategies and your core competencies

Because you save time and energy with outsourcing, you can focus on growing your business. You can meet with important clients, attend seminars, find potential partners and network as well as tend to the management of your business. If you’re strong at marketing and networking, then why not go for broke and concentrate on these to build your business. Outsource your weakest areas to those who are already strong in them.

3. Lower overheads

Paying wages to full-time employees can severely eat into your profits. It’s common for new start-ups to maximize savings by outsourcing to developing countries. People there, who are highly skilled, often work for only a few dollars per hour. It may seem low to us, but it’s often good money for them. Lower overheads from not having full-time employees may give you the competitive edge and mean the difference between success and failure.

Disadvantages of Outsourcing

1. You have still have to manage people

Even though you’re saving money on hiring full-time employees, you’re still going to have to manage the people you outsource to. You’ll have to describe exactly what you want done, recommend amendments and make sure they get projects completed on time, under budget and up to standard. Managing people near you can be difficult enough, but managing them from another country can be even more difficult. It can be time consuming writing emails and making phone calls to give instructions, feedback and recommend changes. There may also be language and culture barriers that hinder communication. You may also have to deal with annoying time zone differences.

2. People may steal your intellectual property

This is a real risk. When you outsource tasks overseas, it’s not hard for someone to steal the idea and use it themselves. If you’re a new business or company, you probably won’t have the money and time to sue someone overseas. I’m not saying that it will happen, but you should be wary of how much intellectual property you give the party you’re outsourcing to.

3. Those you outsource to aren’t committed to your success

Those you outsource to probably have several projects on the go at once. Their priority is getting tasks completed and receiving payment. They may not really care if your business succeeds or fails as they have other businesses also sending them their projects. In the worst case, without time consuming supervision, you can seriously damage your cash flow outsourcing tasks better done yourself.

In Part 3 of this series, I’ll discuss the advantages and disadvantages of business partnering. And don’t forget to read Part 1 “Bootstrapping: Advantages and Disadvantages (Know what you’re in for!)“.

Let us know below in the comments section what your experiences with outsourcing have been.

Business Partnering: Leverage the strength of others

What is partnering?

What kind of partner should you look for?