How Many Partners Should You Have?

I already covered how you find good partners (abridged version: try before you buy), but what about the question of how many partners you should have, or if you should even have partners at all?  Every so often I get asked this, and while there is no “right answer” I always like to analyze each of the possible situations.

Flying Solo

If you’re the “solopreneur”, the entrepreneur with no partners, you have a few huge advantages. There’s no consensus when it comes to decision making, you just make the decision and move on. Your vision for the business is the only vision. If that changes, there’s no one to convince. Having a solo vision and consistent decision making can be a very good thing for your customers and future employees.

There are two relatively sizable disadvantages to being a solo entrepreneur though. First and foremost, it’s next to impossible to be an expert in all of the areas required to run many businesses, so you’re likely limited in the types of businesses you can run (especially in the beginning when it’s going to be just you). The other disadvantage is that you don’t have to run your decisions by anyone. Emotions or bias or short-sightedness can come in to play without you even realizing it.

A Single Partner

Once you introduce a partner in to the equation everything changes. You now have to come to a consensus on decisions, which can be both good and bad as we’ve already covered. It will be a pain sometimes to have to discuss something for hours that seems like a slam-dunk decision in your mind, but that pain can be offset by the many bad decisions that you’re talked out of.

You also now have the advantage of having another person around so that you don’t have to do it all. You (hopefully) have complimentary skillsets, so now the developer doesn’t need to do the marketing, or the accountant doesn’t need to do the customer service. You’ll most certainly be wearing multiple hats, but at least you will be able to offload a few of your weak areas to someone else who can do them better.

The primary disadvantage of a two-man team from what I’ve seen is that there can end up being a me vs. him attitude. Everything should be split 50/50 but it never is. Often times both partners will think that they’re doing the majority of the work. It’s kind of like a bad marriage. And if that happens, each party starts to think “I could just be doing this by myself with none of the headaches and make twice the money”.

Two Partners

So once you introduce that third person in to the mix, you solve all of the problems…right? Yes and no.

Having three brings some huge added benefits.  You now have one more person who offers a complimentary skillset to yours.  With a team of three, you should each only have one or two core functions within the business, and they should be the core functions in which each person is strongest.

You also now have that third person to help mediate disputes.  I’ve seen firsthand that having a neutral party when there’s a one-on-one dispute can do wonders for calming everyone down and providing the proper focus.  Of course, this third person can also team up with one of the other partners so that every single meeting can be a two vs. one ordeal.

With three you also start to introduce multiple lines of communications.  It’s harder to schedule meetings or even to find a time when everyone is available for a group Skype chat.  And once you’re in said meeting or chat, you have to now come to a three-way consensus, which can sometimes take a lot longer than you feel like it should.

Three or More Partners

Once you hit a team of four you run in to what I call “the combination problem”.  You remember combinations from the probability section of middle-school math class right?

From the above link:

The number of ways (or combinations) in which r objects can be selected from a set of n objects, where repetition is not allowed, is denoted by:

What does this have to do with business partners you ask?  Well, you can use this to determine the number of relationships in the group.  If we use C(n,r) as our notation, you can calculate the number of relationships amongst business partners with C(x,2) where x is the number of partners on the team.

For instance, on a three person team, C(3,2) = 3.  This makes sense.  At Pure Adapt we have Mike, Greg, and I.  For us to be successful, I need to have a positive relationship with both Mike and Greg (2), and Greg and Mike need to have a positive relationship with each other (1), for a total of 3 relationships.

Three relationships is manageable.  However, once you hit a four person team, you end up with C(4,2) = 6.  That’s much less manageable.  Each one of those relationships needs to be positive for your team to be on the same page.  There can’t be any bitterness or bad blood on any of those six lines of communication or your done for.  In all six cases, the people need to be able to work together and solve a problem.

This is where, to me, any gain that you get from added perspective or skills, is entirely offset by the unlikelihood that this large number of relationships will exist in perfect harmony.  Need more than three? Hire someone part-time or full-time, or outsource the work to a contractor, or automate it, or don’t do it quite yet until you can afford to do one of those things.

Thinking about a team of five?  C(5,2) = 10.  A team of six? C(6,2) = 15.  Talk about complex!  Good luck finding a place to eat dinner together, yet alone making a business decision.

My Experiences

To some extent, I’ve had experience in each of these situations.  From January 2006 – December 2006 I worked solo on SportsLizard, iPrioritize, and doing SEO and web development as a consultant.  From December 2006 – December 2010 Pure Adapt was a four person team.  From December 2010 to the present, we’ve been a three man team.  And while I haven’t been in a two person partnership, I’ve known many who have been.   So I think my perspective comes from a very real place.  It’s based upon what I’ve experienced and what I’ve discussed with countless other business owners over the years.

If I Was Starting Out…

I’d go one of two ways depending on the type of business I was starting.  As you can probably already tell, there’s no way I’d ever start a business with three or more partners again.  It’s far too complex because of the combination problem.

If I was starting something small, a “lifestyle” business that I envisioned keeping small (maybe an employee or two, lots of outsourcing and automation), I’d probably go at it solo.  I’d offset the negatives by having a board of advisers.  I’d give them each a little stock.  I’d find a way to meet with them all regularly, either in person or virtually, sometimes as a group and sometimes solo.  It wouldn’t be perfect, but it sure could work for me.

If I was starting something that I had big visions for, a “sky-is-the-limit” type of idea, I would take on partner(s), preferably two partners.  I thoroughly enjoy my current situation.  To me, the three person team is the perfect balance of upside and downside. It takes the right group of guys, but if it works it can be immensely fun and rewarding.  I am grateful that I don’t have to worry too much about accounting or inventory management because my partners have those “departments” under control, which allows me to focus on development and other projects that I enjoy more.  Plus, to me, achieving things is always more fun when you do it as part of a team.

3 comments on How Many Partners Should You Have?

  1. Tim says:

    Anyone looking to start a business should read this, bookmark it and revisit it at various times throughout their lives!

    Great post Adam, as someone who has lived with all of the aforementioned combinations, I have a somewhat jaded view point on the subject. What’s funny is I commented on your original post about How to Find Good Partners in mid-2010, my view point is presently VERY different. I’ve had 2 partners, 1 partner and now a solo project. It will take a LONG time for the wounds of my single partnership business to heal, I don’t see myself ever stepping into that bear trap again. In retrospect the experiences I had with 2 partners was pretty good, at the time I thought it was terrible but now that I’ve truly experienced terrible I would gladly take the worst of those days compared to what happened with a single partner.

    My experience with a single partner is the stuff nightmares are made of lies, deception, terrible communication and multiple felonies (on their behalf, not mine). Beyond all of that, the simple truth remains, there is no such thing as a 50/50 partnership, one partner will always put more effort, time, experience, capital and bring more value to the equation as a whole. That puts you in a potentially uncomfortable position depending on the degree of these differences. As you can infer these differences were enormous in my case, I am not equipped to do something half way or pour less than everything I have into any project I work on, my former partner was not equipped with that mindset or level of dedication. Before I digress, I STRONGLY suggest talking to every person in your life that you trust before going into a 50/50 partnership, even though you have to trust the person, you have to make sure you are protected first and foremost. I was burned by a “friend” I had for 10 years.

    Now that I am well dug into a Solo effort I could not be happier. Sure it’s a little hectic sometimes, sure things sometimes get tricky, but it is by a large margin the happiest I have ever been. I suspect I am very unusual in this sense, not only how my business has developed but in my industry niche and my work ethic. I can see the solo project being catastrophic for a lot of people. It can either consume you entirely, overwhelm you or thrust you into the deep end before you are ready. Proceeding with caution and intelligence is always strongly advised.

    The one warning I’ll give to any budding entrepreneur, talk to people who truly care about you before you take any life altering course. Be it your parents, a sibling, spouse or significant other, a long time friend, a mentor, an old teacher, the list goes on… Just find a few people who have no vested interest in your failure or success and will give it to you straight. Really “good” ideas may not be as good as you initially thought and just talking to a few people will shed light on reality.

    • Adam McFarland says:

      Great comment and advice Tim! Your quote:

      Beyond all of that, the simple truth remains, there is no such thing as a 50/50 partnership

      is a really good one. I actually toned down my stance on 50/50 partnerships during my revision. I’m really not a fan of them. From what I’ve seen, it would be really really hard for it to work for me for all of the reasons we both mentioned. I do think the “bad marriage” analogy is probably more right than people would initially think. It’s amazing how different adding a third person is – it goes from a marriage to a team, which is a big shift.

  2. Tim says:

    I’m less bent on world domination these days, so I don’t see the need for a partnership in my life. Who’s to say what will happen in the future though. That said it would take a very strong case for me to get involved in a 50/50 partnership again, I think the dynamic of 3 works well, assuming they are the right 3.

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