Contractors love to go it alone. They are often driven to start their own business because they know they can do it better than their current employer and, frankly, they don't like taking orders from anyone else. I've had far more contractors tell me they started their business because they wanted to work for themselves than ones who went into business to make a lot of money.
This is a common driver among all small business owners. A relatively recent Ohio State University study revealed that 80 percent of small business owners are in it for a job not for wealth generation.
I am a huge champion of the small business owner. Small businesses are the engine of the U.S. economy. Small business owners are America's greatest risk takers. If they fail odds are they and their families are going to struggle to make ends meet for years on end. And failure is far more likely than success.
As much as I admire the small business owner one nagging trend keeps popping up: contractors that are run by two people do better than those run by one. For the purposes of this article I am defining partners as two people who work together passionately for the success of the company. Two individuals who share the load of running the company. It is not always the case that both partners own a piece of the business. Frequently one of the two owns the business out right and the other is simply well compensated for his
or her contributions.
I've thought long and hard about this trend and have reached some conclusions as to why two "owners" do better than one. Unfortunately my conclusion challenges owners who are most comfortable running the show by themselves and most construction companies are run by a single dominant individual. What I've noticed about single owner business is:
- It is hard for a one man shop to grow past $1.5M in sales. Not impossible but hard.
- Too much stress on the owner. Thinking about business 24/7.
- The business is one dimensional. Operations focused or sales focused. Not both.
- The owner runs the business very rigidly. Not flexible and adaptable to new opportunities or threats.
- The owner can't take a break unless the business is severely seasonal (e.g. landscaping).
- No one to step in for owner if he or she gets sick or hurt (a common driver of business failure).
- No one to bounce ideas off of that would result in better quality decisions and help deflect emotional impulse based decisions.
Let's say you are running a business by yourself and are open to adding a "partner" so you can grow the business and reduce business risk. Who should you look for and what stake should they have in the business?
Starting with the second question first, your new "partner" doesn't need to have an equity stake, almost certainly better if he doesn't at first. You can reach an understanding where pursuant to certain conditions being met your new partner will have an opportunity to buy in or will be gifted an equity stake. What most assuredly will need to be part of the upfront deal is profit sharing. You need your partner to treat the business as if he is an owner regardless of whether he has an equity stake or not. The best way to motivate decision making and work effort aligned to what's best for the business is for your partner's income to be impacted by the year-end bottom line. Profit sharing is a critical key to a successful partnership.
The person you should be looking for should never by your twin. Do not pick someone with your personality and skill set. You are not looking to clone yourself. You are looking for a teammate who will compliment your skills, abilities and personality.
Pick someone you are compatible with. In other words pick someone you can "live" with. If you are risk averse, you need someone who is comfortable taking risks. If you are field oriented you need someone who is sales oriented. If you are a people person find someone who is numbers and process oriented and a bit of a driver. If you tend to see the trees find someone who sees the forest.
Choose wisely and be prepared to jettison your first pick and choose again. You didn't marry the first person you ever dated did you?
To find this person look for in no particular order:
- A current employee who is highly valuable, loyal and has displayed sound decision making.
- A former competitor who shut down his business.
- A current competitor who is also small.
- A proven salesman from your industry.
- A proven operations manager from your industry.
- A former direct client.
- Use a recruiter
- Advertise on Craig's List.
When you find a good candidate, check them out thoroughly. Run a back ground check. Check references. Breach a touchy subject: their personal finances. You can't afford to bring on someone who is loaded with debt and in financial trouble. The risk is too high. You must find a trustworthy, honest, hard-working, ethical partner. Bringing in the wrong person and trusting them with your business will set you back big time. The truly wrong person will steal from you. You must be very thorough in your investigation.
However don't let the risk of hiring the wrong partner override the risk of going it alone. Words cannot adequately express how risky going it alone is to your future wealth. If you are running your business completely by yourself you need to consider finding a partner. It is the smart play.