Being your own boss is eternally appealing; being your own colleague less so.
For me, it has always been preferable to share the journey than to direct matters as a sole trader. Perhaps I have made less money than I might have but I believe the experience has been more fun, and I’ve got involved in far more projects than I could have working alone. Besides, very few of us have the genius of a Henry Ford or Sam Walton: for most of us, a partnership will improve the odds of success.
A partner helps relieve the isolation of being the boss and the stress of judging risks. While firms cannot function as democracies, pure dictatorships are vulnerable to all the whims and failings of an individual personality, such as overreach, emotional fragility, intellectual limitations and favouritism.
The easiest partnership is a 50/50 deal, each contributing the same capital and effort, and starting at the same point in the life of an enterprise. But such arrangements may well not be feasible or fair. Often one party has more cash or time or know-how, or has already initiated the operation.
Either way it means the partnership will not be equal, but that should not undermine its success as long as there is mutual respect, complementary skills and aligned objectives. Examples of partnership businesses
Most partnerships have a life span. My old colleague at Pizza Express, David Page, reckoned the typical set-up lasts ten years; I think it varies according to the circumstances. The trigger for dissolution is usually the sale of the joint undertaking. Frequently, one side has the urge to continue the chase, while the other wants to sit back and enjoy their wealth.
Sometimes it is death, divorce or simply diverging priorities that lead to a break-up. As with marriage, ideally such partings are not rancorous; but envy and festering resentments mean bitterness and litigation can flare up when things finish.
There are many talent pairings. I like the combination of an accountant and a salesperson. Other great teams can comprise smooth negotiator and hard nut (a Mr Nice and a Mr Nasty), or a brilliant creative brain matched with a first-class commercial mind.
So often the prime mover is an inventor of some sort, while the partner brings street smarts or finance, or simply energy and confidence.
Curiously, companies hiring high-level staff will undertake extensive referencing and even psychometric testing to ensure the candidate’s suitability for a post, but few entrepreneurs will carry out much rigorous analysis when going into partnership with someone.
All too often we fall into business with someone because we enjoy their company or because we are friends, when the best qualifications are that a person is competent and reliable in business matters.
Partnerships are most vital when times are tough. There is no substitute for being able to discuss confidential affairs in detail with a colleague of equal rank and understanding. Advisors, subordinates, spouses and friends are simply not as likely to be as engaged – or as honest.
For many entrepreneurs, forging a partnership defeats the purpose of working for oneself. It means you cannot control your own destiny to the same degree and take the same level of pride, credit and creative satisfaction. But most of us accept we have shortcomings, and realize that an equity partner will try harder and bring more to the relationship than any employee.
But like any marriage, partnerships must be handled and worked at. They go wrong with alarming frequency. It’s always a terrible thing to witness, and it can happen to the best.In an interview John Lennon gave in 1970, soon after the break-up of the Beatles, he described why things went wrong for surely one of the most wonderful partnerships ever. He was scathing about the egos of his fellow band members and their envy towards him and hatred of Yoko Ono. Unparalleled success didn’t prevent even the Fab Four from a bitter fall-out, and separately Paul, John, George and Ringo never saw the heights they enjoyed as a group. It reminded me of how winning teams in business usually end up going their separate ways, often in rancour.
Three things in particular can precipitate corporate divorce. Firstly, achievement changes people. Once someone attains status and wealth, their attitude towards sharing the spoils and the glory alters. It slowly dawns on them that actually all the clever moves and breakthroughs were their idea, and in fact they are the only one who really does any work. So of course they believe they deserve more of the applause. Thus resentments set in and eventually the bust-up occurs.
Very often memories of the early days get confused. People claim credit for the work or ideas of others – forgetting how much they needed support in the beginning. I have frequently seen deals where the initial carve-up of the spoils leads to trouble later: but at the time that was thearrangement. Those terms were right for the moment. Regret is a dangerous tendency.
The second factor is that as people age their personalsituation evolves. They usually get married, have a family and develop a new set of priorities in life. Spouses and children become far more important to a founder than their business and the partnership that created it. They make some money, the hunger and ambition abate, and perhaps they decide to give up all the striving for a more settled life.
Illness can also intervene. At both Microsoft and Apple, a single founder of each remains involved and famous: Bill Gates and Steve Jobs. But in each case there was a co-founder who dropped out though ill-health (Paul Allen and Steve Wozniak respectively). The fact is that running large organisations takes real stamina and many find the intensity and responsibilities too onerous.
Failure tends to bring out the knives. Everyone starts blaming someone else for the problems. It amazes me how often chief executives get away with the argument that they were not money men, and that the finance director was the only person who understood what went wrong and why the cash ran out. With all the recriminations of a bust-up, litigation usually follows. As ever, the lawyers are the big winners.
But enough break-ups: what about the getting together part? How on earth do partners meet? Often it seems that the way prospective tycoons come together is almost randomly. I first met one of my business partners, Gary Ashworth, in the early 1990s when I tried and failed to buy his recruitmentbusiness; I met my partner Paul May when I invested in the retail company he ran.
William Hewlett met David Packard when they both played for the Stanford football team. Charles Rolls, the aristocratic motor trader, met the engineer Henry Royce through a mutual friend called Henry Edmunds at the Midland Hotel, Manchester, in 1904.
Given that random chance seems to be a key factor in establishing great partnerships, perhaps the best advice I can give to those who would pair up is to get out from behind the desk and constantly place yourself in serendipity’s way. In short, network.
Luke Johnson is the chairman of Risk Capital Partners and the former chairman of Channel 4 Television.
This is an exclusive extract from his latest book START IT UP: Why Running Your Own Business is Easier Than You Think, published by Portfolio on September 8 at £12.99.
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