Founding a new company can be incredibly challenging and time-consuming, and going at it alone can be a daunting process. Bringing in a co-founder to help start or grow the business will not only let you become more efficient, but will often lead to even greater creativity and growth. However, before bringing a partner into your new venture, you should consider the following questions:
What will happen to your relationship if the business fails?
The easiest place to look for a co-founder is the people you already know. Friends, family and colleagues form the vast majority of business co-founders. However, according to Forbes magazine, it is estimated that over 75 percent of start-ups ultimately fail. What will happen to your relationship with your co-founder if the business tanks? Business deals have ruined many relationships, and co-founders should take steps to ensure that a potential failure will not wreck a friendship. The best solution for preserving a relationship is to document everything in writing, to observe business formalities like meetings and votes, and to avoid surprises.
Does the potential co-founder’s skill set compliment your own?
Successful businesses have a diverse group of officers who each bring certain specialties to the boardroom. While a start-up company does not need the brainpower of the Google c-suite, it is important that co-founders offer different skill sets and backgrounds to the new venture. Depending on your own expertise and the type of company, you may need a co-founder with a finance or accounting background, marketing ability or industry connections to round out the venture. Lack of industry-specific knowledge or expertise should be considered but may not be an automatic disqualifier if the potential co-founder is willing to learn.
What will happen if one of you wants to leave the business?
After multiple 100-hour work weeks, even the most ambitious entrepreneur may feel burned out on an idea and want to exit the start-up. What happens when a co-founder wants to exit the business? A poorly-planned withdrawal may lead to bitterness and resentment by the rest of the team, who may feel that the departing co-founder is bailing on the business. As the departing co-founder will likely still be an owner of the business, the other members of the team may feel nervous or apprehensive about being in business with someone who is no longer part of its day-to-day operations. Adopting a written plan in advance for what will happen if a co-founder wants to leave the company will alleviate the stress and potential difficulties when faced with a withdrawal.
While bringing on a co-founder involves many other considerations, addressing these three questions up front will help guide your decision on whether to partner with a co-founder.
Quin Breland is a New Orleans-based attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, where he focuses his practice in the areas of mergers and acquisitions, corporate transactions, finance, emerging companies and real estate. His general corporate practice involves assisting clients in a variety of corporate transactions, including drafting, negotiating and reviewing contracts, forming and advising business entities, and assisting with financing arrangements. He may be reached by email at firstname.lastname@example.org.