Many people love the idea of sharing responsibilities and working together, however there are some who think otherwise. Why? Read on to know some pros and cons of partnerships in business.
Finding someone who fits the bill for a business partnership is just as herculean as finding the perfect ‘soulmate’. You either click with your partner in an instant or it might require some hard work and dedication to reach that point where things go smoothly to reach that successful zenith. From general partnerships to limited partnerships and LLP, starting a business partnership may offer tremendous benefits but, like any other situation, there is always a flip side. Running a partnership not only requires constant dedication and trust, but also a certain understanding between the two partners and a mutual agreement wherein the partners are ready to stand accountable in the event of a grand profit or a loss situation. Therefore, it is necessary to give the idea of ‘partnerships’ ample thought and planning. There are varied responses by people where partnerships are concerned. What is it about this sort of business that sets off mixed reactions among people? Furthermore, what do you have to deal with when you start a partnership? The answer lies in the pros and cons of partnerships in business.
A quintessential adage states that ‘two hands are always better than one’. Sharing responsibilities and work is a major advantage when it comes to starting a partnership. As a sole proprietor, all the work and responsibilities have to be managed and borne by one person. With another partner involved, not only is the work more manageable, but the quality of management and the productivity also increases two-fold. Starting a partnership also welcomes a varied skill set that helps in ‘dividing’ and ‘conquering’ efficiently. As the years go by, and the work load increases, the need for a partner may arise evermore. Therefore, starting a partnership comes with the biggest advantage of divided work and responsibility, making it easier to run the company.
With pooled resources in the form of energy, time and money, the work and the decisions are also equally divided among partners. Therefore, in the event of a loss or downfall of the company, an individual does not have to bear all the losses. With another partner involved, and more combined resources, the losses, risks or damages are significantly reduced per partner. This is definitely a plus. This is particularly helpful during the start of a partnership when failure rates are usually high.
More partners automatically mean more money and capital invested in the business. As a sole entrepreneur, an individual invests all his assets and capital into starting the business. In case of partnerships, be it general or LLP’s, all partners have to equally share the costs of the start-up. In the event of losses, the partner only loses the amount he or she invested, and not the whole capital. This has proved to be an advantage in many cases around the world.
Starting a business without a partner limits and constricts your possibilities on a single path. However, with more capital, different skill sets, ideas, creativity and shared responsibilities, the opportunities of expansion and networking are much higher. The portals to opportunities are never far behind for a partnership.
With the addition of partners in a partnership, there is an instinctive increase in the level of skills and creativity in the company. Different people have different plus points and skills that can prove to be valuable for a company. As a single owner of a business, the opportunity to incorporate different skill sets for the benefit of the business rarely occurs. In a partnership, not only does the creativity increase, but there are also fresh thoughts, talents and ideas that begin to pour in from all sides.
Sharing Of Wealth
Perhaps one of the biggest causes of frowns for those starting a business together is the sharing of wealth which is an unavoidable minus when forging a partnership. You can expect to make more money when starting a business with another partner involved but the flipside is that, when the dividends do pour in, the wealth has to be shared between all partners regardless of whether you have put in that extra effort or work. Apart from sharing wealth, running a business with another partner also adds to the expenses in terms of salaries and cost to company.
Conflict Of Thoughts
With another partner involved in the business, it is difficult to always have things go your way. From decision making to brainstorming on expansion opportunities, there is bound to be a conflict of thoughts with another partner. Due to the diverse skill sets and varied thought processes, partners tend to have different opinions or viewpoints on different matters which cause difficulties in managing a partnership. In the event of an unwanted situation or conflict, personal tiffs may also arise between two partners, especially if they were well acquainted and/or have a relationship outside the partnership.
Who’s The Boss?
With an additional partner involved in the partnership, the work and the managerial responsibilities get divided and, in this case, a pertinent question is who gets the upper hand. In theory, two or more partners are equally responsible for the decisions taken in a partnership and have an equal say in the running of the business. However, in reality, there are skirmishes regarding who gets that rightful say in decisions. A major disadvantage here is when partners do not get total control over the business and end up buying out each other or ‘falling out’ from the partnership, leading to a downfall in the business.
Partnerships are complex agreements between two or more individuals, and the pros and cons of running a partnership must be understood thoroughly before entering into one. However, if managed effectively, partnerships can work wonders for a business idea. A double-edged sword, business partnership comes with its ups and downs just like a marriage, and has to be studied and handled patiently for it to be successful! Good luck!
More from iloveindia.com