Small Business + Partner = Dead Business?

[devine]

We've finally finished with our last client from 2015, here's some statistics on our journey:

104 clients total.
11 clients of Type A (Sole entrerpreneurs).
58 clients of Type B (2 Partners business).
18 clients of Type C (Companies with several partners).
17 clients we know no such details about.

- Group A businesses are all functional up to date.
Minimal "waste" expenses, minimal turnaround time compared to other businesses. In our opinion, the most actively growing businesses of all.
- Group B is 32.7% (19) non-functional. 42% (8) of which are <1 year old.
"Waste" varies.
- Group C is 22% (4) non-functional. All 4 are <1 year old.
Maximum "waste" expenses, maximum turnaround time. In our opinion, the most flawed businesses that would better start from scratch.

All our clients had a minimum of 1k USD to spend on our services, so wannabe entrepreneurs, who usually quit for all the obvious reasons, didn't make it to our list. Location is RU, 1k is "something" here.

Observation #1:
- Businesses consisting from several people in charge are the most difficult to run. Not a single example of efficient business from all small businesses we were introduced to. All had insane amounts of "waste". The most fatigued by their business people. Lowest % of net profit. Constant uncertainty in decision making, smallest % of right decisions. We called this "Environment of Decline".
Observation #2:
- Majority of partnerships were initially formed due to unwilingness to hire specialists.
Observation #3:
- Successful, efficient and growing businesses with more than one person in charge had no contracts and no redirects.

Conclusions:
1. The most efficient businesses are those where only one person is in charge.
2. It's usually better to hire a specialist than to have a partner, especially when one is replaceable by another.
3. It's better to make sure that your partner has no interest in stealing from you, not that he can't do this.
4. Want to hire wrong specialists for your business? Bring more people to make decisions.
5. Those who can't carry a business by themself - won't succeed in a group. What could be an effort in sole entrepreneurship will become pure expenses of all kinds in partnerships.
6. Partnership is less likely to come up with a project that will survive Year One, compared to sole entrepreneurship, when it comes to small business.
7. Make sure that you realize it as quick as possible if your business in on its course to become an "Enviroment of Decline", otherwise you'll blink an eye and you're already there for years.

Do you guys observe the same tendency?
For those who are sole entrepreneurs - what kinds of problems have you ran into, which you consider the major ones?
For those who are in partnerships - how have you made your business more efficient? In which circumstances you would quit the business for sure?

 

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[Camo & Gold]

I couldn't agree with you more. I'm partnered with 5 friends so there is 6 of us total that are all "owners" and it's literally a nightmare. I have learned very quickly that getting into business with your friends, and multiple friends at that, is pointless.
For example our brand has taken off on social media and apparently several stores have offered to sell our products and nobody has made any moves, besides myself. It's because the revenues will be split 6 ways, so even if you made 10k profit that's not much in the grand scheme of things. Plus there are 5 other people to crucify or justify your decisions and everyone always seems to have a "better way" but never actually does it.
I have learned a lot and built a lot of confidence in starting up a business which I am now implementing on some other ideas.

 

[New]

I'm wondering if someone else has replicated this experience.

I have attended to several "start-up events", mostly by tech, "silicon valley" kind of entrerpreneurs, and they are all shouting in one voice that building a team is the first and foremost priority, even to the point that some say team is the only thing that matters, the business idea, not so much.

 

[devine]

I'm wondering if someone else has replicated this experience.

I have attended to several "start-up events", mostly by tech, "silicon valley" kind of entrerpreneurs, and they are all shouting in one voice that building a team is the first and foremost priority, even to the point that some say team is the only thing that matters, the business idea, not so much.

Circle-jerking.
90% of start-ups would bring more value to people by cleaning public toilets.

 

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[ApparentHorizon]

Observation #1:
- Businesses consisting from several people in charge are the most difficult to run. Not a single example of efficient business from all small businesses we were introduced to. All had insane amounts of "waste". The most fatigued by their business people. Lowest % of net profit. Constant uncertainty in decision making, smallest % of right decisions. We called this "Environment of Decline".

Same in the US - they suffer manager syndrome - meetings, pointless tasks to display on their quarterly checklists to one up each other, overlapping decision making...holy hell.

At the same time you have GOOG, APPL, TWTR, et al. which started as partnerships.

For those who are sole entrepreneurs - what kinds of problems have you ran into, which you consider the major ones?
For those who are in partnerships - how have you made your business more efficient? In which circumstances you would quit the business for sure?

Sole: I can make myself completely redundant in less than 24 hours, but when it comes to hiring outside of my area of competence....takes more time than I'd like.
Partnership: Minimal experience here, but it seems like the successful ones split the responsibilities and each side does their own thing.

 

[Scot]

I can't claim to be successful, we're still on the ground floor. But as for partnership, my partner and I compliment each other very well.

I am the idea guy, the big picture guy, the marketing guy.

He's the technical guy, the business admin guy, and the nuts and bolts guy.

And we're both salesmen in our day jobs. So far it's working really damn well. I'll get back to y'all when we start actually making money haha

 

[Jon L]

I've been thinking about this a bit. In particular why silicon valley types promote partnerships so heavily. I'm betting, though I dont know this for a fact, that partnerships provide the best opportunity for a venture capitalist. When a partnership works well, its rise can be meteoric...look at all the big names out there. Mostly, some form of partnership at the start. Meteoric rises in valuation are what dreams are made of for a VC.

HOWEVER

When it doesn't work, and that is most of the time, it fails even more miserably than it would had the company been a sole-proprietorship.

So...do you want to be a statistic on a VC's spreadsheet, or do you want the better chance of success that comes with being a sole-proprietor?

 

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