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Partners in Your EBiz….Good Idea or Bad?


By: Chris Malta,

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Starting an online business can be tough to do alone.

Sometimes, economic issues force people to bring partners into a business in order to provide credit and/or extra startup money. There are some things you need to be very careful of if you think about doing this.

Partnerships with Friends
The most natural thing in the world seems to be to partner with someone you know already. It’s easier to work with that person, and you’re already friends, so it's easier to get them to sign on to your business plan.

The problem with this is that you never really know someone until you have to split money with them. I can attest to that from my long history in business. I’ve had friends as partners who have worked out alright, but never really well. When you’re in partnership with a friend, you run the risk that the friend does things on their own that you would not want them to do. They tend to think it’s okay because they think they “know what you would want”. So, they make decisions without asking you, and that can get on your nerves pretty quickly.

Then, because they’re a friend, you tend to avoid conflict over those issues. If the partner were not a friend, you feel much more comfortable in approaching them and saying “Hey, what did you think you were doing, ordering four hundred pairs of Doggie Shoes? We only sold three of those stupid things last month!” However, because they’re a friend, you end up not wanting to jeopardize a long friendship, and you don’t bring those things up. Or, if you do, you minimize how you feel about it.

That’s a very bad way to run a business.

Partnerships with Family
Take everything I said about Partnerships with Friends, multiply it by a factor of ten, and then throw in guilt and other family members interfering. That’s partnering with Family members. Some families can do this. I know of a couple of good examples, and I partnered in a couple of businesses with my own parents many years ago, which worked out fine.

However, a family member can guilt-trip you like no other person can (besides a spouse, that is). That kind of thing gets in the way of business decisions just like working with friends. Add to that the fact that if a family member disagrees with you and doesn’t want to confront you, they’ll go crying to other family members, and you’ll be the bad guy from several directions in your extended family without ever even knowing there was disagreement.

As I said, some family member partnerships can handle this. Most can’t, and you can’t choose your family members. So, choose your business partners wisely instead.

Partnering with People You Don’t Know
This seems riskier in some ways, but is generally a better way to go. Sure, you’re going to have a harder time convincing someone you don’t know to go into business with you. If that’s the case, make it a casual acquaintance, not a friend or family member.

When you partner with someone you don’t know that well, you are both much more likely to have open, honest discussions about issues that come up in your business. That makes for a healthier business overall.

What to Watch Out for When Partnering
Oh, let’s see, I don’t think I have enough room here to tell you about everything you need to watch out for when you partner with other people! Guess I’ll just keep it down to the main points.

1. When you partner with someone in your business, never, NEVER give up control. Always keep at least 51% of the business. My father warned me about that once, and I didn’t listen to him. I regretted it for a long time. If YOU have an idea for a business, and YOU approach someone with that business idea, it’s YOUR idea. You need to make sure you legally own a majority of that business. No exceptions, no matter how hard the other person tries. Someone who won’t partner with you on a minority (less than 50% ownership) basis WILL cause you trouble down the road.

2. Always create a Partnership Agreement. This is something else in my long business career that I have ignored at times, and I have always regretted it. A Partnership Agreement can be simple, but should cover basics like:

•voting rights
•division of profits
•when a vote is needed (for example spending more than a certain amount of money on the biz requires notification to the other partner and a vote, etc.)
•What happens if one partner is incapacitated
•assurance that problems between partners will be taken to third party arbitration before attorneys are brought in
•and many more; just use your imagination. :o)

3. Be very careful when partners ask you to agree to hiring their family and friends, especially when they want to shortcut standard hiring procedures and bring in their buddies and relatives without offering the job to the general job market first. Never allow a partner to bring in an employee who doesn’t have qualifications for that job. If you’re not careful as your business grows, you could very quickly find yourself outnumbered by a whole army of your partner’s inexperienced relatives. That can be a very bad situation.

4. Make sure you and your partner both agree on employee salaries when hiring people into your growing business. You may find that your partner will want to bring in people they know or are related to at high salaries. It’s extremely important to remember that when you’re hiring people, you need to leave room in their salaries for them to grow (get raises) at a rate of 3% to 5% a year. If you hire people at or near the top of the standard range for their postion, within a couple of years you’ll find yourself either overpaying them or losing them. Both are bad to say the least.

5. Check into your partner’s history a bit. You never really know someone until they disagree with you. It’s possible to think the world of a business partner for years, and then find out some really ugly truths much later on. You’ll want to know if your potential partner has a history of dealing with people well over long periods of time, or if that partner has a history of dancing a happy tune with people for a while, then trying to take over the business in the long run. There are more people out there like that than you’d think.

Overall, if you can avoid bringing a partner into your online business, by all means avoid it. Following your own dream should never be subject to the twists and turns of other peoples’ fear, greed, poor judgement and/or psychoses. :o)

This article has been provided by Chris Malta's blog. Find more great information about your online business on Chris's site. HERE.

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