As gung-ho and independent as most entrepreneurs are, successful businesses aren't created alone. Many companies are started by two people — think Steve Jobs and Steve Wozniak or Bill Gates and Paul Allen – with the idea that two heads are better than one.
However, it can be hard to make a partnership work, says Leila Banijamali, the San Francisco-based founder of Bedrock, a tech-focused law firm, and the founder of Startup Documents, a company that automates legal documents for startup firms. In fact, many startups end up with enormous challenges because of partnerships gone bad. Through her experience working with partners and representing startup clients who have had relationships sour, Banijamali has identified four partnership-killing mistakes many startups make.
Mistake #1: Letting Ego Get in The Way
Business owners are often type A personalities — they know what they want and they go for it. Having two of those people running a company, though, can be a challenge. “Everyone wants to own their own product and be a leading stakeholder," says Banijamali.
For a partnership to work, people need to check their egos, focus on their own responsibilities, and perform tasks and duties in a way that helps everyone grow the business. Always keep the collective, and not the individual, in mind, she says.
If someone's doing something that you don't understand, ask questions. “You have to figure out what's going on in that person's head," she says. “Oftentimes, the other party will start to come down from the top of their mountain."
Mistake #2: Failing to Clean Up the Legal House and Saying We'll “Figure It Out Later"
Starting a business is so exciting that partners often fail to talk about how they should actually work together. That may be fine in the early days, but it can cause problems later on. “That initial stage is where everything is fantastic," says Banijamali. “It's in the later stages, though, where things can get complicated."
Co-founders need to sign a partnership agreement early on. It should include details on how a partnership might end, how compensation works between the two parties, and everyone's responsibilities, among other things.
It may not be fun to talk about some of these things at the start, but you have to. “It will save a lot of stress, time, and legal fees if you end up having a fight," she says.
Mistake #3: Not Communicating Openly and Frequently
Like in a marriage, communication is key, though how much founders talk to each other will depend on the maturity of the company.
In the early days, partners should be talking all the time, she says. Regular meetings can be helpful, but even popping into your co-founder's office to talk about the business can be enough.
That can shift to a weekly meeting once the business becomes more mature, but it's still important for both sides to check in frequently.
Fortunately, it's easy to stay in touch these days. Programs like Slack, a collaboration and messaging tool, and document-sharing programs like Google Docs can do wonders for keeping lines of communication open, she says.
While communication is crucial for keeping founders on the same page, it allows people to be more autonomous in their decision making. "It empowers you to make the right decisions," she says. "If you know what's going on you can make yourself more valuable."
Mistake #4: Rushing Into a Partnership
Most partnership-ending mistakes can be traced back to the enthusiasm two parties have about working together. But don't let that excitement cloud your judgment.
You need to make sure you can work with the other person after the excitement fades, says Banijamali. To do that, you'll want to have several meetings. The first will be an information gathering session. Then you'll want to learn more about the other person and the direction they'd like to go with the business. Finally, take some time to think about all that's been said. Consult other partners, or advisors, and see what they think.
It can help to write down what you want in a partner. While that may change during discussions, it at least gives you a starting point to work from. “You want to make sure that the partner's goals are in line with yours," says Banijamali.
These are by no means the only mistakes that co-founders make. Some startups get pushed out of the market by ignoring smarter or more lucrative partnerships and not creating a timeline. Banijamali had one client who quit his job to work on a business while the partner kept his. It took so long to get a product off the ground that the job-quitting partner had to leave because he ran out of money. Doing your homework at the beginning of a new partnership will help you minimize these risks.
Working with a partner can be exciting, but be mindful of these mistakes. Be open, honest, and make everything legal so that there are no mix-ups later on. “Be proactive in the early stages," says Banijamali. “You have to take measured decisions about your business. Whatever you do will affect your life, so all of this is very important."