Pros + Cons of Having a Partner

I'm collecting stories from my career, and when I can't get fired anymore, I'm going to write them up (anonymized, of course). One of the funniest was years ago in Chicago. I was having dinner with the two partners of a firm to kick things off. I knew she was married and I knew he was married, because they had made a passing reference to it in their individual surveys. Neither of their spouses participated in the firm, though, and both had separate careers.

But during dinner I kept seeing those unmistakable signals that these two were married to each other (which I knew they weren't) or in a relationship, which struck me as a taboo topic to raise. Little touches, knowing looks, smiling at jokes that weren't funny, etc.

But you know me, of course. The guy who says what everyone else is thinking as people can't avert their eyes at the oncoming car wreck. So, in the true spirit of asking someone "When are you due?", I said, "Hey, I know you two aren't married, but what's going on? Is there some affair happening here that I should know about before we spend two days together trying to improve your firm?" This was followed by my own very nervous laugh as even I can't believe I just said that.

They look at each other and leaned back, laughing their asses off, and one of them says. "Hah! Very perceptive. We used to be married and run the firm together, but the personal relationship never worked, even though we were great at running the business. So we divorced and each of us remarried, but we loved working together, so here we are."

You're going to love this book if I ever get around to writing it.

Anyway, that brings me to the idea of partnership. Are they good? Bad? I've seen deep inside 1,000+ firms, now, and I honestly don't see any patterns except one, which is this: three partners is twice as complicated as two, and four is twice as complicated as three, and any firm with more than that ought to have their license revoked. (Unless we're talking about token partnership levels that are more symbolic than real.)

To be more specific, when I see that a firm is run by a single partner or two equal partners, I never assume anything about it's performance or culture. I just don't see any patterns, which leads me to take a stab at the honest pros and cons of either.

Advantages of Multiple Partners

You can have too many partners (see above), but for the purpose of this article, let's assume we're talking about an ownership group of two or three equal partners. What are the advantages?

• There's tremendous emotional benefits of being shoulder to shoulder with someone else at the plow, sharing the highs and lows of entrepreneurship, tough staffing calls, client disagreements, downturns, etc. This isn't reason enough to have a partner, but it's very powerful. If you want this sort of support without a partner, I'd recommend having an open book relationship with a few peers or joining a community of fellow principals.
• A built-in succession plan is a whole lot easier to pull off, assuming that you aren't the same age or run out of engagement at the same time. The key to pulling this off well (instead of self-destructing) is to fashion a strong, fair partnership agreement, and if you do that, the firm is far more likely to gracefully navigate the departure of a partner.
• It's so much easier to focus on your own strengths if you have a partner. Anybody who hates new business but who has a partner who loves it knows exactly what I mean. But the key here is to not have a "stack of plates" partnership where you each run separate firms, but rather slightly overlapping Venn diagrams instead.
• You shouldn't have more than 6-8 direct reports, and multiple partners makes it easier to effectively manage a team, especially in a very large firm.
• An obvious diversity of opinions is useful. Maybe it's male/female. Or maybe it's black/white. Or maybe it's "hard charger" versus "empathetic listener." If you want that and don't want a partner, then work hard at being self-aware and valuing the opinions of other people on your team, especially.
• And finally, it's easier to get away or even take a sabbatical when there's someone to cover for you. By the way, in these slightly slower times when not as much is happening, this is probably the best time to take that sabbatical for a few months.

If you go this route, here are a few very specific suggestions:

• See the "stack of plates" analogy above. That's the most important.
• Make sure that every initiative is headed by a specific partner and not the partners as a group.
• Have strong legal agreements, where non-participating spouses or common law partners are a party to those agreements. A divorce that an individual partner faces is by far the most common legal jeopardy for a firm.
• Any partner who owns 20% or more should be paid equally, and no partner should be on a commission structure. All it does is highlight what one or more partners might view as unequal contribution.
• Absolute trust is essential. That trust erodes when a partner goes behind another partner's back and buys a shit domain for $100k after being overruled (another true story), there's an affair with a team member, stealing, etc. Rebuild that trust immediately through all the hard conversations that follow.

Advantages of Being the Sole Principal

I wish I had stats for this, but it strikes me that most firms do not have multiple partners. Regardless, what are those advantages of going it alone?

• Since I don't believe that there is any necessary boost to economic performance for firms with multiple partners, I would necessarily conclude that there's actually a financial tax on having them. Turn that around and you can see that a single partner can be more highly compensated. In fact, in our "Principal Compensation Normalization" algorithms, we assume that a single principal will earn between $70k-$155k more if they don't have a partner. And that only accounts for the fixed comp and not what happens when you split profit distributions.
• Decisions are faster and often carry better calculated risks. With multiple partners, decision making is slower and less remarkable, because the rough edges get knocked off as the issues get masticated to death until they finally emerge with an announcement: "Look, we finally made a decision! And it's not remarkable!" I kid, I kid, but that's what the illustration is meant to communicate.
• Your key team members feel like there's more opportunity to grow through advancement, because there aren't partners clogging up all the high level seats.
• Performance issues can be more readily fixed. To me, every partner is a stump in the swamp that needs to be navigated around because they can't be fired. (I'm still working on this empathy thing I keep hearing people talk about.)

Closing Thoughts on Partnership

If you are looking for a business partner, don't, because you'll almost always settle. Let it happen naturally. That's a part of my recent past, even. About six years ago I strongly considered adding a 30% partner with a woman whose business acumen I greatly admired. We did it right, having many discussions that faced all the issues head on. In the end, we didn't pull that trigger but remain friends with mutual respect, and I learned a whole lot about partnership in the process, mainly because she was really good at facilitating those discussions that we needed to have. It came up naturally, we pursued it thoroughly, and then we made the right choice. If I had been determined to add a partner, I would have made the wrong choice.

When I get a little more courageous, I'll pen an article about spouses working together, but for now, here's some bonus content from a few years back: a webinar on how to do good partnership.