The Rewards and Risks of Forming a Partnership

“Partnership” is a seductive buzzword in the business world today. My phone company wants to be my “partner in communication,” and my doctor at Kaiser Permanente wants to be my “partner in health.” Company owners hear constantly about the virtues of becoming partners with their customers, their employees, their vendors, and even their competitors. The overuse of the term partner has stripped it of traditional meaning, which in business has been two or more people joining together, pooling their money and talents, and taking a risk. Partners are people out to create or build something—together. They are putting something at risk in the hopes of creating a sustainable venture.

This book [excerpt] is about business partners, for the most part without regard to their legal status as partners. They may be in a partnership or a corporation. They may own property together or be co-producers of a Broadway musical. What matters is that they have a duty to one another, and the actions of one partner affect the others. In this sense, partnership is a state of mind. Partners sink or swim—together.

The enthusiasm for partnering is rooted in a down-to-earth fact: You’re much more likely to succeed in a business with a partner than without one. Entrepreneurs who have succeeded by pooling their strengths far outnumber those romantic figures, the lone entrepreneurs who have triumphed over all odds.

Academic studies confirm the importance of partnering. Researchers from the Center for the Study of Entrepreneurship at Marquette University investigated a sample of nearly 2,000 companies and categorized the top performers as hypergrowth companies and those at the bottom as low-growth companies. Solo entrepreneurs founded only 6% of the hypergrowth companies. Partners founded a whopping 94%, and many of those companies had three or more founders. In stark contrast, solo entrepreneurs founded nearly half of the low-growth companies.

Founding partners are memorialized in the names of some of the world’s most successful and visible businesses: William Hewlett and David Packard, for instance, or Charles Dow and Edward Jones (who actually had a third partner, Charles Bergstresser). Sometimes partnership origins are less obvious. EMC, the world’s largest data storage manufacturer, was founded in 1979 by Richard Egan, the “E,” and Roger Marino, the “M.” (“C” was a third person who did not make it to the actual founding.) The company that employs more people than any other on the planet, Manpower Inc., was founded by Elmer Winter and Aaron Scheinfield. Compaq Computer Corp. was the brainchild of three Texas Instruments engineers. Intel was co-founded by Gordon Moore and Robert Noyce. Home Depot was started by Bernie Marcus and Arthur Blank. Even Microsoft, which for years many people thought was founded only by Bill Gates, was co-founded by Paul Allen. The list goes on and on.

People usually form partnerships because they want to own a business. In a partnership, you don’t own 100%, of course, but for most partners, owning part of a business is much better than owning none at all.

Having partners