A common concern of prospective 50+ business owners is that they will be working all by themselves. That’s a big leap for many who’ve worked as part of teams in corporate jobs throughout their careers.
But you don’t have to go it alone. In fact, you may be more successful with your startup if you find a partner to help you run it.
Below, I’ll explain the four types of partners and how to make the arrangements work:
A Project Partner
Finding a project partner is often a relatively quick way to grow your business. In this scenario, you might be a small consultant or service provider who approaches a larger provider or consultant to see if he or she would like to farm out some work on a big project. This is known in business parlance as “subcontracting.”
In some industries, such as aerospace, subcontractors are a common way of successfully completing complicated, long-term projects.
With a revenue-sharing arrangement, I’ve been able to gain a level of income in several months that would take me a year or more on my own.
Having a project partner can not only provide some quick cash for your company, it can lead to ongoing work that comes relatively easy to you.
How to find a project partner: There are two ways to do it. One is to use your knowledge of your industry to identify the “big players” and then do a web or LinkedIn search to find an appropriate contact. Call the contact to see if he or she is looking for subcontractors and, if so, how you can apply to become one.
The other way is to find a customer you would sell to and ask the contact person who their primary contractor is. Then, call or email the contractor and mention that the contracting person referred you.
How to set your pricing: As a subcontractor, your company will be paid only a fraction of the dollar amount being billed for the work — perhaps something like $75 per hour for work billed at $400 per hour by the primary contractor. This inequality can be a bit grating at first. But remember, in this arrangement, you usually don’t have to invest any marketing money to land the job, which gives you more profit for each hour you work.
Often, the primary contractor will stipulate exactly how much you’d be paid. It’s pretty much a “take it or leave it” situation.
But if you’re offered the chance to bid on subcontracting work, use your industry knowledge to propose a competitive market price.
How to make the arrangement work: In project partnering, you need a clear written agreement saying exactly what work you will deliver, on what timeframe and when you will be paid (known in consulting as progress payments).
Don’t be surprised if your delivery timeframe winds up changing unexpectedly. It sometimes takes weeks for a project change to make its way from the primary contractor to you, the subcontractor. Be ready to pivot quickly to deliver what you promised.
A Revenue-Sharing Partnership
In this style of partnership, your business is typically more of an equal partner than with subcontracting work. The arrangement works much as you would suspect from the name: you work with a partner to produce revenue and then share that money.
How to find a revenue-sharing partner: There are two ways to do this, too. One way is to find larger companies or organizations who are already speaking to your desired customers. In this case, locate the business development manager there and email that person with a summary of the deal you’re offering. Then, see if there’s interest a further discussion.
The other way to find a revenue-sharing partner is by reading about new marketing projects that larger organizations are proposing (Prweb.com has thousands of corporate press stories, for free). Then, contact the appropriate person, mention the particular project, present your proposal and see if there’s interest in talking further.
How to figure out the financials of your revenue-sharing offer: Many potential revenue-sharing partners are familiar with a popular way to build online sales — affiliate marketing. Most affiliate selling arrangements offer commissions starting at 40 percent, so a prospective partner will likely ask for a revenue share in that percentage range.
I have entered into a number of revenue-sharing partnerships in recent years. Typically, my company provides entrepreneurial courseware that has sold well with my complete promotional and delivery system. My partner provides access to a large number of prospective customers, gained through its marketing programs. Using this arrangement, I’ve been able to gain a level of income in several months that would take me a year or more to achieve on my own.
How to make the arrangement work: Look for prospective partners by using web searches with key phrases related to your type of work. Approach one to three of them by sending a brief presentation of the partnership exchange you’re proposing. Prepare a clear description of exactly what your company will offer, demonstrating that you not only have a winning product or service, but also the requisite support and selling system behind it.
When you find interest, arrange a call to get to know each other and to more clearly understand where you both see a partnership going. If you feel good about the prospects for success, send the prospective partner a one-page Letter of Agreement describing the partnership from your point of view. Once there’s mutual agreement, agree on an implementation process and schedule and get cracking.
A key to financial success in a revenue- sharing partnership is to accurately assess the unique strengths of you and your prospective partner and then clearly define in writing how these strengths will combine to produce new revenue more quickly and robustly than either you or your partner could alone.
A Legal Partner
Here, you are agreeing to share legal authority and financial participation with one or more individuals. This is a serious step, particularly if you conceptualized the business concept and have driven it forward. So don’t be too quick to give up control, unless you can clearly see how a partner can help the business grow more quickly.
Here are three sound reasons to consider a legal partner:
You need a key skill filled in. For instance, you might be the “idea guy” and your partner would be the “rainmaker,” adept at finding new customers.
Your partner has developed a marketable technology and you are the astute marketing guy. That’s another way you’d complement each other.
You are seriously looking at attracting outside investment. But to do so successfully, you strongly suspect you need a management “team.”
And here are two bad reasons for offering legal ownership to someone else:
You need money. There are a number of ways to raise reasonable sums of money without giving up ownership, including crowdfunding; receiving generous credit from suppliers; borrowing from a financial institution; and borrowing from friends and family.
You don’t want to do all the work. There are a number of ways to receive the benefits of extra manpower without giving up equity, including: using online services to hire expert contractors; using revenue-sharing to pay someone a percentage of sales in return for services and connections; and asking family members to assist during your start-up period.
How to find a legal partner: Although project partnerships and revenue-sharing partnerships often run for less than 12 months, legal partnerships are long-term arrangements. So you must carefully consider not only a potential legal partner’s skills but also the chemistry between you.
In my experience, most successful legal partnerships combine two or more people who already know each other well — perhaps as college roommates or as corporate colleagues.
How to make the arrangement work: I strongly recommend executing a written agreement between you and your legal partner(s) that specifies the following aspects of the relationship:
- What financial investment each of you will contribute and what percentage of ownership each will receive. (In some partnerships, one partner may contribute important non-cash investment, such as industry contacts, while the other primarily puts up cash.)
- What the key responsibilities will be for each partner
- What compensation each partner will receive (this can be on an increasing scale, as the business grows)
- The designation of an outside individual to break ties when there is a major difference of outlook or opinion between the partners
- A clear process for when a partner may request to be bought out and how the buyout will be calculated
A Partnership with Your Child
Increasingly, older entrepreneurs want to start businesses and involve one or more of their children.
Here’s how I suggest you set up such a relationship:
Introduce your son or daughter to your business by having him or her help on some projects. Then, ask if your child enjoyed the work. If there is discernible interest in working in your business, have an honest conversation about this and how working in your business can suit your child.
When the time is right, discuss a plan with specific dates for how and when your child will progress to running and then assuming ownership of your business. You might want your son or daughter to earn or “vest” a percentage of ownership each year for a specified number of years before ultimately becoming the sole owner.