 You are wise to evaluate new business possibilities after establishing a good foundation of clients and industry recognition. Solo consultants all face a challenging reality. Their income is limited to the number of hours they can bill every week. That’s hard work. Like you, most entrepreneurs want greater financial rewards for their hard work.
The solutions you are exploring are right on target. You can add revenue generating consultants to your company’s payroll, develop new products with greater profit potential, or pursue both strategies at the same time.
The right course will depend on your priorities, temperament for risk and confidence in the proposed partner. Ask yourself what is YOUR purpose for partnering? Is it to allocate your existing consulting work to a qualified person while you focus on more profitable business building pursuits? Is it to add a very different type of customer base to your operation? Is it for another source of cash flow? Is it for daily companionship and collaboration? Does the partner bring important contacts, a deep financial pocket or expertise in managing aspects of the business you dislike?
Don’t be afraid to set a high standard for partner acceptance. Early partners should improve the company’s financial position in a meaningful way or provide critical intellectual capital to develop higher profit margin products. Anything less is probably not worth the risks associated with shared ownership.
Another way to measure potential partnership viability is management alignment. If you haven’t already researched a business plan for your expansion product idea, now is the time to do it.
How “big” is your idea? What can it mean to your company’s growth and profitability? What operating and financial resources will be needed to commercialize the product?
Now here’s the test: Does your partner share your enthusiasm for the new product idea or is her vision of success building a larger consulting organization? Partners have to be perfectly aligned at launch otherwise the good ship enterprise just won’t sail, or at least very far.
Once the major goals are agreed, spend time talking about work style compatibility. Is there agreement on who should manage the company’s more tedious administrative duties? What is her tolerance for stress and risk? How do you each feel about vacations, overtime or just taking time off on a whim? Should profits be plowed back into the company for growth or rainy days or will the company payout partner bonuses?
While these issues may seem awkward to discuss, it is better to identify conflicts before you partner, not after. Business partnerships are like marriages. Since you spend a lot of time together you should genuinely like and respect each other’s character and work habits.
Again, as you tally the pros and cons, evaluate your partner’s expected contribution in terms of profitable business growth. Does that contribution add to the company’s value? Does it match your own projected contribution? If not, you can continue the relationship as is and refer business back and forth or subcontract excess consulting work to her. If it is, start drawing up your partnership agreements and celebrate your first steps forward as a team. Cheers! |
I have a successful transaction software consulting business for large companies and am thinking about what’s next. I see tremendous upside in developing new products that can generate licensing income rather than just getting paid by the hour. A colleague wants to join my company as an equity partner. She does great work, but is less adventurous. She can add to my firm, but I wonder, is now a good time to take on a partner?
