June 6, 2011, 5:00 am

Pros and Cons of a 50/50 partnership

by: admin    Category: Make Money Online
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Me again, turns out the silent partner is less quiet these days. After introducing myself and discussing the actual creation of our online company, I wanted to give my thoughts on the a 50/50 partnership structure. I know that Mike already discussed his point of view as did MD. What triggered this post was reading an article about these types of partnerships on the excellent Venture Capital Blog “A VC”. There is no doubt in my mind, 50/50 partnerships can turn out to be the greatest thing in the world or the worst disaster. Here are the things that I enjoy most about being 50/50.

Balance of power

Being the two executives of the company means that for big decisions, we need to both agree in order to move forward. It could handicap us if it meant that we were unable to make any of these decisions but us that is not the case. It has actually been a good thing overall. Sometimes, especially in the fast pace of the internet world, it is tempting to go ahead and make big decisions based only on intuition. Being two means that we can’t do that. We have to think about something carefully and discuss it with our partner, that is a huge advantage.

Leaning on each other

Mike and I have very different strengths. As 50/50 partners, I know that he feels as a full owner of M35 and has a great sense of responsibility for the fate of every project that we are involved in. Thus, I feel like I can trust him blindly which is something I’d have a harder time doing if we were not “equals” in this business.

No plans to move from 50 / 50

I think we both see the huge value in keeping the balance at 50/50 and therefore even in periods where one has been in a better (or worse) cash position or if one of us spends more time than the other, we have always agreed on keeping the shares equal at 50/50. It just works out much better this way.

No place to hide

In difficult times or when faced when difficult decisions, it becomes very easy in a scenario where there are many shareholders for groups to form. This is rarely good for the company, especially in the long run. In our case, we can only form one group; the two of us.

Why join as a team?

One of the things that I was asked about was the reason I wanted to have a partner in such a venture. The fact is that I had a successful internet business at that point (nowhere near what we have now but still) and many would have simply continued as is. So what are the most significant impacts of having Mike and I working together?

-Accountability: It’s much easier to relax or stand still when there’s no team. I, personally, have been much more disciplined since working in a team.

-Motivation: Don’t get me wrong, I was highly motivated even before Mike joined. But getting emails every day from a partner with thoughts, ideas and questions is an incredible way to get fired up and ready to work.

-Focus on strengths: Mike and I are VERY different and that has been an incredible strength as we both focus on our areas of expertise. Both Mike and I truly enjoy being able to completely ignore a few areas of the business.

-Picking up the slack: In times when one of us has personal things going on or in the event that one of us would become sick, keeping things going is a challenge but much more possible than if we were alone.

The Potential Downsides for our 50/50 partnership

It might seem like the perfect little team, but I think we both understand that it could change in the future. Hopefully when such a situation arises, our history, friendship and mutual professional respect will help us navigate through it.

Disagreement on a big decision

If we come to the point where a big decision (such as buying or selling a site) is a split decision, we would probably opt for the “status quo”. However, that could be very frustrating for the other partner and could lead to more serious discussions.

Priority Changes

Right now, we both have a very strong focus on the company, but also have balanced lives, we are both married as you know, Mike also has 2 kids. If for some reason, as time goes by, one of us loses interest or must diminish his focus on the company, that could mean trouble.

Success?

I think we both understand that success can be dangerous. Having the company making lots of money and being worth multiples of what it’s worth now might have a negative influence on our vision of the company or of ourselves. Why? One of the scenarios could be inflated egos. The day when we think one of us could have done the same without a partner would be a bad day for M35 inc. I have heard many stories of friends starting off a very successful company only to see things derail when they got to a certain level of success. Another thing of course is that many of us change when we have more money which can always provide some challenges depending on each individual.

Overall

I think that 50/50 partnerships can turn out to be the great success stories or massive failures. It’s more about the individuals involved and their relationship than anything else. In our situation, things have been going great for many years now and we only seem to be getting stronger as a team over time. Because of all these reasons, one of the things we have decided is that if ever we do sell some shares of our company in the future (no plans for that at this point), they would ideally be non-voting, which is really the only way to keep our balance of power.

I’d love to hear from those who have ventures, are you in a 50/50 team? Did you consider joining one? What do you see as potential benefits/downsides?

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Comments

I would love to be in a 50/50 partnership but it’s just about finding the right partner. I have friends I would love to work with, but I don’t think they would be interested in an online business like I am. Suggestions for finding a partner?

A good partnership is a little like a good marriage. They are hard to find, and maintain.