Why it pays to start a business with a partner

Paul Armstrong had been running his web design business for 4½ years when he decided something had to change. The business, Sydney-based Sitback, was profitable but had not grown for three years.

“I had reached a plateau,” Armstrong says. “It was tough doing it by myself.”

Starting your own company allows you to exercise full control in determining a business model and culture but can be a frustrating experience.

“It’s not fun when you keep hitting the same roadblocks,” Armstrong says. “You have to do jobs you know that you are not the best at because there is no one else to do them.”

Just over half of the 2012 BRW Fast 100 businesses were started by more than one person. Forty-three of the businesses were started by two people, while eight were founded by three or more people.

As one of the list’s 45 sole founders, Armstrong knows how tough it can be. He says that running Sitback by himself took a lot of the fun out of having his own company.

“If you are doing jobs you hate, you might as well be working for someone else,” he says.

In 2009, Armstrong made a decision that had the potential to make or break his business – he relinquished full control and brought in an equity partner.

The appointment of Kiel Van Daal had immediate benefits. Revenue at Sitback rose from $550,000 in the year to June 30, 2010, to $1.4 million a year later. By the end of the 2012 financial year, Sitback had annual turnover of $3 million – enough for it to debut on the Fast 100 in 31st place.

Being prepared to relinquish control was crucial, Armstrong says. He acknowledges that it was risky but believes that retaining complete control may have come with bigger risks.

“A lot of people begrudge giving away what they see as theirs.” Armstrong says. “But I think you can inhibit your own growth by greed.”

When the business was turning over about $500,000 a year, Armstrong says it was too small to sell, so providing equity to someone who could help develop it made sense.

After joining Sitback, Van Daal worked on company branding and put in structures to better foster growth. This led to the appointment of other senior staff, including a general manager.

Van Daal says the new structure allowed Armstrong to concentrate on what he did best – attracting and servicing clients.

“Paul is an excellent salesman but cannot stand managing spreadsheets, whereas I love that stuff,” Van Daal says.

“Paul and I are similar but we are also very different. It [joint ownership] provides checks and balances.”

Although Armstrong says he would be unlikely to start another business by himself, he believes that he benefited from having to develop an understanding for everything that needed to be done.

“Wearing a lot of hats was difficult because it didn’t free up time for me to go and get new work but it did give me good exposure to how different parts of the business work.”

Quay Consulting co-founder Michael Bolton says he is very glad he started his business with a partner and would be reluctant to start another one by himself.

“It is the best thing I ever did,” Bolton says. “In the early days I was giving up profit share but the business is far more successful as a result.” Quay Consulting is a Sydney-based project management consultancy. Bolton started it with fellow consultant Rod Adams in 2006 and they remain co-owners and principals.

The business began after they put in a joint tender for a job. Bolton says their careful documentation of a business plan was important to future growth. “We defined a specific framework and culture,” Bolton explains. “It means we can be quite comfortable to make decisions independent of each other when we need to.”

Quay Consulting turned over $8.5 million last year and Bolton says there is room for growth.

Managing a fast-growing business can strain a partnership. Bolton says he and Adams don’t always agree but this isn’t a bad thing.

Differences of opinion can be productive, Bolton says, providing they are properly managed. “You can’t have conflict with yourself. You need to be challenged and everyone brings something different to the table.”

Some fervent discussions between business partners are bound to end badly. Arguments can end in stalemates unless a business has a plan for resolving disputes between its equal partners.

Bolton and Adams remain sole owners but brought in Orla Kassis in 2008 as sales director. Having a third member of the management team has helped hasten decisions and ensures that votes aren’t deadlocked, Bolton says.

Ian Morley hasn’t had this problem with his business Serraview, which has three co-founders. Morley teamed-up with fellow business consultants Alex Birch and Stephen Macnee to form Serraview, which provides an online commercial property management tool.

Serraview debuts on the Fast 100 this year after achieving 50 per cent revenue growth over the past three years to revenue of $2.5 million in 2011-12.

Morley says he took great care picking who he was going to go into business with. “You need to be able to trust them,” he says. “You need to work on your communications skills and keep communicating. Make sure you have common values and work with coaches and mentors to help understand what is important to each of you as business owners.”

One of the biggest benefits of having three joint owners, Morley says, is the opportunity it creates for each to assess the business.

“When you start a new business, you can get stuck in the operational issues,” he says. “It is really important to take a step back and ask whether you are doing the right thing.

“Those conversations are very hard to have by yourself. You need to be able to bounce ideas off someone.”

There are other benefits of multiple founders, Morley says.

“Working with other people helps boost your motivation,” he says. “Consulting by myself was lonely.”

Smith & Sons Renovations and Extenstions is one of the four businesses on this year’s Fast 100 started by four people.

Corey Passey is its chief executive, while the other three owners, (Greg Gardner, Darren Wallis and Leigh Wallis) each have specific management roles.

“We all have our strengths,” Passey says. “That’s the beauty of our team. We all bring different things to the party.”

Smith & Sons is a home renovation franchise. It has 65 franchisees, most of which are qualified builders who had a desire to run their own businesses. Passey says he wants to increase this number to 260 across Australia and New Zealand.

The name Smith & Sons was thought-up by Gardner, Passey says, because it sounds trustworthy and is consistent with the family culture the founders wanted to create.

Group turnover was $29 million in the year to June 30. The business was ranked 12th on this year’s BRW Fast Franchises list and 30th on the BRW Fast 100.

Passey says having several co-founders can be risky but his situation has worked well, in part because his co-founders trust him to make decisions on their behalf.

“You have to have one person calling the shots,” he says. “But you all have to be on the same page and have a clear vision of where you see things going.

“[Starting a business] isn’t easy. Having other people beside you helps when things aren’t going great.”

Another franchise, Keen to Clean, was started by Brijesh Purohit in 2003. Within six months, Purohit had brought in Jignesh Prajapati as a co-owner and co-manager.

“When I started the business, I had to knock back a lot of jobs,” Purohit says.

“I knew that if I wanted to expand, I had to work on the business rather than in the business.”

Purohit says his partnership with Prajapati has worked well because of their different skill sets; Prajapati concentrates on administration and quality control, while Purohit handles sales and marketing

“You have to trust each other,” Purohit says. “You need to have the same mentality in terms of growing the business.”

Keen to Clean turned over $1.7 million in the 12 months to June 30 2012 and debuts on the Fast 100 this year, ranked 88th.

Although co-owners can help bring new ideas to a business, sometimes it won’t be enough.

Purohit and Prajapati decided to begin franchising the business in 2008 and sought the advice of a business consultant, which Purohit says has proved to be invaluable.

“You need an outside person who can give you an outside view of your business,” he says.

“If you are working on a business on a day to day basis, you sometimes won’t see the mistakes you’re making.

“You need someone who isn’t emotionally involved to give you their opinion of what is going on and what needs to be changed.”

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