When two people start a business, it’s common for them to start out on a wave of excitement and a shared belief in the vision for the enterprise. The final decision usually has been preceded by inspirational conversations where each partner builds on the other’s ideas.
It’s a heady time.
Unfortunately, that excitement often blinds the new partners to good decision-making.
At the top of that list is 50-50 ownership and control.
Agencies are different from tech startups or capital-intensive ventures. Neither partner is likely to be contributing a substantial financial investment. Neither partner is likely to be primarily responsible for developing a software product or similar high-value piece of intellectual property.
Usually, each partner comes in with a fairly similar background and will engage in fairly similar activities – at least in the early days of the agency.
So the natural instinct is to split ownership and control equally. It sounds great. It seems fair. What could go wrong?
As it turns out, many of the stickiest problems agency owners can confront occur when equal partners disagree.
When I talk about project management, I often remind people that if more than one person is in charge and accountable, nobody is in charge and accountable. If things go wrong, the finger almost always points to someone else with that shared responsibility.
From an agency management perspective, that only becomes magnified.
If two partners have equal ownership and equal say in all decisions, the only way that something can be done is by unanimous consent.
In those early days, partners often find it hard to envision a day when they are not aligned.
It’s a bit like the early stage of a romance.
But we all know that not every romance has a happy ending.
If partners truly are split 50-50, it means there’s a stalemate. That can be frustrating in chess, but it can be truly maddening in business.
Some might argue that this would bring partners to a point of being forced to reach consensus.
And that may be true in some cases.
But the reality is that may not always be possible.
So then what?
It likely marks the beginning of the end for the agency. Either one partner buys the other one out or the agency effectively implodes.
That’s not good for anyone.
How can this be avoided?
There are two options.
First, you can opt to have ownership split 50-50 but allow one partner to be the tie-breaker on certain decisions. You likely would not permit this for major items like selling the business or incurring debt, but you could easily grant this authority to one partner for day-to-day management to avoid getting bogged down.
That can still lead to bad blood and an eventual break-up, but it provides more latitude to keep the agency running in the meantime.
Second, you could decide not to have just two partners.
Every situation has unique circumstances, but I tend to be a fan of agencies (and other businesses) with three partners. It’s small enough to be collegial, but the odd number provides greater ability and incentive to work through thorny issues.
Three people in the conversation also changes the dynamic so that it isn’t always head-to-head. Alliances can shift from issue to issue. Fresh perspectives are more likely to be introduced.
Of course, no matter what partnership structure you have, it’s important to think through both the good and bad things that can happen and ensure your agency’s management documents outline how to handle them.