David Hauser

Having a co-founder comes with amazing benefits, as I outlined in the first post in this series. However, having a co-founder is not without some inherent risks. The good news is that when these risks are well managed, the relationship can be beneficial for everyone involved, and can drive your company towards success. As any project manager would tell you, the best way to mitigate risk is by identifying potential problems, and then creating a shared plan to address them. The following are the biggest risks that I have observed as an entrepreneur:

• Confusion about leadership
  Starting a company means making big decisions, and big decisions can sometimes be stressful. When there are two or more people in control, there’s sometimes confusion about who the leader is in any given situation. People (employees) want to know who to turn to for answers, which quickly leads to the “mom and dad game” where people try to play the leaders off of each other. This can easily be solved by dividing up responsibilities, making this clear to everyone on the team, and always being on the same page with your co-founders by communicating the chain of command with regard to each task.
• Lack of alignment
  If co-founders have different long term goals that are not aligned, this will quickly cause problems. Decisions will become an area of stress because you’ll continually have to address the fact that you’re not headed in the same direction. How does this play out in real life? Imagine if one founder wanted to build a great company and the other wanted to build a company for quick sale—the decisions made with those divergent goals are vastly different. This is not to say that there will always be agreement about the future of your start-up, but if the long term goals are aligned, things roll along more smoothly. Be clear about your goals from the beginning so that you’re all on the same page, and frequently “check-in” with each other to make sure you’re in sync. Everything should be aboveboard.
• Questions about ownership
  This is a no-brainer: When you have co-founders, you will own less of the company than if you started it on your own. However, the benefits of having a co-founder far outweigh the fact that you’ll own less of your company. Why? Because successful partnerships come from the shared mindset that owning a smaller amount of something bigger is better than owning a bigger amount of something small. Simple as that.
• Unclear expectations and rewards
  When a co-founder relationship is unbalanced, it’s more likely to fail in the long term as these imbalances grow larger. This is not only about percentage of ownership, but more about the expectations for individual contribution, fair compensation and building an environment that rewards everyone.
• Your best friend is your co-founder
  Opinion is divided around starting a business with a friend, but my belief is that it should be avoided. When you go into business with someone, it’s different than a friendship. You have to ask yourself if you’re ok altering a friendship over your business. You have to ask yourself if you’re ok getting into heated discussions and passionate debates with someone you normally have a beer with on the weekend, someone who knows you better than anyone else, can push your buttons and confuse emotional issues with matters of business. For many, it’s a sticky situation, and for that reason, I don’t recommend going into business with your friends. On the other hand, many people find a lot of positive aspects to going into business with friends; for example, some say that trust with friends is greater, so you know you’re all in it through thick and thin. My feeling is you should 100% trust anyone you go into business with, and you don’t have to find that person in your circle of friends. This doesn’t mean you can’t know the person ahead of time, or have worked with the person in the past, but I would not suggest starting a business with your best friend.

All of these risks can be managed, so there’s no reason not to have a co-founder. From the start, building a better relationship with anyone which will lead to more success and more authenticity. So start the conversations with your co-founder(s) early, be open and honest, and make sure everyone can be successful.

What are some of the other risks you have seen as an entrepreneur, and how did you manage past them? Share your story below.