Partnering in Middle Age
Robert Heinmiller, Co-founder and Vice President, Omnet, Inc.
A cliché of entrepreneurial life is the image of the founder unwilling to let go when the company passes the start up stage and needs someone with managerial skill to drive rapid growth.
Another situation in which letting go is difficult, however, occurs when a mature company suddenly finds itself in vastly different circumstances. Take Omnet Inc., for example, the company I founded in 1980 with my wife, Susan K. Kubany. For 23 years, we operated the company entirely on our own - through good times and bad.
In the 1980s, we rode the crest of a then-exotic service - e-mail - which we provided to scientists doing research around the globe and needing to communicate across time zones. Annual revenue rose to $3.2 million. In the mid 1990s, when the Internet dealt our proprietary service a crushing blow, we shuttered the business, moved from Boston to Staunton, Virginia, where costs are lower, and repositioned Omnet as a consulting firm focused on information technology and the Web.
Time for a Partner
We had operated all on our own, with nary a thought of bringing in a partner - until recently, that is, when a wave of good fortune has forced us to think the unthinkable: that we may have to hire someone other than an employee.
You might also be thinking of finding a partner, should your business follow a similar trajectory. In our case, my wife - Omnet's president - has been pursing government contracts for the past several years. What happened recently is that many began coming to fruition. We were named a prime contractor by one agency, meaning that work is about to flow to us. A large contract is in the works that will increase revenue geometrically. Several smaller pieces of business are also on the horizon.
All of a sudden, our staff of seven employees seems dwarfed by the opportunities, and my wife and I question the scope and adequacy of the skills we bring to the table.
It is time, in short, to think about a partner. Wrestling with this dilemma - and it is a dilemma that we're far from having solved - has led to a flurry of questions on a number of levels that I will share in this article in hopes of guiding entrepreneurs in similar situations.
To Partner or Not to Partner
At the most fundamental level is the question of whether we need to partner. An entrepreneur, of course, could forego enticing opportunities and choose just to coast, especially if the outcome would involve merely growing less rapidly than otherwise would be the case. However, if those dangling plums represent an important change in your market, or a shift in what your customer wants, perhaps you can't as easily ignore them - and survive.
At the next level, you might be able to pursue the new opportunities by simply taking on a new employee, one that you manage as you have managed others so far. If that is possible, you don't have a problem. However, if the opportunity requires a self-starter, someone who is ambitious and au courant with the technology, and who has skills you don't have, you might need to face the fact that you need a partner rather than an employee - and that you need one sooner rather than later.
Ask yourself: are you expanding from a customer base with which you are familiar to one with a different culture? Are you shifting from a business model in which you will incorporate products into a service you've been providing, or vice versa? Are you aiming (like Omnet) to actively pursue large government contracts?
The Role of Authority
If you've answered yes to the above questions, you've taken your thinking about partnering to the next phase. You might believe that the task is as easy as finding a person with the right skills and giving that person the authority to do the job. (This is all the more doable in this Internet era, in which you can search for talent nationally and even internationally as easily as placing ads in the local newspaper.)
Ah, but the kicker is that little word "authority." When a bright self-starter takes the plunge and pulls your company into a promising new market, that person is going to know more than you do and substantially increase the value of your company. In return, he or she may want and deserve to be rewarded with more than a salary.
Thus, the ultimate question becomes: if you are going to have to give up some control to achieve greater value for your company, are you ready for that? Do the math to figure out what the new opportunity is worth to you. In other words, how much of your company can you justify setting aside for a partner to drive the new business?
At this point, you also need to address the thorny issues of how big a cut the new shareholder gets and what that person, in turn, might be expected to chip in, over and above expertise.
Wrestling with Demons
Whether you can cede some control is just the first of the demons with which you will have to wrestle. Recognize that bringing a partner into a mature business isn't the same as doing so in a start up. When moving from infancy to adolescence, a company doesn't have a lot of history or a deeply engrained culture. When moving from maturity into a new phase, however, it has all of the above, plus a customer base to protect and a well-established chain of command. Do you really want to stir up all of that?
One specific danger is that your company will split in two, psychologically speaking. One group continues with business as usual, while another cohort led by the partner could go off on its own. As a way to guard against the culture shock of such a split, you might consider setting up the new group as a separate corporate entity, or moving it into different physical quarters or to another geographic location.
Inevitably, some corporate upset will occur as a result of your bringing in the new authority figure. The trick is to keep it to a minimum by establishing in advance the boundaries of the person's authority and making sure those boundaries are understood by others in the organization. A clear commitment to the new partner as to the extent and timing of his or her own rewards is also in order.
A Balancing Act
Ultimately, recruiting a partner involves a delicate balancing act. You must give your new equity holder (or potential equity holder) the authority and personal space to get the job done, while making sure the values and culture that served you well for a long time don't get lost in the turmoil. After all, those values are a part of how your existing customers see you.
The balancing act also involves a nod to the inevitability of change. And change is difficult, all the more so for an established company that has become comfortable and achieved results under its existing way of operating. As my wife and I ponder the changes ahead for Omnet, I am not about to say we've come to an answer about whether or not to bring in a partner. However, we've begun to ask the questions, and for us, as well as for you, that is what is important.