I've got an interesting situation. Been working solo for about four years and built up a solid client base here in Cincinnati, mostly working with Cincinnati Gas & Electric and Duke Energy accounts. A colleague from my previous job (we both used to work in Duke's commercial rates department) wants to join forces. He's got his own book of business in the Louisville market. We're debating whether to structure this as a partnership where we both bring our clients into a joint venture, or if one of us should hire the other as an employee. Anyone been through a similar decision? What are the pros and cons of each approach?
Partnership vs employee model?
Cecilia, I'd be really careful about the partnership route unless you've worked closely with this person before and have very similar work styles and business philosophies. Partnerships sound great in theory but can get messy fast when you're dealing with different approaches to client service, pricing, quality standards, etc. The employee model gives you much more control over quality and consistency, but obviously requires more capital and management overhead. Have you considered starting with a subcontractor arrangement first? Let him keep his existing clients but work on your overflow, see how the collaboration goes before making a bigger commitment.
I went the partnership route about three years ago with someone I knew from the Arkansas Public Service Commission. It worked out well for us but we spent a lot of time upfront getting the legal structure and operating agreements right. Key things we addressed: how to split existing clients, how to handle new business development, what happens if one partner wants to leave, decision-making processes, and how to handle different service standards. We also kept our books separate for the first year to see how the economics worked before fully integrating. The advantage is shared risk and more bandwidth for growth, but Bonnie's right that it requires very compatible working styles.