Solo or Partnership: 7 Factors to Consider Before Structuring a Self Storage Business
Many new businesses start as solo ventures. But, is that the best structure for your self storage startup? Or, would it be better to have a partner?
Tina Moser, a partner and senior business advisor of the small business advisory group Cultivate Advisors believes the decision should start with one question: What is your end goal?
She points out that going alone gives you complete autonomy and control, but a partner could allow you to grow and take a more dynamic approach.
Your choice will influence everything from day-to-day operations, to how much of your personal assets are at risk. Creating the right balance is key.
In this post, we’ll look at seven main factors you should consider:
- Managing Risks
- Making Decisions
- Allocating Resources
- Time Commitment
- Earning Money
- Building the Business
- Maintaining Relationships
1. Managing Risks
Controlling the stakes - Most people get into business to make money, which means losing money is a risk they’re hoping to avoid. As a sole owner, you have complete control over your financial plan and complete responsibility for any economic catastrophes.
Sharing exposure - Spreading your investment risk with another person can help cushion the blow if you do hit a rough patch or things don't work out as planned.
That person can be strictly a business associate, or a spouse (or even another family member) can also be a good option. Knowing someone has your back and additional resources can help you feel more secure.
“When you're sharing the workload, the financial commitment, and you have a good balance of personalities and drive, a partnership can be an amazing way to go.” - Tina Moser, Partner and Senior Business Advisor, Cultivate Advisors
2. Making Decisions
Maintaining control - To you, owning your own self storage business may mean having the freedom to make decisions without question.
Partnerships are all about concessions and a constant check-in to ensure you are both on the same page. It can be a frustrating place to be if you aren’t prepared to make any compromises.
Working together - Unlimited authority also means unlimited responsibility. And being the only one in charge of the business can be stressful.
A partner will serve as a sounding board for new ideas and aid your approach to growth. If you are willing to work with someone, the moral and intellectual support you can get from a partnership is immense.
3. Allocating Resources
Tapping into expertise - This is when a partnership can be particularly useful. You can't be an expert in everything. Choosing a partner with skills that complement yours will broaden the scope of your business.
Additional expertise could grow your business faster and increase its earning potential. Partners with different skill sets will also help to spread out the workload.
"What works best in a partnership is when each partner uses their different skill sets to the advantage of the business," Tina said.
Learning as you go - Many successful entrepreneurs teach themselves what they need to in order to succeed. They may not have known how to market, develop, outsource, or whatever the business needs, but they have the drive to learn as they go.
Your background and current skill set doesn’t need to define your future as a business owner. The self-taught entrepreneur is persistent, adaptable, and takes the initiative to learn new tasks.
4. Time Commitment
Giving up your days - As a self storage owner with no other partners, it’s up to you to keep things running. On your own, you may struggle to find enough time in the day to get it all done.
However, you’ll be able to set your own hours. As a sole owner, you’ll have creative control and build the work-life balance you want. With that flexibility and without the possible contradictory needs of a partner, you can put whatever genuinely matters to you first.
Creating balance - A partnership has the benefit of creating the support the business needs and sharing the labor. That goes for the day-to-day hard work that needs to be done. It also means you can take the occasional vacation and know the business is safe and in trusted hands.
Depending on the size, location, and several other factors, running a self storage business can take a big chunk of time out of your week
5. Earning Money
Dividing up profits and losses - You probably expected to share in the success, but handing over a percentage of the profits to a partner can still be hard. The good news is sharing also applies to loss and shared responsibility in acquiring funding to grow the business.
Understanding and being very detailed the partnership agreement is essential to avoid confusion, whether it's gains or losses. This is particularly true if someone wants out.
"If a partner wants out...then that owner is owed the value of the company equal to their percentage at that point in time..." - Tina Moser, Partner and Senior Business Advisor, Cultivate Advisors
"Say the agreement is a 60 or 40 split," Tina explained. "If a partner wants out five years after the partnership is set up, then that owner is owed the value of the company equal to their percentage at that point in time, regardless of how much they may have contributed to the business in those years." she says. This is a detail sometimes overlooked, which leads to serious misunderstandings.
Controlling profits and losses - You hold the purse strings as a sole owner because it's only your money that is invested. You’ll be able to decide how you want to use profits to grow, but you’ll also have to address any losses and manage how you’ll obtain additional funding if required.
Some sole entrepreneurs fear funding could be a problem because they don’t have anyone else to back them up. But, according to the technology and start-up news website TechCrunch, in an article about breaking the myth of needing a co-founder, over 52% of those surveyed who successfully secured loans were one-owner companies.
Data was limited to only “successful” startups and shows over half of the sole owners get start-up funds. It’s a great example of why going solo isn’t likely to limit you.
6. Building the Business
Growing at a slower pace - Solo-founded ventures may experience more significant resource constraints and lower growth rates. This is perfectly normal. According to Forbes, even Walmart founder Sam Walton took seven years to open his second store.
More business opportunities - As a one-person band, you are limited to the time you can spend exploring new avenues for revenue. A partnership allows you the flexibility to pursue further options for growing the business.
A partnership could provide additional funds to invest in those opportunities too. They may also have alliances and connections, which could help the business to grow faster.
7. Maintaining Relationships
With a solo operation, you only have to work with yourself. A partnership relies heavily on your initial relationship and the relationship throughout the business's life.
If the partner is your spouse or even another relative, there is probably already trust and a specific dynamic established between you. However, even close relationships can sour.
Tina recommends having clear documentation laying out exactly who does what and who is responsible for the varying operations of the business as well as what happens if one partner becomes disabled or passes away. It should be well thought out and written in advance, no matter the relationship.
Advice from Forbes backs up Tina’s sentiment. The article addresses business partnerships and advises agreements should always contain provisions related to resolving disputes. It should also provide procedures for partners to buy out other partners under certain circumstances.
“Even in scenarios in which the buyout begins on amicable terms, disputes about details of the buyout can sour the process.” - James Murphy, CEO, EquityNet for Forbes magazine
It Boils Down to Preference and Circumstance
Your current financial and personal situation will undoubtedly influence your best approach to starting a self storage business. Considering your work style, business goals and general preference also need to be taken into account.
Tina stressed that planning and thinking further ahead than you may initially have deemed necessary is critical no matter the setup your business takes. She suggests creating at least a five-year financial plan.
It’s advice especially true in self storage. It’s a business that may look fairly straightforward but one that often experiences unexpected challenges. A careful plan that addresses possible roadblocks is your best chance of success solo or with a partner.