We all know that in a mathematical setting, 1+1 always equals 2 but in most other contexts, rarely! For purposes of this article, the question has been asked metaphorically and thus, as we shall see, 1+1 rarely equals 2.
Before diving into the key points of this article, let me ask another question (I clarify this article is not about questions only. I will try to not ask any more questions. I promise):
Without spending too much time, name 5~10 businesses that instantly come to mind. Now name a similar number of professional services businesses, such as accounting firms, law firms, financial services firms, management consulting firms etc. that you are aware of, whether you have availed their services or not.
Looking over your answers, if my guess is correct, most of the companies and firms on your list, with the exception of maybe one or two, were founded by two or more people. Is that merely a coincidence or do you draw any inferences from your answers? (Oops! I asked a question again. Sorry and definitely no more!). Studies have shown that companies with more than one founder tend to stay in business longer compared with similar businesses founded by only one person. Even businesses with one owner (this would include family owned and managed businesses, small businesses, and services businesses) tend to perform poorly compared to similar businesses which have multiple owners.
Research on companies and firms with solo founders versus co-founders
To lend further credibility to this hypothesis, let us look at some reliable research conducted on startups and services firms with one founder versus two or more founders.
Startups: Prof. Noam Wasserman of the Harvard Business School conducted a study of more than 3,500 start-up companies from 2000 to 2009. Among the “high-potential startups” (defined as companies with the potential to become large and valuable), about 25% of the companies had three or more founders; over 34% had two founders, and only about 16% had a solo founder. Prof. Wasserman concludes that startups with more than one founder have a better chance of becoming successful and surviving longer compared to startups with only one founder. Should you wish to learn more about Prof. Wasserman’s research, you can visit his blog.
Paul Graham, the famed venture capitalist and a co-founder of Y Combinator, a seed funding company and business accelerator, also says that startups with two or more founders have a better chance of succeeding. In an essay he wrote in 2006, he stated that the single biggest reasons start-ups fail is when there is only one founder. Though this essay as written almost ten years ago, his findings ring true even today.
Starting a business or even managing one requires a diverse set of skills, and no one person can have all the required skills. As Seth Godin succinctly but eloquently said, “….when people work together in an institution, they are able to produce more than if they work separately. Ricardo (?) makes it obvious that if one person mixes the dough while the other bakes the loaves, they’ll get more done than if each did the whole job.”
Professional Services Business: While there is abundant research available on startups, I found there to be a paucity of published research on professional services firms discussing founding or ownership of professional services firms. Some relevant research on wealth management firms has been done by Philip Palaveev, the owner and CEO of “The Ensemble Practice LLC,” and author of “The Ensemble Practice: A Team-Based Approach to Building a Superior Wealth Management Firm.” His research led him to conclude that a [wealth management] firm’s success is predicated upon a team-based service model that serves as the foundation of the enterprise. Defining an “ensemble” firm as “a firm that is multi-professional and team-based,” he says that “ensemble firms grow faster, achieve greater profitability, create more opportunity, and have real equity value.”
My perception of solo practitioners rendering professional services corroborates the conclusions reached by Palaveev. I frequently interact with lawyers and accountants who are solo practitioners and I find that the majority of them, at best, are just surviving, not thriving. Conversely, services firms with multiple professionals and stakeholders seem to flourish.
Compared to other businesses, the difficulties faced by solo practitioners rendering any services are even greater. For example, a manufacturing or retail business with a single owner is more likely to be self-sustaining if the business manufactures and/or resells goods in large volumes, achieving economies of scale. Services, in contrast, have to be rendered by professionals personally, usually to one client at a time, making it extremely difficult, almost impossible, to grow organically. For a solo professional to make an above average income, either s/he has to command a high fee or work longer hours to service a larger number of clientele.
In the face of such hardship it is quite perplexing why many solo practitioners insist on remaining independent when they could potentially augment their income significantly by enlarging their practice by either entering into a partnership or employing other professionals so that a larger number of clientele can be served.
Is co-founding or partnership always the right answer?
The answer to this question is a definitive “no” and few answers can be so unequivocal. Co-founding a business or working in partnership requires a commitment to the venture; to fellow partners; an almost perfect understanding and a high level of trust among the collaborators. The importance of due diligence in selecting the right partner cannot be emphasized because if two or more people work together but have different ideologies, the association inevitably breaks down, causing considerably more damage than if the venture was taken solitarily.
A wise man once told me that the word “TEAM” is an acronym of “Together Everyone Achieves More.” Whether this is true or not is futile to discuss but at least it sounds reasonable. However, the word “together” here needs to be accorded a meaning which is more profound than any dictionary definition. For example, the Oxford dictionary defines “together” as “with or near to somebody/something else; with each other.” Other dictionaries have a very similar definition and they all seem to imply “physical proximity.” Assuming the T in TEAM does stand for “together,” the relevant meaning here should be a “shared vision,” or perhaps “similarity in thoughts and ideas” rather than physical proximity to other team members. To illustrate, most of us probably know married couples who live under the same roof, eat in the same kitchen, likely sleep on the same bed but that is the extent of their “togetherness.” Their opinions differ on most matters, their preferences are diametrically opposite, and one finds the view of the other on most issues abhorring. Not surprisingly, such marriages are chaotic, punctuated with constant bickering, accusations, and disagreements over practically everything. A collaboration between people who have opposing opinions about how a business should be managed, how the products are to be marketed, or what growth strategies should be employed can be even more disastrous than a dysfunctional marriage. If a business is to survive and grow, it is imperative that all collaborators share a similar, if not identical, vision.
Summary
To complete the answer to the question raised in the title of this article, mathematically 1+1 always equals 2; when two like-minded people work together, 1+1>2; and when two people work together but are not emotionally and intellectually bonded, 1+1<2.
Forming healthy, workable alliances with others is not an option but a necessity if we are to achieve any success in life or in business. If we want to change the world, or bring a game changing, disruptive idea to fruition, we need the cooperation and support of others. As Nelson Mandela said during his inauguration as President of South Africa:
“ We know it well that none of us acting alone can achieve success.”
Success, in any endeavor, is always a team effort. Rarely can a person succeed alone.
Business is Strategy. Play Well©
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The (Not-So) Fine Print:
About me: I am tax and business strategist who is yet to be widely discovered. When either strategy is astutely utilized, individuals and businesses can benefit tremendously. In combination, the results can be very potent.
About my articles: My articles do not make for easy reading because they are written to make the reader pause and think. In writing, my goal is not merely to inform but provide a perspective; not teach but educate; and not to dispense advice but lay the groundwork for fertile exchange of ideas and opinions. I will mostly write on smart Business Strategies (tag line: Business is Strategy. Play Well©) and on Personal Development (Life is Precious. Live Well©). Most of my posts will focus on these objectives, but occasionally, I may wander just for a change of pace. While I cannot guarantee that you will enjoy reading my articles, I can guarantee that I will express my mind fearlessly, without being restrained by social, political, religious, or professional norms that seem inane to me. And while I also cannot guarantee that you will agree with my views, I will try to provide a perspective which is likely to be fresh. I would love to know if I am succeeding in my objectives. Your comments below will be highly appreciated.
Acknowledgements & Appreciations
1) I would like to express my gratitude to Tricia Ang, a very valuable friend to me, for helping me develop this article and reading the many drafts and providing her valuable insights. Tricia is a highly focused startup entrepreneur. You can sample some of the amazing work she does as a web solutions architect at www.azence.com
2) The illustration accompanying this article was created at www.canva.com. I thank and appreciate the friendly folks at Canva for creating an easy to use but a very versatile platform for creating graphics and illustrations. With a little effort, even amateurs like me are becoming designers!
3) I would also like to express my appreciation and gratitude also to LinkedIn Corporation for allowing us to publish on this platform and making available a large audience with whom we can share our ideas.