Why Business Partnerships Fail

Picture this. You are up with a partner or best friend until early morning discussing an idea that you are both getting more and more excited about. Maybe over a glass of wine, a simple conversation turns into a thought process and ideas are just flowing.

The next day you come back together and discuss the idea more seriously… could this work? Is this a business that could change your life? Is this an idea that can change the lives of others? No matter whose idea it initially was, both of you can suddenly “see” the vision of what could come.

A business is born out of a vision for the future

This is often how a business is born and a partnership is started. A vision, excitement and the feeling of partnership and togetherness. You can’t picture anything but roses for the most part. I mean, of course, it will be “hard” and there will be compromises and shifts, but the two of you can make it work!

Business partners often start businesses together with very little planning and few ground rules, if any. Sooner rather than later, they discover the hard way that what’s left unsaid or unplanned often leads to unrealistic or unmet expectations, anger, and frustration. Partners can disagree over countless things, including conflicting work ethics and financial goals, roles in the business and leadership styles.

How do you avoid issues and sustain a business partnership? The fact is simply that business partnerships fail. It happens. Despite its frequency, the dissolution of partnerships can sometimes mean the dissolution of lifelong friendships, marriages and lead to fractured families.

Do you really need a business PARTNER?

If this an idea you have been thinking about, really consider the necessity of having a business partner. Taking on business partners should be reserved for when a partnership is critical to success.

There are many factors in this, but you don’t always need a business partner for financial resources, connections or vital skills you lack. You may be better off hiring the other person as an employee or an independent contractor so the role they play is very specific to the needs of the business.

Your business and relationship are two separate areas to be addressed.

Once the decision is made to start a business together, you should create a partnership agreement with help from a lawyer and an accountant. Often these things are not discussed so the other person doesn’t feel that you don’t “trust” them.

This conversation doesn’t take place until trust has already been broken, or is thrown out into the middle of a conversation as a way to show the other person you no longer trust them.

Take this step no matter who your partner is. People with strong personal connections may feel certain that their supposedly unbreakable bond will help them overcome any obstacles along the way. This is a Big mistake. Get a written agreement while your thinking is level, clearheaded and you are both excited about the business and next steps.

The Partnership Agreement

Every agreement should address three crucial areas: compensation, exit clauses, and roles and responsibilities. Include who owns what percentage of the business, who is investing what, where the money is coming from, and how and when partners will be paid.

Often the being paid discussion is something that is neglected because there isn’t any money at the beginning. We say, “We will figure that out when we start to make money”…

Make sure to discuss what happens if no money is made for a while-the person who is investing financially may feel upset if there is a payment agreement in place and no money to pay it. Be realistic-entrepreneurship and business success is far from an overnight process, and so chances are the money will take some time. Don’t allow that to add stress to the relationship.

Resentment is the main cause of partnerships failing.

They basically collapse inward or tumble over as the foundation you thought was unbreakable crumbles around you.

There are two primary causes of resentment in a business partnership which addressing at the beginning, although difficult can lead to a deeper understanding and bond.

The first cause is an imbalance in work ethic. This basically means that although the assumption going in was that both partners would work as hard as they can to move the business forward. Intentionally or unintentionally, your partner works less than you do, knows less about the business than you do or is willing to give up less than you are.

Naturally, as you see this happening you will feel upset, and little by little you will start to resent the fact that although you are equal partners, you are not putting in equal work.

Conflicting visions are the other main cause of resentment.  Fighting over small things is an indication that there is a deeper conflict. Control over the company direction will lead to constant battles that aren’t good for your health, relationship or obviously, the business.

Be clear about the end goal of the business and the roles you will take to get there together. Remember that initial goals and visions can and will evolve. Make sure they are evolving together, and that you are constantly communicating about changes you are thinking about and feeling.

Remember, that just because you feel it’s a GREAT IDEA to head one way, if this wasn’t the original vision your partner may push back. It doesn’t mean that you are wrong or they are wrong, but be ready for the push back, state your case and then decide together if it’s a good idea. You partnered up for a reason, and so they may have ideas to make your new vision stronger or point out weaknesses that you didn’t see in your excitement.

Remember-Partnerships only fail 90% of the time

Business partnerships are harder than a marriage, harder than parenting, harder than anything else you will experience because you have to agree to disagree, know when you take a back seat, smile through the tears and think logically through a process and emotions that are anything but. With that said, the partnership can be rewarding if everyone involved has clear boundaries from the beginning, or as soon as the first conflict comes up.

Learn to be flexible, open-minded and above all, communicative. Partnerships only fail 90% of the time-if you start right, you have a chance of staying in the 10% and growing to unimaginable heights with someone who shares your vision.

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