Barri’s Partnership Insights

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To partner or not to partner?

Insight #1

There are a lot of good reasons to take on a business partner—you may need an infusion of cash, adding a product line will strengthen your customer relationships and profitability, or you want to enter new markets. The list goes on and on.

So, why do all these good reasons to pursue a partnership turn into bad business partnerships?

I have worked with numerous business partners, usually after they’ve decided to partner and are heading for a break-up. Over the years, I’ve uncovered several avoidable causes of bad business partnerships.

Take the case of Tom and Mary. These two individuals had worked together before and respected each other’s work. When Tom left the company and decided to go into business for himself, he encountered a prospective client who wanted Mary to be on their account.  So what did Tom decide to do? He invited Mary to join his company as a 50% partner and figured it was a small price to pay for this first stellar client.

Fast-forward three years and Tom is angry and resentful because Mary is a great account manager, but a lousy business partner. As the company has grown and gained new accounts, the value of that first account has lessened and Tom is now wondering how to get back a majority of the equity in the firm. He has become increasingly belligerent to Mary and Mary epitomizes the walking wounded.

There is rarely just one reason for a faltering or failed business partnership. In Tom and Mary’s case, the first wrong turn came when Tom didn’t ask himself how else he could get Mary, get the account and not give up 50% of the company. He was too excited and too eager to sign the deal. Would Mary have come over as an employee or for less equity? No one can say for sure.

Whatever your reason is for considering a business partnership, ask yourself, “How else can I accomplish it?”

Below are some common reasons business owners take on a partner and a few of the questions they might well ask themselves before making a final decision:

  • Need for a specific expertise (sales, financial, etc.) “Would hiring someone, outsourcing or creating a strategic alliance be as or more effective?”
  • Feeling lonely and disconnected. Wanting to be part of a team. “How else can I get connected?  Will a Mastermind group, strategic alliance, or an advisory board fill that void?”
  • Geographic or product expansion. “Will a strategic alliance, outsourcing or acquisition work as well or more effectively?”

These are just some questions that are important to consider before embarking on a partnership and to be able to make the most prudent decision.

 

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