Why Partnerships Fail

“By the time a partnership dissolves, it has dissolved.” ~ John Updike

How do you convince people to take preventative measures when they have no pain in the moment and the pain is only a possibility sometime in the future?

That is the million-dollar question!

All too often I get calls from business partners that truly frustrate me. It usually goes something like this: “My business partner and I are having problems and we were hoping you could help us”. So far so good. Once I start probing however, it becomes apparent to me that first, this could have been avoided and second, it’s probably too late.

The most common reasons business partnerships fail are:

Infatuation Syndrome

This is when partners get caught up in the idea of the business partnership. While I’m a big proponent of dreaming and visioning your ideal future, if you truly want to live it you have to give your dreams a realistic chance to succeed. In order to do that, potential business partners should invest the time up front to:

  • Ensure you share core values, vision and expectations for the business.
  • Agree on your roles, responsibilities, authority limits and decision-making process.
  • Get clarity on individual contributions and equity percentages. Make sure you “assume success” and picture this arrangement 3 to 5 years out. Will it still seem fair to you?
  • Understand your partner’s financial situation, credit rating and willingness to invest additional money if needed.
  • Make it legal. Talk to your attorney and tax accountant to make sure you create the best legal structure for your situation and that you record your agreements.

Taking Your Relationship For Granted

We often take for granted those people who are closest to us. We convince ourselves that they should understand what you meant or they should know that you appreciate them. Investing your time and energy up front is no guarantee your business partnership will succeed if you don’t continue to invest in the relationship.

  • Spend time on the relationship, not just the business
  • Hold regular partner meetings
  • Be honest and forthright with your feelings of inequity and appreciation

Head In The Sand Syndrome

News flash! If you ignore problems or feelings of resentment they really don’t go away. In fact, resentment and distrust builds until it is often too late to restore the relationship. I’ve seen business partnerships go from infatuation to partnership dissolution in less than two years, not because the business failed, but because the relationship was past saving.

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